Financial Troubles

When it comes to running an effective construction or field service business, there are a lot of financial hurdles to overcome—from finding leads to closing deals to running successful projects. With the constant challenge of needing to launch and complete expensive projects long before a cent of payment is due, one of the biggest obstacles for business owners is financial troubles.

In an industry where cash flow is king, payroll comes at you fast, and late client payments are anything but a surprise, keeping your finances airtight is tough, but critical to the success or failure of your company.

Here are some common roadblocks leading to the financial troubles you as a contractor are facing.

Problems

#1. Not properly staffing projects

Occasionally, you’ll overestimate how difficult a project will be when it comes to manpower and staffing. Without some way of tracking and measuring past projects similar to your current one, there’s no accurate way of knowing if digging that ditch or framing that small building will require four workers or eight. This can result in much higher payroll expenses than what would’ve been required otherwise.

On the other hand, whether due to payroll issues or underestimating, there are some cases where your projects are understaffed. This results in a tired, less focused workforce to get the same job done—meaning longer hours, less productivity, and bigger payroll expenses.

#2. Labor shortage

Anyone involved in construction or the field services is familiar with the labor shortage that’s led to a drought of talented and qualified workers. In fact, 91% of U.S. builders and contractors have gone on the record to say they’ve had issues filling positions. Similar to the point above, this causes workers in the field to work longer hours to finish the same project—resulting in more overtime being taken out of your pockets.

Being understaffed without any plans for increasing efficiency might cause you to miss project deadlines altogether, which can negatively affect your company, or to turn down new projects altogether.

#3. Government projects

On any government-funded projects, you’re required by law to pay employees the prevailing wage on a weekly basis. This can take a big toll on your payroll given the frequency of compensation before you even get paid for the project. This causes many contractors to fall behind on their cash flow, or bypass government contracts altogether.

#4. Clients late on payments

As contractors of all sizes well know, clients can take 30, 60, and 90 days—or longer—before they write you or your accounts receivable department a long-awaited check for your work. With all of the overhead expenses required to complete a gig—from labor to equipment and more—this adds another layer of complexity to running a successful construction or field service business.

#5. Getting sued

No matter how large or small your company is, legal expenses can add up quickly—and in the construction industry, getting hit with a lawsuit is all but uncommon. In fact, since 1985 there have been just under $200 million collected by the Department of Labor due to non-compliance with prevailing wage laws alone for U.S. construction industry. As a business owner or operator, you already have enough fees and expenses to worry about, and a lawsuit is another one on the list.

#6. Lost, stolen or damaged equipment

A million things can happen on the job site. One of those is lost, stolen, or damaged equipment. Given the high price point of both heavy and lighter equipment, having it lost will set any business or construction company back financially. And, unlike an extra hammer or walkie talkie, jobs can’t get completed without essential equipment, so if it’s damaged or lost, you’ll need to pay out of pocket to get a replacement as soon as possible.

#7. Inflated time cards

It’s nice to think all your workers are completely honest when it comes to filling out their time cards. Yet, the grim reality is that inflated hours, late clock-ins and buddy punching often arise. And as a supervisor or business owner, you can’t possibly be in every place at once—so there’s no manual way of monitoring and combating these issues.

According to the APA, there’s an error rate of 1-8% of total payroll for companies that use paper time cards. Whether intentionally or not, padded or outright incorrect hour totals usually show up in timesheets—and several minutes here and there can add up fast when it comes to your bottom line.

On top of that, because some businesses have their workers wait days, even weeks, before filling out their time sheets, mistakes may even be made unintentionally by employees. All of this results in reduced margins and massive overpayment.

#8. Expensive materials

Anyone in construction or the field services knows materials, from cement to stone, are anything but cheap. And thanks to tariffs and rising fuel costs, the price points are only getting steeper. From 2017 to 2018, the costs of diesel fuel increased 29 percent, 22 percent for steel pipe and tube, and 11 percent for asphalt mixture—showing just how unexpectedly rising material costs can put a dent in your profit margins.

As a business owner, you want to give your clients the best possible experience and service to increase the likelihood they’ll call you back for another gig in the future, so cutting corners never works when it comes to materials.

Solution Talk // Words of Wisdom

Cash flow is crucial in any business—but especially in one as reliant on immediate action and manpower as construction is. While many expenses will be inevitable and unavoidable, more methods for increasing your bottom line exist than you might think. Focusing on those and cutting out unnecessary expenses is the key to a healthy business balance sheet.

In terms of solutions, the lowest hanging fruit here would be using technology to streamline your manual or error-prone processes. From time tracking (with software solutions like, you guessed it, ExakTime) to bidding to HR software, using technology will help you to automate slower-moving processes and become more aware of your actual expenses, allowing you to be “shave off the fat” where necessary.