The construction business is tough. Construction industry leaders are among the strongest and most capable managers in any industry. Success requires mastery of a vast array of skills in logistics, project management, leadership and motivation, practical know-how, and financial savvy.
But construction business owners aren’t immune to mistakes. Here are a few tips on how you can avoid them, and set your construction or contracting business up for long-term success.
1. Invest in technology.
The construction business requires intensive, detailed planning and synchronization of logistics, execution, and financial operations. Nobody can reliably keep everything in his or her head – and you wouldn’t want any single employee to do that even if they could. You need to invest in the best construction project management software platform and other technologies you can afford.
2. Focus on “High-Value” Activities and Delegate the Rest.
Construction firm owners and senior managers should be aware of details. But they shouldn’t be distracted by them. You should have a very solid understanding of the value of an hour or even a minute of your time, and resist being pulled into the weeds when these lower level or menial tasks can be delegated away.
Try to “power down:” Delegate both responsibility and authority over small or repetitive but necessary tasks to junior employees, consistent with their capabilities. Then provide mentorship, leadership, and training to help them grow.
Bookkeeping is an excellent example. As an owner/executive, you should be very aware of what’s coming in and going out of your firm. But you shouldn’t be spending hours and hours every week keying in individual transactions, fighting ongoing battles with your accounting software, or manually reconciling your own transactions and bank statements every month.
Instead, you should be receiving detailed and useful value-added reports and projections from your staff and from outsourced accounting vendors. So you can focus on making sound and timely decisions, supervising and ensuring quality control, leading your team – and closing new business.
3. Understand construction accounting.
Construction has some unique bookkeeping and accounting challenges. For example, you need to account for job costing, separate costs for materials and labor. You also have some decisions to make about when to recognize revenue on your books. For example, you can choose between the percentage completion method – recognizing revenue as earned or as you receive milestone payments, or the completed contract method, in which revenues are only booked as contracts reach 100 percent completion.
Your bookkeeping and accounting partners should be very aware of what system to use when. When contracts are expected to last two years or longer, the CRA requires you to use the percentage completion method.
Construction bookkeeping and accounting are challenging. Too many construction company principals make the mistake of trying to do their own bookkeeping, or delegating the function to an admin assistant with no bookkeeping background.
4. Maintain high standards.
Never walk by a quality deficiency or a safety deficiency on a job site or anywhere else and leave it uncorrected. Train your foremen and managers the same way. Remember: You’re the boss. As soon as your employees notice you ignoring the standards, you set new and lower ones. It’s tough to turn that ship around.
5. Use the Cloud.
You’ve heard of the “paperless office.” The Cloud lets you take that important concept one step further. Instead of storing your critical business records electronically on your own servers on-site, the Cloud lets you ditch your local servers and upload all your documents directly to remote drives, though you can access them at any time from any web-enabled device.
This eliminates the risk of damage or data loss due to a local disaster, theft, or hard drive failure.
It reduces expenses: You don’t need to maintain the hardware, or pay an expensive IT staff to maintain and upgrade your equipment. You don’t even need to buy software, in many cases: Cloud-enabled vendors handle all the back-end software issues for you.
LedgersOnline is the premier Cloud-enabling bookkeeping and accounting firm in Canada. Our bookkeeping professionals are experienced with the unique issues and challenges in the Construction Industry.
To find out how we can help you lower your cost, reduce your risk, and improve your processes and cash flow, contact us today.