5 Common Pitfalls that Construction Companies Face

Author: Dan Segal (QuickLyft Construction Company Expert)

https://www.quicklyft.co/

Introduction

Many times construction companies that I deal with are in a money crunch because of the following avoidable scenarios. Follow these tips to avoid feeling a cash crunch in your financial company.

1. Not Estimating Projects Enough

• Most successful construction companies have jobs lined up at least for 12 months in to the future.

• Lots of my clients that are struggling with cash-flow is because they do not have enough jobs lined up.

• Importance of comprehensive cost analysis during project planning.

  QuickLyft Recommendation : Hire a full time estimator that is trained to estimate projects accurately. There should never be a time where your crew is not absolutely swamped with work. The more jobs you are estimating the more money you will make. Lots of times jobs do not start on time and your crew and company show never have any downtime.

2. Poor Cash Flow Management

• If you do not know how much your jobs are costing you, you are losing money.

• Many construction company owners prefer being on the job managing crews instead of looking at the numbers.

• Understanding the cost of individual projects can help you price things correctly and add on adjustments if need be.

• Not getting paid on time from clients

  
  

  QuickLyft Recommendation: As painful as it is for some construction owners you have to be in the numbers and organized. Every supply run, every minute spent on a job should be accounted for in a software preferably. At the end of the job you will know to the penny how much was spent on the job. Do not forget to leave over ample reserves so that if a payment comes in late from a client it won't paralyze your company.

  
  

3. Timeline Management

• Many construction jobs go longer than they are scheduled for which will increase the cost of construction

• Lot's of real estate developers rely on an accurate timeline from their contractor for their financial success.

• Poor timeline management can lead to lawsuits occurring and a horrible reputation.

  
  

  Quicklyft Recommendation: Invest in robust mangement software system like Monday.com or BuilderTrend. Have weekly meetings with your project managers to make sure the timelines are being met. Preorder supplies not to deal with supply chain delays so the crews are constantly busy.

  
  

4. Poor Supply Management

• Hours of time are wasted driving back and forth for needed supplies.

• Buying in bulk will save you lots of money if you are pre planning the tools needed for a job.

• Poor supply management can lead to weeks of delays if certain things are unavailable or out of stock.

  
  

  QuickLyft Recommendation: Break down the whole project down to the last nail and screw. Order everything in bulk at least a week in advance so you can hit the ground running. Pre-ordering supplies in bulk will also help you keep track of accounting easier. We recommend hiring a purchaser to buy all the products needed for a job in advance.

  
  

5. Construction Loan Issues

• Construction loans given out by banks usually have many strings attached to them.

• The loans often do not give money upfront, rather they have draw requirements that are quite extensive.

• Banks may impose strict timelines that must be met in time for the next draw. Delays in the job can delay the ability to draw, which will put you in a cash crunch.

QuickLyft Recommendation: When it comes to construction loans you have to have all your ducks lined up in a row. Before signing onto a construction loan, negotiate the stipulations that are required to receive each draw. Sometimes that bank will require odd things that you can negotiate out of the loan. Sometimes it is worth it to take a loan out from an alternative lender. If you are looking for alternative loans please feel free to reach out to us and send in an application linked below.