Key Problem Areas in a Trade Business

Here are some key problem areas that many tradies fail to deal with effectively. The cumulative result of some or all of these issues is a business that continually struggles or potentially even fails.

• Relying on piece rates or meter rates to estimate jobs

Every job is different. Do your estimators understand the complexities like you do? Have all the variables been accounted for? Using flat rates will invariably lead to important factors being overlooked. Any assumptions and ambiguities should be tagged in order that variances are able to be claimed.

• Failure to properly document inclusions and exclusions in the initial quote

Inclusions and exclusions must be carefully documented to avoid any argument when work is underway. Any misunderstanding will generally lead to an expense borne by the contractor. It is very important to document and claim variances in a timely manner.

•  No back costing of actuals against estimates

There is little point back costing jobs after you have completed them. It is then too late as there is nothing you can do if there is an overrun. Projecting forward is crucial if you want to keep jobs on track. By capturing data in real time you will be able to both back cost and project forward at any point in time.

• No integration between various data, systems and activities in the field

Getting information from your field staff, contractors and suppliers in real time is critical. There is no substitute for live data in real time and managed in a central database.

• Lack of management reporting

There is no way an effective decision can be made without accurate data. This data will allow you to make effective decisions before problems occur.

•  Poor documentation and compliance with various laws such as construction contracts act and OSH

There is an ever increasing amount of paperwork and compliance required to stay abreast of the various regulations and customer reporting needs. Poor documentation and compliance will invariably lead to unrecoverable debts, workplace accidents and potentially open your business to legal issues.

• Time not fully accounted for

Paid time not charged for is one of the largest areas of loss in a trade based business. Accurate allocation of time is critical to on-charging all hours worked.

• Materials not fully charged

Poor stock control and purchase order control is potentially another area of significant loss. Accurate real time tracking will ensure stock is properly accounted for and charged to jobs.

• Failure to fully account for overhead recovery

Pricing on the basis of estimated costs plus a markup is unlikely to properly account for the costs of actually running your business.

- See more at: http://www.it4tradies.co.nz/blog/