Financial construction management is important for all businesses, and it can make or break project success in the construction industry. Within specific projects, adherence to a well-established budget enables organizations to see significant improvement in operations, ensures funds are available for unknown expenses later, and keeps the end client happy. Financial management in construction projects plays a direct role in the overall success of any organization.
Core to this is ensuring that construction leaders are hiring for the roles they need to meet expectations but also to ensure solid financial management oversight. How can companies ensure they stay within expectations and guidelines?
Budgeting and Cost Estimation
As noted by Procore, financial construction management ensures the success of the construction project by providing accountability transparency and stakeholders with accurate tracking of company success at any given point within the project. Delays and cost overruns impact the specific project and the construction company’s overall reputation.
Core to that is budgeting. Specifically important in the people portion of the company are leaders who must establish budgets for hiring to account for increasing wages, overtime costs, and worker-related expenses. Choosing how many employees to hire, whether to outsource components or hire employees and when to expand payroll cannot be done without accurate cost estimation from the start of any project.
Tracking Expenses and Cash Flow
Once budgets are in place, organizations then need to track those metrics on an ongoing basis to spot specific areas of overruns early. This includes tracking all expenses and cash flow for the project. A few over-budget purchases will strain the company’s ability to meet its goals. While it should be expected that some adjustments are necessary, careful tracking minimizes the risk of costly significant overruns.
When it comes to hiring within the construction industry, companies must set objectives for labor hours and costs while also tracking them at every stage of the project. Are they hiring experienced, ready-to-work employees or those needing more training time? That could impact the company’s overall success in meeting budget expectations.
Managing Subcontractor Payments
Subcontractor costs can quickly become out of hand, increasing financial frustration for organizations over time. To manage this, establish clear guidelines and budgets for each subcontractor. Then, ensure they are fully aware of those requirements. Good communication and early warning of overages keep the project on track.
Ensure contracts with all subcontractors outline stipulations for paying more than the agreed-upon price at the start of the project. This typically means ensuring routine check-ins with organizations to ensure ongoing success. Setting up routine payments and verifying the accuracy of projected costs and payments made are also tools to minimize financial management mistakes.
Ensuring Compliance with Financial Regulations
Nothing is a bigger financial loss for a construction company than an excessive fine for an avoidable situation, especially related to compliance and regulations regarding employee safety or environmental projections. Construction management strategies must always focus on creating a safe environment for employees, but it is also essential to consider the financial loss that can occur when oversights happen. Look beyond just OSHA guidelines, too.
From an employment standpoint, consider not meeting the expectations of the Affordable Care Act, which cost companies millions of dollars in losses in 2023, according to Construction Dive. Moreover, when you consider that the construction industry has the highest rate of turnover among employers, according to Zippia, this creates the ideal gap in meeting compliance requirements for providing insurance.
Couple this with fines for other losses related to labor and wages, and it adds up quickly and can easily become one of the most expensive mistakes for the organization, directly impacting construction management profitability.
Maximizing Profitability
Overall insight into maximizing the profitability of any construction project means consistent research and development of new strategies, implementation of a higher level of technology, and working to determine which specific areas of any project contribute the most to higher costs.
Monitoring metrics, working to improve employees’ productivity, and sourcing higher quality, better-trained employees are some of the most effective ways to support the organization’s profitability from the employment perspective. Profitability is drastically improved when organizations work with employees who can be productive, efficient, and effective. Minimizing turnover and maximizing hiring objectives through the help of recruitment services can also support profitability. Creating a strong talent pipeline is also beneficial.
Takeaway
For every construction project, financial construction management is crucial to ensure success. Project execution cannot happen without some costs, but vigilance and communication throughout the project can minimize these risks. Organizations must consider the costs of running the project, from materials to design, and the role that hiring plays in the process. Hiring with a focus on ensuring compliance, improving profitability, and minimizing overruns is essential.
MRINetwork empowers construction companies by supporting them in their search for highly qualified, productive employees and ensuring they have the best professionals for the job at hand. Contact us for more information and support for your recruitment efforts.