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Another Builder Collapse? Ways to Avoid it.
By Enabliser Howard
Over the last years we have read about plenty of builders collapsing, leaving debts into the multi millions of dollars. Not only is this a disaster for employees and clients, it leaves their subcontractors and suppliers owed millions, and a personal disaster for the principals too.
This shows how tough the construction industry is. In bidding for jobs, builders usually have tight margins and any cost blow out or error can have dire results. The Collins Report into building industry insolvencies in NSW identified many reasons a builder can go under. A construction focused accounting software solution is one of the tools that helps cut this risk and allow the builder to stay in control of each job. We know builders who, when we checked their estimates, were working too low and hadn’t increased for current costs, and wouldn’t believe it. Guess if they’re in business now.
One of the many problems for builders is not knowing how any job is going, knowing quickly, easily - and if it’s going bad, only knowing after the event, too late. This is because the information is in multiple spreadsheets and the payroll system and not collected per job, only calculated when the job is finished – when it’s too late. With construction focused accounting software, all costs incurred, including payroll, are recorded against each job in the same system - so you can tell at any time how each job is going. With many accounting systems this is too hard. Not if it is designed for construction.
When you place an order, this will be a cost for the job, even if not paid for yet. If you don’t include future commitments like this, your Cost to Complete is wrong – and may cause a big shock. Cash flow is another issue. If the jobs are all flowing smoothly and progress claims coming in, everything is great. But when jobs slow down, it’s trouble. A good construction focused accounting system helps plan ahead and avoid nasty surprises. It gives you other benefits too. It won’t stop you going broke, but staying afloat will be a whole lot easier, with your finger on the pulse of the business.
To find out more, contact Enabling.