Construction Company Overhaul

Does your construction company run seamlessly?  Do bills to customers get processed and go out timely?  And then the customers pay timely?  You seldom borrow on your line of credit?  The costs on your construction projects are typically less than budgeted?  Change orders are approved timely and always available on file?  Your accounting department produces a financial statement and job cost schedule by the 15th of the following month?  If so, congratulations! However, I assume most of you are shaking your heads.

If there’s something in your organization that just doesn’t feel right or keeps you awake at night, you may have a process that needs to be reengineered.  Or you may have multiple processes that could use some TLC.  A lean six sigma professional can help you redesign processes to make them more efficient, more relevant and more current.

Imagine all of your project managers use all of the same tools and communicate information to others in the organization in a timely fashion.  All of their projects come in on budget.  Probably not the case since the human element introduces variation to how we do things.  But, if we take the best tools of each of the project managers and implement those as our “process”, we should have improved results.

You may have a strong sense of who your best project managers and estimators are, but an exercise I like is to prepare job schedules with the project manager and the estimator’s names as fields.  You can then sort jobs by gross profit percentages and review if there are clusters of the project manager or estimators’ names.  Does anyone shine as a super star and we can use that person to train or mentor others?  Maybe that person uses a process, software or spreadsheet that we can implement as a part of the process?  Conversely, can you identify anyone who may need a little assistance since all of their jobs are at the bottom of the pack?

You can then sort the job cost schedule by over/under-billings to review the same information.  You may constantly be nagging one project manager to get their billing done more timely, but a visual may help illustrate the issue.  Implementing policies around what is billed and when will help to alleviate these variances.

Additional analysis of job cost schedules can provide a wealth of information on where to focus improvements.

Starting with the job cost schedule is just the tip of the iceberg when implementing lean six sigma in your business.  Some other good applications would be

  • the billing process
  • the change order process
  • the application of overhead and/or equipment costs
  • the budgeting process
  • and estimating and bidding processes
  • the requisition/purchase order/receiving process
  • the scheduling process
  • the training and/or safety process

Construction companies have many processes occurring concurrently and that typically means there are a lot of opportunities for improvement.  Our Construction Accounting Services group would welcome a discussion about your company and where you see those opportunities.   We even have a tool to help you prioritize the items you are considering for improvement!

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