News & Events

Even in Good Times Watch Overhead

By almost every indicator, now is the time for construction businesses to be gearing up for growth and, ironically, keeping an eye out on overhead. For example:

  • The U.S. Department of Commerce expects total annual construction spending in the U.S. will top $1.19 trillion in 2017. This is up more than 40 percent over the levels of five years ago.
  • The American Institute of Architects’ Architectural Billing Index, another leading indicator of future spending, has been in positive territory most recent months.
  • Washington is abuzz at the prospect of $1 trillion in proposed new infrastructure spending

Watch Overhead, manage OverheadWith revenues increasing, it’s easy to allow overhead expenses to creep upward, eroding profits and diminishing your ability to bid competitively. In addition, bad habits ingrained during good times can be difficult to break when growth slows again.

One key to managing overhead is a strong job-costing program. Capturing job costs fully and breaking them down accurately can help you gain a better understanding of your operations and capabilities.

Another key to managing overhead is accurate budgeting: setting and tracking goals and adjusting course as needed. Here are four basic steps in this process:

  • Get to know your overhead expenses. Put together a comprehensive checklist and then track and analyze expenses monthly.
  • Learn from what others are spending. Industry surveys and networking can help you set realistic goals.
  • Trim the catch-all categories. Whenever possible, reassign costs from the general to the specific and from indirect to direct.
  • Rely on your people. Your employees know where the waste is. Establish a strong cost-control committee with company-wide participation, documented meetings and specific proposals to drive out costs.

If you’d like to take a closer look at overhead expenses, our firm is ready to help. Please contact Jason DaPonte at 401-752-0558.