By Victoria Downing. One of the biggest reasons remodeling companies don't make money is because job costs are greater than the amount estimated. This "slippage" could be caused by field inefficiencies or higher-than-expected subcontractor or material costs.
Two years ago, Schloegel Contracting Company, Kansas City, Mo., decided it was time to be aggressive in tracking job costs. Today, Connie Young, office manager at Schloegel uses a simple system of purchase orders and subcontractor contracts to keep track of the various expenses related to a job and avoid cost overruns.
"Until that time, any of the guys could make any purchases they wanted," she says. "Often the office wouldn't get the right paperwork, therefore, the costs weren't tracked accurately."
Now, the Schloegel team accounts for every penny. Salespeople issue purchase orders for all special order materials to be procured and prepare contracts for any subs that have bid to work on the job. Lead carpenters handle the rest.
Each purchase order or contract includes the total amount expected to be paid and is coded to a specific job. Invoices arriving without the purchase order or contract numbers are sent back unpaid. A letter goes out to Schloegel's pool of subs and material suppliers each year reminding them about this policy so that no one is taken by surprise.
All of the vendor information is input when the purchase order is created. "When invoices come in, all I have to do is enter the purchase order number and all of the other information appears automatically," says Young.
For subcontractor contracts, Young can track the original estimate amount, any change orders, and invoices already submitted. If subs submit a bill that's more than the estimate, they are not paid until the overage is explained. This depth of information helps the production staff keep close tabs on expenses. --Victoria Downing is president of Remodelers Advantage, Fulton, Md. (301) 490-5620, firstname.lastname@example.org.