The foundation of a successful home construction project lies with a detailed construction quote and resulting contract. Clarifying, via a quote to the homeowner, the project scope, specifications, costs and timeline reduces payment delays and unfortunate disagreements. The use of a building quote template leads to a higher level of customer service without becoming a time-waster for builder.

Properly defining the scope, specifications and costs requires a detailed itemization of labor costs and material charges. Custom home builders struggle finding the time to do this administrative work. This work competes with the need to be on the job site. However, smart builders have found an answer to producing the written document that the prospective client expects. They use construction management software and an associated building quote template to quote more work and win more contracts.

Moreover, it’s important to remember to charge a fair price for bidding for quoting a job. With this in mind, many builders can easily cover the cost of cloud-based construction management software. In the best cases, the software, for one monthly charge, offers a full suite of management tools. This set of tools goes beyond just offering a building quote template to include project scheduling, documentation and invoicing. So, the upfront investment benefits the entire project – from quote, contract agreement and signature to final invoice. 

Advantages of a building quote template

A powerful feature of modern, cloud-based construction management software is the ability to create home building quoting templates. These templates offer a detailed breakdown that you can use over and over again. Using easy-to-use software, you can create a building quote template for all the different home construction projects you perform.

The templates keep you consistent and organized so you miss nothing when ordering materials and scheduling labor. Creating the specifications and costs that make up your quotes becomes a simple task. Also, using top-rated software, you can customize your quotes. For example, you can offer detailed terms and conditions that best suit your prospective client and your project types.

The best software also comes with preinstalled templates. These allow you to create and customize job checklists, allowing you to add and remove material and labor items as needed. The software also includes the ability to adjust for markup and other contingencies, such as material price increases.

What to include in your building quotation process

A building quote needs to be comprehensive and complete to help you avoid the time-consuming and stressful documentation of change orders. As a builder, consider the following items:

Preconstruction costs

Preconstruction costs are fees and charges that occur before construction begins. You will want to clarify in your terms and conditions if the homeowner must pay these costs before construction begins. Preconstruction covers surveys, building permits, site preparation, utility installs and business fees, among other items. Not surprisingly, these can add up to a significant amount of money. So, it’s best you detail them in an easy-to-follow professional quote that properly informs your homeowner.

Labor and material costs

By performing a material takeoff, you arrive at the proper counts of supplies. To save significant time, you will want to use construction management software that includes digital takeoff tools. Digital tools make these calculations much quicker and more accurate than using traditional pen and paper. Digital tools also allow you to perform a material quantity takeoff by unit cost, linear length, surface area, cubic volume or weight. When software does the calculations, you greatly reduce errors, saving you time and increasing your professionalism.

Of course your quote is not complete if it only contains a material estimate. You need to also include the costs paid to your subcontractors and work crews, who are typically organized by the phases of your project (site work, foundation, framing, landscape, etc.). The best construction management software allows you to break out these costs in separate line items. The software also lets you include overhead costs associated with maintaining your payroll. You decide how detailed your quote breaks out this information for the homeowner.

Advantages of using software quote templates

The best construction management software directly flows the individual costs calculated from your material takeoff, labor estimates and markup into a building quote template. You can customize the quote template with preloaded product and material sample images as well as your business logo and letterhead.

Templates cut down on the administrative time you spend to build professionally looking quotes. Once built, you can send quotes to potential clients by email or traditional mail. It’s the kind of detail that makes your customer service an important competitive advantage in today’s ever-changing construction market.

How to find the best construction quote template software

Recently, Buildxact software ranked among the best construction management software as reported by both Gartner Digital Markets and Forbes magazine. In the case of Forbes, Buildxact topped the list. Editors considered Buildxact’s multiple quoting and job management features, affordable pricing and excellent customer reviews. 

Interested in seeing for yourself how Buildxact quoting templates can improve your business? Register here for a 14-day free trial or book a demo to see how Buildxact can help your business grow.

The post The building quote template offers builders a better way to serve homeowners appeared first on Buildxact AU.

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What are soft costs in construction? eBook

What are the costs that home builders need to consider when running a project? There are so many moving parts in a home builder’s business and managing all of them in one go can be a challenge. This eBook explains the difference between hard and soft costs, recommends ways to overcome challenges, and explores how software can help you manage projects better. 

In this guide: 

• Find out what hard and soft costs are and why tracking them can help your home building business 
• Discover why soft costs should be included in your budgets 
• Highlight construction management software to integrate processes such as takeoffs and scheduling 

Download

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There are several ways to save money when operating a construction business. Here are some tips to help you spend wisely and save construction costs when completing your next build.

Reducing costs during the design process

Reducing construction costs during the design process could be the key to reducing the total cost of your project. Working with clients to modify design and project scope is an important part of controlling project costs and realizing savings.

During the design stage, you and your clients establish the structures, plans and guidelines you will adhere to throughout the rest of your construction project. By making cost-effective decisions early on, you create a clear budget that you both agree to follow. This is your one-way ticket to creating your client’s dream home without unnecessary financial stress.

These are some ways to reduce construction cost during the design phase of a building project.

1. Reduce scope

It’s important to always be realistic about project scope when undertaking a construction job. Setting clear and achievable expectations can enable you to plan effectively and budget realistically.

As you plan a construction project, think about the financial parameters you’ll need to work within and identify design decisions that may increase the project’s total cost. Communicate clearly with clients to identify areas where changes might be necessary to accommodate your finances. The design stage is a good opportunity to reduce project scope and eliminate costly features that could push the limits of your budget.

2. Reduce complexity

Similarly, reducing project complexity is an easy way to bring costs down during the planning and design process of a construction project. Often, overly complex design features and elements can be expensive and may also be at a greater risk of costly construction material orders and scheduling complications.

By examining your design plans closely, you can identify areas of unnecessary complexity and work to refine and simplify project demands. This will help to save you money when building commences, and it may also make for a smoother, less demanding construction job.

3. Change materials or systems

Sometimes, the best way to save money in construction is by simply changing your materials or systems. Because the most obvious answer isn’t always the right one, it’s important to always consider all of your design options before finalizing plans. This way, you can be confident that you’re making high-quality and affordable choices.

When creating designs for a construction project, think about all the possible solutions to every problem. Some materials are more expensive than others, so when you can, look for cost-saving alternative materials to use in their place. For example, could you reduce costs by choosing vinyl flooring material instead of hardwood? Consider how you can adjust your client expectations to meet the project budget without compromising on overall aesthetic or quality.

How can builders reduce construction cost?

Once designs are finalized and building commences, there are many more ways to reduce overall construction costs even further. If you think strategically, it’s possible to make budget-friendly decisions for the good of your project and your bank account.

1. Consider material alternatives

First, consider material options. Even once the design stage is complete, there are opportunities to alter your plans and accommodate more cost-effective building materials. When these are used broadly across your project, you could save a significant amount of money. Discuss any potential material usage changes with your client to ensure that they are happy with alternative options.

Before you begin work on each new phase of a building job, take a step back and consider whether your choices are the right ones. Could you maintain a standard of work while also saving some extra cash here? When looking for areas to cut costs, it’s a good idea to focus on the small things.

2. Use software to stay on budget

The secret to effective budgeting is planning ahead, and modern technology makes this easier than ever before! Using digital software to create a clear and comprehensive budget-minded plan can help you anticipate financial demands and respond to them effectively without exceeding your limits. As previously discussed, put a budget plan in place early on in your project, and prepare to keep a close eye on rising costs. While you can return and make changes, this plan should act as your guide throughout the duration of the build.

In your budget-friendly construction plan, factor in all important building considerations. What materials will be needed? Will you need to collaborate with other skilled workers? How long will each stage of the project take? Do you have a little extra cash in your budget in case something goes wrong? What labor costs are you anticipating? What is the total square footage of your project? Advanced digital takeoff software like Buildxact can help you predict the overall cost of a construction project with ease and accuracy. Keeping these things in mind will help you prepare for anything.

3. Streamline communication

Clear communication makes it much easier to understand and adhere to a construction budget. Communicate regularly with all project stakeholders, including your client any other builder or contractor working with you. This way, you can ensure that everyone remains on the same page and aware of construction expense considerations. You can make sure no important considerations are forgotten.

Throughout your building project, aim to communicate with your client and any other contractors regularly. Using software like Buildxact, you can set tasks and reminders as you build your project’s cost estimate. This makes it easy for everyone to stay on track as the job progresses.

With software as a guide, you can see how work progresses against the schedule, which can prompt you to ask questions and have your team think about construction progress, time demands, financial constraints and material availability. This can help you predict and manage building construction costs with much more accuracy and confidence.

4. Reduce excess construction waste

Waste is the enemy of saving, so if you’re wondering how to reduce construction cost, it’s important to consider ways to reduce unnecessary waste. Try to save and reuse excess construction materials whenever possible instead of throwing them away. This will enable you to make the most of all available items, which is so important during times of fluctuating material pricing and overall economic inflation.

Reducing waste also is better for the environment; so be resourceful with your materials whenever you can be. Recycled materials can often be helpful later on. If you’re left with an excess carpet square after finishing work in the living area, save it! It might be useful if you find yourself running low in one of the bedroom closets.

5. Eliminate change orders

Change orders can be a major source of construction cost, as clients alter project plans and processes over the course of the build. When these alterations are not factored to your initial budget or plan details, they can cause financial difficulties, even impacting the overall project outcome.

Reducing or eliminating change orders helps you to feel confident and secure in your construction plans. You can do this by communicating your change order processes or expectations with clients before building begins. Remember to be clear and respectful, ideally including change order permissions in a contract.

When mid-build changes are not permitted, you can get on with the construction process, not worrying that project demands could be altered at any moment. This can help you be more resourceful with your available budget and could even reduce the funds you need to set aside for problems or emergencies.

6. Properly manage subcontractors

Employing subcontractors is often an important part of construction work, but labor cost can also be expensive. While you always want to pay contractors fairly for their work, renegotiating fees can be helpful in lowering labor costs and bringing your expenses down, saving money that can better be used for other business administration or construction purposes.

Choose your contractors carefully, looking for the perfect combination of skill and affordability. Before you start work on a new build, set clear contractor prices that allow you to compensate contractors without exceeding your financial limits. You can schedule skilled contractors effectively using Buildxact software, helping you keep track of all staff working on a project. Clear schedules also prevent any miscommunication about when work crews should arrive on a job site. Poor timing can lead to work crews being unable to work, leaving a job site, and not being available later when you need them.

7. Buy dynamically

Dynamic purchasing is a well-known concept in the construction industry, providing you with opportunities to explore the most cost-effective options for your business and project. Buying dynamically allows you to procure all the materials and services you need from a wide range of suppliers, searching for the highest quality at the lowest prices.

Buildxact software offers material suppliers and dealers the ability to integrate pricing directly into the software so that builders can easily see prices as they build their cost estimates. This helps you make budget-friendly choices at a time most convenient to you.

Reducing costs using takeoff software

One of the best ways to reduce construction cost is by using advanced construction takeoff software. Once, the takeoff process involved complex manual estimating and calculations. This process was time-consuming and could result in inaccuracies, comprising the effectiveness of project plans and budgets.

Digital takeoff software now makes it much easier for builders to perform fast, effective takeoff estimates. You can accurately estimate material needs, time demands, staff requirements and budget suitability, all using efficient modern technology. This information is clear and comprehensive, allowing you to plan ahead much more easily. You’ll know exactly what you’ll need to complete a project and how much these items will cost.

By establishing clear cost expectations during the takeoff process, you can determine early on in the construction process whether the project will fit within your budget parameters. If it does, you can get started! If it doesn’t, you can make changes and adjustments to your plans so budget limitations are accommodated before you start building.

Free trial of Buildxact

If you’re looking for excellent digital takeoff and estimating software to help you reduce construction costs, try Buildxact. Book a 14-day free trial of our advanced digital software today!

The post How to drastically reduce construction costs for builders appeared first on Buildxact AU.

Buildxact hosted a webinar with The Association of Professional Builders (APB) co-founder, Russ Stephens, who outlined some vital, but straightforward, steps you must take immediately. He warned that failing to do so would risk you becoming caught up in what he described as the “tsunami of building company failures” bearing down on the Australian construction industry. 

During the webinar, Russ explained how you can remain profitable and even grow your businesses despite unprecedented challenges, such as labor and supply shortages and rising material costs.  

Below are the three key steps he recommended for all Australian home builders. Russ based these necessary actions on his extensive industry experience and the first-hand experience and accounts of builders in the US, Canada and New Zealand.

1. Lawyer up

Seek legal advice on residential building contracts

While the pandemic has sent the building industry booming, increased demand has driven up material and labor costs. As Russ explained, such rapid construction cost inflation quickly consumes any net profit you may have projected in a fixed-price project. Additionally, the resulting lag time waiting for available workers and required supplies inevitably leads to expensive delays that you, the builder, must absorb. 

With the current environment changing so rapidly, in many cases, you will know you will be losing money on a signed and contracted build before you begin. 

Think long-term

Let’s say your build has not started–circumstances then change. You now surmise plowing forward makes no financial sense in the end. The right move is to stop, said Russ during the webinar. 

“In fact, as the director of a company, a builder has a legal obligation not to continue, because this contract will clearly lead to a situation where the building company will be forced to trade insolvently. It’s very unlikely that a court will order a builder to start a contract that they cannot complete before having to place the company into receivership because they can’t pay their bills when they become due and payable,” he said. 

Because contract laws vary significantly across Australian jurisdictions, your legal obligations in Victoria may be vastly different from those in Queensland or Western Australia. Russ said he recommends seeking professional legal advice from a firm not connected to the company that may have supplied your original fixed-price contract. 

Also, most contracts have enough ambiguity to allow “plenty of leeway for interpretation when it comes to ‘acts of God’ and force majeure,” he said.  

In other words, there may still be several legal opportunities to terminate or significantly revise signed contracts to prevent you from losing money. It is critical to seek legal advice before you commence work to know exactly where you stand and your options. 

Stop, review, survive

“You can work yourself silly for the next 12 to 18 months, make no money and potentially face personal bankruptcy – or you can take a step back,” advised Russ. “You can re-evaluate your current situation, and then only proceed with the jobs that are definitely going to return you a profit. 

“So, stop right now, before you go any further. Review and re-estimate every contract that has not yet been started and include provisions to cover the expected continuing price increases.  

“It’s important to include special conditions that protect your building company from bearing the brunt of the cost escalations.” 

2. Keep your clients happy while protecting your margins

With all the proper legal and financial safeguards in place to help keep the project in the black, you’ll now need to manage your relationship with the homeowner. 

Delays, unforeseen problems and unplanned costs are all par for the course on any building project – so clear strategic communication with your client is paramount.

Russ outlined three key techniques to use: 

• Over-communication
  One key reason builders have a terrible reputation as communicators is their tendency to put off the tough conversations they need to have with their clients. They often wait until the problem has grown from minor and annoying to significant and potentially catastrophic to both the project and their client relationship. Over-communicating means addressing the elephant in the room as early as possible – ideally as soon as a problem is likely to significantly impact the budget and schedule. By being on the front foot about the issues that pop up, you’re helping manage the client’s expectations. Don’t sugarcoat the problem and resist the urge to lean towards predicting a best-case outcome.Homeowners want to know they can trust you to act in their best interests. And when things go wrong, you’re the natural person they’ll be looking to blame – but also for help. So, they’ll be doubly angry if they ultimately end up footing higher costs and inconveniences because you failed to warn them. While they may still be frustrated at having to create additional space in their budget or timeline, they’ll appreciate your honesty and be grateful you acted quickly to nip their problems in the bud. 

• Anchoring
  As Russ puts it, ‘anchoring’ is about “bending” your clients’ perceptions and expectations from the beginning by dictating their emotional starting point. A key example might be providing an estimated cost range for something that includes an extreme figure at one end so that the actual amount ends up feeling far more reasonable and less scary to the client.
  Anchoring might seem simplistic and obvious, but there’s a reason sales and marketing campaigns do it: it works. “The real value of anything depends on the vantage point that you’re looking at it from – it’s all about perspective,” Russ explained. By controlling the context and position from which your client is viewing the situation, you’re able to help them make the choices that are right for themselves and the build.  

• Labeling
  Labeling is especially useful when it’s time for tough conversations. Building a home is stressful enough already for your clients. And when things aren’t going well, this anxiety will only be heightened. So, before you approach the client to discuss a significant delay or high added cost that might have popped up, Russ recommends doing an “accusation audit.”Take a moment to consider all the worst-case scenarios the client may bring up to you: How and why will they blame you? What labels might they throw at you? Untrustworthy? Dishonest? Shonky?
  Start the conversation by anticipating these negative dynamics – saying these labels out loud makes them seem more exaggerated than they are and helps prevent the client from over-reacting to the situation. For example, you may begin by saying something as simple as “you’re going to think I’m ripping you off,” or “I should have predicted these astronomical material price hikes.”
  Speaking these anticipated criticisms and negative dynamics out loud will often prompt the client to spring to your defense – they’ll end up telling you that the opposite is true. Now they see things from your side.  Russ then suggests following this up by offering positive labels the client would want to have attached to themselves to encourage positive, reasonable behavior on their part. By telling them how smart, reasonable and understanding they’re being, they’ll be encouraged to act that way. 

3. Watch the correct numbers now to cover your future cash flow needs

When looking at the financial position of a construction business, builders, their accountants, bookkeepers and even business coaches too often fail to see the bigger, more accurate picture. 

And this has never been more important than during lockdowns, where a potential building industry shutdown could smash cash flow and all but wipe out any remaining margins. 

As Russ explained during the webinar: 

“I would say there is a 95% chance that your accountant is not producing accurate year-end financial statements for your building company and, as a consequence, if you are a new-home builder, then you’ve probably been paying too much in taxes.”  

Your bank balance might look great, but it’s important to remember that home building is generally a cash flow positive activity for builders and the bulk of that cash is OPM: Other People’s Money. 

Understand the numbers the underpin your construction business

It can be hard to see an accurate picture of the financials when you’re still yet to receive invoices from a concreter for the slab he poured six weeks back. Another factor could be if the initial client invoices were heavily front-ended – specifically to help with cash flow at the beginning of a project.  

 According to research carried out by The APB, 81.5% of building companies owe far more than they realise, meaning they’re likely paying more tax than they should. Remember, the healthy-looking incoming revenue amounts appearing in the credit column are still waiting to cover costs, and debts are yet to appear on the spreadsheet. And paying too much tax, of course, reduces the cash reserve on hand to pay the invoices when they do eventually come in. So, just like that, your problems are compounding. 

“You need to know exactly where you are right now financially before you can then look ahead and plan to the future, because better information leads to better decisions,” explained Russ. 

“Once you know where you are financially, you can start planning your future. And that means creating a business plan that covers your key performance indicators.” 

The key numbers to watch like a hawk, are: 

– Sales revenue 

– Profit and gross margin percentage 

– Fixed expenses and fixed expenses as a percentage of revenue 

– Net margin and net margin percentage 

– Equity 

– Cash on hand 

– Work-in-progress figure 

A small building company with annual revenue of $6 million will typically have an actual work-in-progress figure between $500,000 and $1 million. Knowing this number is vital in ensuring you manage how much cash you have on hand to cover the ebb and flow of your debts and expenses. 

And if your equity figure is not growing month-on-month, then you’re losing money. 

Following the money

Monitoring these and the other numbers in Russ’ list lets you identify inefficiencies and red flags and allows you to take swift action when you see things going in the wrong direction. Making improvements might mean better allocation of resources, planning and managing future revenue, and tightening things up to remain profitable. 

“Normally this would be done monthly, but right now, with things changing so quickly, it’s a really good idea to keep an eye on them weekly,” Russ advised. “And it’s not hard to do when you’re using advanced software like Buildxact, that enables you to record your budget and your actuals – software like that has never become more important.” 

“I would urge you to be using all the features that Buildxact has to offer you guys, because you need it now more than ever.” 

For more on this and why these figures are so essential to understand and monitor, watch this informative webinar section here.

Take action now

Hundreds of APB member builders around the world have already benefited from the above techniques and strategies and helped ward off the financial consequences of the ongoing pandemic. 

And while Australia has been luckier in some ways compared to other nations in how COVID-19 has directly impacted the building sector, you must start taking steps now to ensure a profitable and prosperous future for your construction business. 

Buildxact’s comprehensive and easy-to-use software can help you get on top of your figures, so you know where your business stands. From there, you can make the right choices for your business now and for many years to come. 

To learn more about Buildxact, sign up for a 14-day risk-free trial. Or, if you’d prefer to talk with one of our team members, book a 1:1 demo. 

The post How to keep your residential construction business profitable despite material shortages and price increases appeared first on Buildxact AU.

About Buildxact

The post Buildxact Launches for Small Builders in the U.S. appeared first on Buildxact AU.

“We’ve come out of a period where there has been so much workaround. Good systems didn’t necessarily come into play then because the next job was always around the corner” the article reads. Good systems are easier to run when you have good software, which has helped most industries achieve massive gains in productivity and risk reduction.

Construction management software can help avoid negative cash flow

Construction management software is designed to simplify your residential construction business. Tracking construction cash flow is important and every construction company, big and small, does it in order to be successful and stay in business. It automates and connects all the parts of your business — like estimating, job management and accounting — allowing you to be more efficient and profitable.

Construction management software is key to growing your business. Tracking your business expenses is important to make sure the current cash flow is healthy, meaning more money is coming into the business than going out. Negative cash flow can hold you back from making decisions that fuel growth. Sometimes, especially for custom home builders, negative cash flows are the result of late payments from customers on construction projects. It’s important to know when more money is expected into the business, to inform decisions that help keep it running. A construction business with cash flow problems usually struggles to stand out from the competition, so getting software to help you keep track of the finances will go a long way in setting you up for success.

Benefits of construction management software

If you’ve used or are still using Microsoft Excel, paper plans, calculator, and ruler to create takeoffs and estimates, there’s a better way. You can start reducing the unnecessary stress of managing multiple jobs or not knowing if you’re making money. Always know if you will have money coming in to continue driving your business forward.

Save time and frustration by using a construction management software solution that centralizes manual, inefficient processes into a single automated platform.

An integrated, Cloud-based system saves you flicking between spreadsheets and manually inputting data into multiple systems can lead to mistakes. Sometimes, these mistakes can lead to losing money, which is never a good thing for a small business owner.

Stop wasting time checking different places to get the needed information.

For builders and trades in construction, having an integrated solution for estimating, job management, timesheets and accounting will cover 90% of what most companies need. Builders can save hours by making better software choices.

Some things to consider:

• Look for technologies that sync with other systems. Tools and software websites should have a list of apps, tools and technologies they integrate with
• Ensure your tech is Cloud-based for easy data backups
• Search for new tech designed for construction as they will have a better chance of integrating with your other programs.
• Look for mobile-friendly programs
• Check for a wide range of functionality such as costing, quoting, scheduling, etc.
• Find technologies that capture as many of your data sets as possible, such as client details, employee details, invoices, etc.

Remember: more technology does not equal better technology. Having fewer (but smarter) integrated tools is more efficient.

3 things you can do now

1. Use good accounting software (Cloud)

We see that the most successful custom home builders and trades on our platform use a modern, cloud-based accounting software such as Xero, MYOB or Quickbooks Online. Being online (or “Cloud”) you benefit from being able to invite your Accountant or Bookkeeper to work on your accounts and access your information from anywhere, so you can keep you on track.

2. Track your jobs like a boss

Staying on top of jobs as they happen is the key to good cash flow management to be a successful company. You need to right tools to do that. Job by job, you need a real-time view of what’s going out, and how that stacks up against what’s coming in. Construction Job Management software like ours means you know exactly at your fingertips. With all your purchasing and invoicing done with one tool, and everything neatly transferred to your accounting software at the click of a button, you’ll be on your way to managing cash flow like a pro.

3. Familiarise yourself with safe harbor provision

Company directors in the construction industry should familiarize themselves with safe harbor provisions, which allow directors to attempt a business turnaround while being protected against personal liability for insolvent trading. “Safe harbor is really an insurance policy towards insolvent trading, but it’s something people don’t really like to talk about,” Andrew Spring from Jirsch Sutherland Insolvency Solutions says.

We’re on a mission to help builders and trades thrive, so talk to us about how you can use mobile and cloud-based tools to drive your business forward.

The post How to manage the cash flow of your construction business appeared first on Buildxact AU.