Construction is a multifaceted industry and a risky business. It requires huge financial investments, which get returned as profits much later. Thus, it is an expensive business which offers delayed benefits. The construction project cannot proceed without adequate finances. Hence, the owner of construction facilities must obtain reliable capital resources to finance costs of construction. The owner does not just work on one project but numerous projects which are all financed together. In addition, there are other problems such as budget overruns, unreliable contractors and delays. If the owner is unable to cover costs, the capital investors face financial problems.
However with a pragmatic approach, owner of construction industry can build finances (achieve profits) in less time. Some of the guidelines for the same are as follows:
- The owner should be aware of the amount of work to be undertaken. Further obtain knowledge of the technical skills required which will enable to calculate the correct cost of construction project. Thus he should define goals and set expectations. Emphasis have to be on long term planning. Setting expectations enhances confidence of both clients and employee’s in the owner.
- Generally it costs less during planning and designing of the project but involves substantial expenses during construction. Instead of giving importance to sales, and getting deals, owner should develop understanding of the financial aspects and costs involved in the construction project. They can also hire appropriate project managers and financial consultants to understand the actual costs incurred by a project.
- Estimate the true profit by considering overhead costs, risks and job costs.
- Managing the job production to achieve profits: the job should be done in the cost-effective manner to make profits. Changing daily orders of operation and determining the productivity of labour force. When the work to be completed in 2 days, takes 6 days, it incurs additional costs. Thus jobs should get delayed.
- Accounting for profit by employing a project manager who keeps track of the budget and purchase orders. He has accurate knowledge of the expenses since he is present on the site. He applies construction specific accounting knowledge.
- Since education always helps, hence training to be given to labourers, employees and management professionals.
- Emphasis on written procedures (SOP) is important. Procedures should change improve. They should be evaluated periodically.
- Effective Good communication with employees is valuable and necessary. They result in strong relationships with all parties and frequently result in future referral business.
Overall building finance in construction industry takes time. Following the above guidelines will enable the owner to develop business skills to reap profits in less time and have sustainable career in construction industry.