Beyond the Build

Leadership

Are Unnecessary General and Administrative Costs Whittling Your Profits?

As a construction company navigating our way through these hard economic times, we are devoting much time to seeking out the right opportunities. Many of us are in the same boat, looking for work that has reasonable profits. On the cost side of our operations—overhead—we’re fortunate to have a forward thinking CFO who keeps me from having to watch our backside, so to speak.  I asked Del Allen, the moneyman here at Stewart Perry, to share a few things he keeps top of mind. These 5 points have saved our company, and hopefully his advice will provide good takeaways for you too.

Closely Monitor Cash – The rainy day fund we established during the “good times” we experienced at the peak of the previous economic cycle (2007 and early 2008) has come in handy now that revenues have fallen and customers are delaying payments. Staying in contact with customers reminds them we appreciate prompt payments.

Negotiate – Now is an ideal time to renew or renegotiate services (like telephone), equipment leases (like postage machines/meters) and supply purchases. Many vendors are willing to reduce prices or upgrade services.

Watch for Good Buys – Prices for electronics, computer hardware and software have moderated or even fallen. Upgrades to our network and new devices for the office or field managers can be purchased at a more reasonable cost.

Communicate Wisely and Effectively – During tough times, the CFO often becomes a bad guy with a reputation for cost cutting and belt tightening. Clear explanations of changes in policies and controls on expenditures are necessary to alleviate employee fears and resentment. Showing your team the long-term benefits of modest spending right now is imperative.

Become a Salesman – This is closely related to communications above, but includes capturing employee “buy-in” to cost saving measures and productivity improvements. When the whole organization supports management in implementing new practices, success is all but assured.

Merrill Stewart Jr.

Merrill Stewart is Founder and President of The Stewart/Perry Company, a commercial building contractor based in Birmingham.