Finding savings anywhere in the business is always a positive thing. One thing that many construction companies fail to realize is that there are many ways to reduce costs within their organization by simply altering their current processes. One way to do this is by addressing your existing overhead expenses and finding areas where savings can be made. Many of the tips suggested below can be applied to a single project and bidding process, but can also be implemented across the entire business.
- Analyze/Recognize Fleet Cost
The use of heavy duty vehicles is a necessity for any construction company. Fleet costs account for a reasonable portion of an entire construction budget. One of the biggest expenses that construction companies face is purchasing equipment as well as the vehicle maintenance that each piece requires. One way to address this is by altering how you manage your fleet. You can start by selling lightly used vehicles or trucks for profit. in place of purchasing, renting or leasing equipment is proving to be a cost-saving strategy which allows you to avoid high maintenance costs. Another way to adjust fleet costs would be making sizable investment when selecting your new equipment. Investing in hybrid or electric vehicles may provide higher upfront costs, but are a more cost-effective long-term solution.
- Rewards Programs for Employees
By creating rewards programs for employees, you can effectively reduce your overhead in the long run. For instance, rewarding employees who come up with ideas that minimize cost, will not only reduce expenses, but also motivates other team members to put forth their ideas. For employees who come up with actionable cost saving ideas, you can offer free lunch, extra free time, promotion or even an instant cash bonus. This will go a long way in improving employee cooperation. Most construction companies put reward programs in place to facilitate employee productivity. Rewards for an averted extra cost is also a good way to continually slash your overhead expenses.
- Hire Multi-Purpose Workers
Another good way to reduce overhead expenses is by hiring multi-purpose workers. Hiring workers that can function in different roles allows businesses to reduce salaries. For instance, instead of hiring separate workers for book keeping, data entry, and other administrative functions, hire someone who has experience in all areas.
Also, you can reduce the number of off-site and on-site employees by carefully employing versatile individuals. This will go a long way to cut down overheads, because a reasonable percentage of overheads in construction comes from employee salary. When you hire multi-purpose staff, you are able to reduce down time, create efficiencies and also increase productivity. Although finding these individuals may be difficult, work with your HR department who can help you attract the right people for the job. More importantly, hiring fewer staff with various capabilities may force your business to pay them a higher salary, but retaining employees will prove to be a long term benefit.
- Reduce the Number of Suppliers and Strategically Negotiate Contracts
The first step in reworking your current contracts must be to develop a strong relationship with less suppliers. By forging a better working relationship with fewer suppliers, they are more likely to cut you a deal or honor discounts. When working with your best suppliers, negotiate longer-term contracts that provide volumes of discounts, rather than working on a per-project basis. This will stand to lower overhead expenses over the long term.
- Make the Move to Paperless
As more businesses move to a paperless office, construction companies have been slow to follow. With many files existing in storage it may be difficult and even daunting for many businesses to start making this shift. One thing that many construction companies fail to realize however is that continuing to rely on paper is only adding to overhead expenses. The cost of paper, mail and storage facilities can add up quickly. In addition to reducing expenses, the limiting paperwork eliminates a variety of problems within the business, including lost or misplaced documents and time spent searching for documents. Although the initial process of scanning and uploading documents into a document management tool may be an arduous and time-consuming task, it will undoubtedly prove to be a long-term benefit in cost reduction and will contribute to increased efficiency.