3 minute read
Technology in Construction
Herb Brownett, B2W Software, Inc.
Monthly Job Review Meetings – A Critical Construction Business Practice
The Monthly Job Review is the single most important financial management practice for a construction company. This is not only because projected job profit is the key building block of the company’s financials, but more importantly, this meeting is the best control over the primary source of revenue and profit for a construction company.
Please note: monthly financial meetings are not a substitute for daily performance tracking. Contractors should also take full advantage of electronic field logs, e-forms, telematics, and other technologies to monitor jobs and make timely operational adjustments. The immediacy of reporting from these and other field-centric tools is extremely valuable, and the data can be reconciled later with the financial system of record.
By Monthly Job Review, I am referring to a monthly meeting attended by each project manager and by senior management to review the projected cost and profit on each significant job. Failure to faithfully hold these meetings and to put a serious effort into reporting, is a risk to a company’s future. Losses on a single project of 25% of the contract value are not uncommon in the industry. Many companies cannot afford one or two such events within a short time period.
Once the meetings are schedule with a regular monthly cadence, the key steps of the process should be: • Project managers prepare a detailed Projected
Cost Report, with other relevant information prior to the meeting. • Senior managers review the reports prior to the meeting and develop questions. • Based on reports submitted by project managers, a preliminary Work in Progress Report (WIP) is prepared and distributed to each project manager for their specific jobs. Senior management
receives the report for the total company. • At the meeting, each report is reviewed, and questions are asked by senior management about key issues. • A decision is made by management whether to use the project managers projected profit in the
WIP or to adjust it up or down. • After the meeting, a revised WIP is issued to senior management for final review.
Useful information to include with the job projections includes a Job Profit Trend Report that shows the monthly projected job profit and variance from the previous month for the life of the job. Additionally, a Contract Summary showing the type of contract, saving split if applicable, indemnification clause, and whether the job has liquidated damages and, if so, how much per day. continued on page 70
Technology in Const. continued from page 69
The schedule, any issues with the job owner, change orders, and subcontractor performance are among the issues impacting profitability that should be discussed for each job at the monthly meeting. Self-performed work productivity and profit swings from the previous month, significant over and under billings, accounts receivable status, and job-to-date cash position should also be covered.
Everyone involved needs to understand that these meeting are very important and are mandatory. There will be schedule conflicts for both senior management and project managers. That is the reality of construction. These should not be reasons to skip meetings. If absolutely necessary, they should be rescheduled as close to the original date as possible. It is not unusual in the industry for a project to get off track in weeks and become a serious loss issue in a matter of two or three months. The sooner problems are identified, the quicker the loss can be mitigated.
Another firm rule is that dishonesty in job profit reporting by a project manager should not be tolerated.
In summary, it is necessary to have a regular Monthly Job Review process that is very disciplined and conducted with total integrity. The financial future of any construction company is at stake. n
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