89. Accurate Project Reporting With Dennis Wong

If you don't have timely and accurate information about how every project's going, you really have no idea whether you actually, you know, on track, Are you actually making money or not? And that's obviously a very critical topic for all builders.

Welcome to Professional Builders Secrets, the podcast for building company owners wanting to grow safely and securely. I'm your host, Will Blunt, and today I'm joined by executive business coach at the association of Professional Builders, Dennis Wong. Dennis, welcome to the show.

I will. Thank you very much. It's a pleasure to be here today. It's our first podcast today. I'm looking forward to the. To our chat.

I'm looking forward to it as well. You're actually in Singapore at the moment, aren't you, Dennis?

I am, I am. So it's just a little bit warm here, but it's all good.

Funnily enough, we usually live about five minutes from each other, but now we're on other sides of the world. But all good. The wonders of modern technology. But today we're talking about project reporting for builders, which is a topic you're working with builders on all the time with your. With your clients. But do you want to just explain what the concept is?

Yeah, great question, Will. And I'm really pleased that that's the topic of today's podcast. Project reporting for Builders is all about having these ongoing and systematic processes in place so that builders can collect, they can analyze, and then they can communicate. Communicate information about the progress of every single construction job that they're involved with. Now, it does involve lots of different areas in construction, so includes budgets and financials. Can also include things like quality control measures, measuring the timeframes, construction milestones, and even risk and health and safety.

Interesting. So it's like an in depth document which kind of keeps them up to date with all their projects that are running at once.

Yeah, absolutely.

Yeah. So why. Why is it so important for builders to have something like this in place?

Well, the point about the information is that if. If you don't have timely and accurate information about how every project's going, you really have no idea whether you actually, you know, on track, are you actually making money or not? And that's obviously a very critical topic for all builders and, and Reese, you know, and recently, because of all the challenges in industry with escalating costs, delays in the supply, you know, supply chain, shortage of labor, it's been, it's been even a bigger challenge for every builder. So you really need to be very closely monitoring how every project's going so then you can then make decisions before it becomes, you know, becomes a serious issue or becomes too late before you can actually do anything.

Yeah, right. Interesting. And what kind of impact is that having on, on the individuals running their business if they don't have this in place?

Well, I mean, to be perfectly honest, Will, if you are a typical building business owner, I would like to think that you are trying to build a profitable business that's going to give you a profit for all the hard work that you're putting in and it's going to compensate you for the risk that you're taking. But if you're not making money, then you're really only working for wages and you're not actually building a sustainable business. So you've got to make sure that you know where every job in the business is profitable and heading the right direction or not.

Can we just unpack that more? A little bit more? So when you say a job's not going to be profitable, what does that actually mean in reality?

Okay, well, if you're not closely monitoring the profitability in the job, and I'm talking about comparing the ongoing construction costs versus your original budget which you would have put together in your estimate, if you're not actually keeping track and you're not managing your costs well, you could end up actually losing money by the end of the job, which will lose means that your margin is, isn't where you thought it was going to be. And in fact, if you, if you're not monitoring and your project runs longer than you anticipated as well, it also means that your gross profit margin will gradually get, get eroded because that you, you know, you got to constantly keep running and managing this job much longer and beyond what you thought was going to be necessary. Now if you're not proactively monitoring your, your projects right now, you just don't have the information and timely information to help you make a decision making. Now if you think you can wait for your accountant to tell you at the end of financial year or the fiscal year, you know, whether you've actually made money or not, it's just too late to do anything about it. Would you agree?

Yeah, absolutely. I mean, I'm not a builder myself, but have run a business in the past and it can quickly get away from you when you're not on top of your profit and loss.

Yeah, absolutely. So in the past few years, with what we've been seeing in the industry, with the construction cost increasing, the supply chains are talking, those labor shortages, project reporting has even become more critical because for builders, for the majority of builders at least, profit at the end of job has often been much less than they've expected. So you've got to do something to be proactive and be able to protect that going forward.

You mentioned like supply chain issues and a few things have popped up, especially in recent times since lockdowns and everything came in last year. What type of delays are builders seeing on their jobs? That is just out of the ordinary in recent times?

Well, you used the term out of the ordinary. I think supply chain issues and labor shortage being such critical things that it's almost become the norm now. So. But a couple years ago it probably was less usual. But bottom line is with a lot of builders I've been talking about is that they are still experiencing delays in certain products. It has improved, especially since we've gotten over most of the COVID lockdowns. But there are still ongoing issues with supplies. Cost is certainly not going down as much as we would have liked. I guess with inflation increasing pretty much everywhere around the world, it's continuing just impact construction. And the other one that that has been an issue is, is labor shortages. And that includes trying to hire more people to take on your construction projects or even get subcontractors. It seems to be a continued short shortage in supply of good reliable subbies out there in the market. And if you can't get those people, it means that you can't start your jobs, you can't build when you expect it according to your schedule and just means that everything just gets pushed out and then it becomes a bit of a domino effect. Everything needs to be replanned, reschedule and gets pushed out further and further. And as I said, there's an impact there on your long term overall profitability on the business.

I imagine it adds frustration to the client as well, doesn't it?

It does, it does. I mean, it's one thing, you know, if you are a great organizer, you plan everything from, you know, before the project starts, so you've got all your, you know, best made plans, you know, in train. And then when you get these delays, you've got to suddenly, you know, reorganize yourself and you've got to react. And it's not generally ideal, it's generally not as effective or efficient as you would like it to be. And it does put a lot of stress because it means that you're going to impact lots of stakeholders throughout the job. You've got rescheduled your sub sub your subbies and your contractors and your team and then you've got to reschedule material. So it's a, it's a, it's a major ongoing issue that, that builders are constantly facing.

Yeah, it does. I mean, it's, it sounds like a super important thing. When, when you bring it up to builders and you're coaching them about putting KPIs and reporting in place on their projects, do you get any pushback?

Yeah, that is a good point. I would, I think it would be fair to say that most building owners that we talk to are very time poor. They've got so much on their plate right now. They're dealing with so many different issues both in and outside the office, dealing with clients. They don't often have a lot of time. And I'm talking to builders that are working anywhere from 45 to 70 hours per week. So I think it would be fair to say that they will be feeling that they don't really have a lot more time to take on project reporting. So, so, so when I sort of bring that topic up, they sort of, they, you know, they'll take a bit of a breath and go, now more work for me. But the bottom line is that if they don't, as I said, if they don't take on project reporting, they don't put time and effort in it, you are never going to be in position where you can actually track and monitor your profit position. And that's a very dangerous position to be in.

Yeah, I guess that's the, the implications. Right. Of, of them not putting in place. It's almost like they can't afford not to. Right?

Absolutely. Yeah.

Dennis, if a builder tells you that they don't have time to put KPIs in place because they don't really have any room to move for increasing profit margins, what would you say to them?

That's another very good question. Because a lot of builders believe that you really can't increase your profit margin on the job once you sign a contract, in particular fixed price contracts. So I can appreciate where they're feeling. If you're working 50 to 70 hours per week and you don't have much more time to take on project reporting, why would you even do that if you can't change the profit margin on the job? But one of the biggest myths that you can't increase the profit margin is actually not true, because the truth is you can. And more importantly, you can actually do it ethically. So let me explain it this way. I believe every builder knows that once you start a project, it is Very easy to lose money along the way, you know, due to delays, cost overruns that we discuss. And this is happening all the time. So when your project gets delayed, the cost of running the job also increases and that will erode your profit. So if we accept that delays will cost you money, then the opposite must also be true. So that if you actually can shorten your construction program and finish the job earlier than expected, you can actually make money or save money and job, and that will actually improve your gross profit margin. But there's also a number of other things that you can do to increase your profit margin. And yes, it is challenging, but for example, if you have strong relationship with suppliers, you can negotiate better pricing, better terms, and you may even be able to consolidate your orders and get volume discounts. If you look at your construction materials, perhaps you can look at alternate materials and methods and maybe even look at how you could reduce wastage on your construction and materials, because those overall efficiencies will actually help you lower cost, increase your margins. If you have strong subcontractor relationships, you could possibly negotiate better competitive pricing as well. And then overall streamlining your construction process. Because if you can improve your scheduling, reduce errors and rework, if you can have better coordination between your subbies and your teams, you may be able to then save time and resources. Ultimately, that shortens the build time, saving you money. That's what we're talking about here. And then lastly, if you have an efficient way of managing your change orders and variations, because there's generally lots of variations on projects, if you can manage those variations well, minimize the impact on your profit margins. So if the scope of a project has changed, make sure that you can pass on the variations to decline at a fair margin for the additional work. And that way your margins overall will improve as well. So they're just some of the ways that you can look at improving margins. And that hopefully debunks that myth that you can't increase profit margins.

I mean, that's some great tips there, because automatically when you think increase profit margins, you think, I need to increase my prices. There's a whole bunch of efficiencies you can create there, which is going to help create some more fat in the margins there, right?

Absolutely.

And that, that's obviously helping with the project reporting aspect, because when you're monitoring a higher margin project, you've got more room to move, right?

Yes, absolutely. It's, you know, at the end of the day, your profit margin is what's going to fuel your future growth as well, so it creates a buffer that you can then use to, you know, that you can then use to, you know, continually build and fund your business.

Just, just what would you do? I guess if you're monitoring your KPIs and your, and your reporting every month and you notice a project is going to overrun and you're running close on your margins, that you're actually going to lose money on that project, what would you recommend to be able to do at that point?

Okay, if you're losing money, then you basically. Well, first of all is that you've got to stem the bleeding. So you've got to look at, see what's causing the actual cost overruns and try to stop that as quickly as possible because if you, if you don't, it's just going to continually bleeding. So, so that's the first thing you need to try and find a solution as to why the problem lies. Then the next thing to do is look at how you can reduce the risk or start, start looking at creating some savings to be able to recoup some of those losses. And then that's when you would go through looking at some of those things that I just mentioned about, you know, looking, repricing, going back to suppliers, trying to get a better deal, look at subcontractors to see whether you can actually, you can negotiate a better price, et cetera, et cetera, and just improve your overall construction program to the end to see whether you can actually improve or shorten the cycle.

At some point do you need to push back on the client and increase their expense?

Well, legitimately you can only really charge for clients for things that outside your control, like a change of scope. And then you would have a change of order and variations that you, you can then pass on things that are outside your control. Will be things like bad weather, you know, if you, if your project is impacted by that, then yes, you can legitimately, under terms of contract, apply for extension of time and you know, and legitimate then pass on that cost to the client. But, but really, yeah, there are only limited things that you can do as long as they're, you know, within so outside of your, you know, outside the control of your client.

I guess that reinforces how important it is to have a good contract in place as well. And the right clauses in place.

Correct? Correct.

So I guess at a high level, what advice would you give home builders when it comes to this topic? Facing the challenges of profitability, project overruns, staff shortages, all these things you've mentioned. So what's the high level solution for them. Obviously we're talking about project reporting, so that is the solution. But I've answered my own question.

Yeah, I guess in a way you have. But really, I guess to summarize what you're saying, Will, is that the number one thing is that they have to recognize, acknowledge that project reporting is mandatory, it's not optional, you have to do it, otherwise you're just at risk. You know, you're running your business blindly and you're never going to be sure you know how your business is actually tracking and every project is tracking. So that's number one, you really have to accept that you need project reporting. The second thing is then you'll have to accept that you have to make time if it's that important. You have to make a make, set it as a priority. You have to dedicate time to it. And I'm talking about tracking your numbers. And I'll mention KPIs key performance indicators. You need to track certain KPIs around your business and projects and you need to do that regularly. You can do that weekly, but minimum, you have to do these at least once a month. That's absolutely, that's absolutely critical. And you really cannot shortcut. There's no, there's no other path besides that.

So you're talking about time, obviously something that builders don't have a lot of and they need to actually dedicate the time to this. How long does it take to put together a proper KPI tracking project report for a single project?

I thought you might ask this question. It is a tricky one here because it really depends on how you know your existing setup, how well organized, what tools you currently have in place. I mean, if you're fairly automated and you've got software systems like BuildXact and Buildertrend or other systems like Procore that are designed to help you track your projects and you've implemented successfully, then I would imagine it shouldn't take you more than a couple of hours per week be able to extract these reports of the system. But I've talked to builders that are only either they haven't implemented the YAM that's still in progress, so. So they could be months away from actually getting those things up and running. And some builders still use spreadsheets, which if you are a bit of a spreadsheet wizard, you can certainly use them. But obviously there's a risk that if you're not careful in how you set up your spreadsheets and are they going to give you the data and do you have inherent errors in spreadsheets that kind of. So it could take you a couple of hours to tens of hours, just depending on how developed your systems are. But I would like to think that if you've invested the time to putting the systems in implementing them, then you will reap the benefit as you'll be able to hit a button, get reports out literally within seconds for each project, compare that with your original budget, you know, and, and then look at a few other KPIs along with that. But it really, at the end of the day, if it's been implemented, it shouldn't take you more than a couple of hours in the month.

Okay, so those tools you mentioned, build exact, build a trend, are they basically automating this process to a certain degree or.

Well, they, they are tools that software systems out there that will help you to actually track your cost. So essentially what happens is that you set up your budgets. When you do the new estimate, you import it, or you, you load it into one of these software packages. These are not the only packages out there. These are all project management, cost management, cost, job costing systems out there. But essentially what they do is once you have your original budget, as your project is progressing and you start receiving costs from suppliers and contractors, and your labor costs, for example, your own construction guys, you are actually inputting the actual cost into the job week by week, month by month, so that you can then compare how you actually tracking against your original budget. So essentially that's what you're doing is actuals versus your original budget. And that way you can actually see where you're making money away, you're not, or how much you have, you know, you've allocated to, left to spend on a particular line item.

Okay, that makes sense. So let's get into the detail then of one of these project reports. Let's look at one in isolation. What KPIs are you including in a project report?

Well, the KPIs will vary, but essentially the kind of KPIs that we need to look at is we need to look at margins. That's probably one of the top ones. So your margins, we need to monitor your margins all the way through the build. So not just after the client has signed a contract. So a successful builder is going to constantly recalculate and monitor gross margins every month during the build. If you happen to be doing something like a WIPA calculation using our WIPA tool, one of the outputs in that particular report is in fact it will give you your current gross profit margin. Month by month. Second KPI, which is really important, is to be able to check whether you're finishing on time and on budget. Because as I mentioned earlier, the longer a project takes to actually build or gets delayed, then you're potentially going to be losing money. So the reverse is true. If you can shorten your construction program, you are potentially able to make or save money in the process. So tracking your finish time and budget is obviously the second thing is related to the point above, and that's calculating the cost of delays. When you realize that it's actually costing you any extra money. Every day a job gets delayed, it's going to put the focus on completion because suddenly everybody becomes aware that there is a cost involved. So, for example, if you've worked out that your cost of overheads per day is, say, $500 per day and it's been delayed by an extra two weeks, well, what does that mean then? The financial impact of this delay is going to be $500 per day for 10 days, which is $5,000, and that's going to come off your net profit. So the moment a builder becomes aware of the cost of delay, I think it suddenly wakes them up and puts a bit more pressure on making sure the job stays on track. Or they look at how they can reduce the delay in the shortest possible way. And then the next KPI I would suggest is using something to assess the client's satisfaction throughout the job. And we would suggest using something like a Net Promoter score in the build process, because what this is designed to do is to help you get client feedback on your performance or your company's performance throughout the job. Because the more aware how happy your clients are and helps you to identify where potential issues are, then you can deal with them before they just get out of hand. So it's all about being proactive and being on top of things.

So I guess the Net Promoter score, though, that's. It's a little bit more intangible. While it's a score itself, it's the feeling and the perception of the client compared to, you know, the budget and the margins that they are as they are. Right?

Yeah, yeah. Some numbers are a little bit more concrete, I guess you say, whereas Net Promoter scores are a little bit more on subjective scale because it's based on how the client's feeling about your performance.

Yeah, yeah, exactly. So how do they. I mean, you spoke about those tools that they can use to track all of these different things, but the examples you gave, so finishing on time and budget, monitoring your Margins, calculating your cost of delays using a Net Promoter score. I'm assuming they're not built into Build Exact and Build a Trend and things like that. So how would you recommend they kind of keep track of all of those things?

Well, we've actually put together a project reporting spreadsheet in one of our action plans. We actually have an action plan which is project reporting for builders. And one of the tools in there is a Google sheet, which we set up specifically to help you monitor those four KPIs. So once again, monitoring your margins, finishing on time and budget those cost of delays, and then summarizing your Net Promoter scores. So it's an easy to use spreadsheet that summarizes all those four KPIs in one place so that you can quickly assess and monitor how every project is going.

That sounds like a great place to start. I mean, it's just plug and play, right?

Pretty much. Pretty much. We try to make it as easy as possible for our members to use.

And with a little help from their coaches, right?

Exactly.

Well, Dennis, that's been super helpful. Do you have any other tips for builders out there which are looking to put in place a project reporting system for their business?

All right, Well, I hope that by listening to this podcast you've appreciated the importance of project reporting and you've made decision that this is something that you want to embark on. Then if you're looking to then implement project reporting, I do suggest that for all our APB members and private and elite mentoring clients that you do have a look at the action plan. Project Reporting for Builders Action Plan. It's on our training portal because this action plan is a very practical guide to help you get started. And what we've done is we've included, as I said earlier, will, we've got the downloadable spreadsheet. So those are the kind of tools that's going to help you to do some analysis on those KPIs, your margins, timelines, client satisfaction and quality. Qualitative kind of measures. So, you know, please go to that training portal and check it out because I think that's going to give you a big, big head start to get you up and running.

Yeah, perfect. Well, I'll be sure to include the link to the training portal in the show notes and for any non members out there listening, obviously if you join apb, then you can access all of these resources as well, which will be super helpful with your project reporting.

Fantastic.

Dennis, thanks so much for coming on the show today. You've provided a ton of value for builders about project reporting and KPIs. My biggest takeaway was that they really need to get a system in place where they can track monthly KPIs at a minimum so they can stay on top of cost overruns, budgets, margins and all the fun stuff when it comes to running a profitable building business. But a big thank you to our listeners wherever you are in the world. If you like the show, please subscribe to Professional Builder Secret on your platform of choice. And if you're feeling generous, please leave us a review as well. But until next time, have a great day.

Thanks very much, Bill. Thanks everybody.