How to avoid these common risks in construction
There are risks that come with any kind of business. In construction, these problems can delay projects, cause issues with cash flow, and damage your business reputation. These are all common risks in the construction industry. Here’s how you can avoid them.
Non-payment
Contractors should always do thorough research on their prospective clients before they price up a project. This research could tell you if the client has a history of not paying their contractors, or of disputing their invoices.
During a project, you should always keep the client updated of what the expected final cost of the project is. Make sure you give timely notifications for any invoices or variation claims.
Keep an eye on the rumour mill. If a client is in financial trouble, you are likely to hear some whispers on the grapevine first.
Submit your invoices in a timely manner and make sure they’re correctly formatted with all the right supporting documentation. Don’t give your clients any excuse to get out of paying.
If your client is late paying, immediately contact them. To avoid this, remind the client in advance than payment is due and when you expect this payment to be made.
Work with the client to minimize variations to the project. Variations will add costs to the project and could result in the client exceeding their budget, and you not getting paid.
Losing money on projects
Make sure you accurately price your projects. Do what you can throughout the project to maximise productivity and minimise waste.
Make sure that all work is invoiced and that any items that are different from the project document are claimed as variations. Make sure the project is completed on time, or ahead of time. Any delays that aren’t your fault can be claimed as a variation.
Make sure that the quality of any work and materials meets the specifications. Carry out a proper risk assessment, such as pipeline risk monitoring, to avoid costly errors.
Cash flow
Submit your invoices on time and follow up with clients to make sure you’re paid on time.
Submit any variations claims immediately, with supporting documentation. Do what you can to get the client to agree to the claim as soon as possible.
When you price the project, understand the payment terms and conditions. Check the cash flow of the project before you submit your price. If cash flow will be negative, look at alternatives to improve it.
Finishing projects on time
To make sure projects get finished on time, check that the construction schedule is correct and achievable, taking into account all restrictions on the project, as well as the expected weather conditions.
Don’t price projects that have an impossible construction schedule. Make sure that you have the resources and skills needed for the project and that your team understand the required schedule.
Update progress against the schedule on a regular basis. If slippage occurs, work to understand the reasons and implement steps as quickly as possible to prevent further slippage and to help you catch up on lost time.
Impacts of adverse weather
Try to plan your schedule so that tasks that will be the most impacted by poor weather are done when the weather should be good. Close up buildings before poor weather starts and avoid any earthmoving during rainy time.
Construct earth berms and drains to prevent stormwater from getting work areas. Be ready for bad weather, so incomplete work and materials can be quickly protected.
If you can, try to plan work so that parts can be built in protected areas off-site if possible. Avoid projects that need to be constructed at the workst time of the year.
Safety
It is important to keep your team safe and that everyone on site is committed to reducing safety risks. You can keep safety by making sure everyone has the required skills that they need. Keep all work areas neat and tidy.
Make sure all project workers undergo a proper project induction before they start work in the project, so you can ensure that understand the rules and any possible hazards.
Good quality
Make sure your workers all the right skills and training needed to complete the project to a high standard. Buy your materials from reputable suppliers and don’t make choices based on price alone.
Put in place continuous checks to eliminate any errors. Use subcontractors and suppliers with the right resources and skills to deliver the required quality. Provide your team with the right equipment.
Encourage a sense of pride in your team to deliver a quality job. Never sacrifice quality for speed or price.
