Seven Reasons You’re Over Budget at Your Sites
Decrease costs by paying attention to these seven things.
Accurate, real-time financial data is the lifeblood of every business, especially for industries with tight margins like janitorial and security contractors. If you’re in a service industry and you’re not monitoring profitability at the site level, you could still be losing money even if most of your sites are profitable. If you’re not continually evaluating budgets at your sites, your bottom line is going to suffer. On the other hand, if you use job costing and budgeting tools, you have a better gauge on your company’s fiscal health and can better manage your profitability and cash flow. To help you get started, here are seven things you can fix to help you get back in budget.
1. You’re paying your employees too much.
No, we’re not saying you should immediately slash your employees’ salaries. But, did you account for things like shift rates and wage creep when you built your budget? Cost of living increases can derail your budget if you’re not careful. And, if unemployment stays low, you’ll have to pay more to get — and keep — good employees. Another aspect to evaluate is how often do you have supervisors filling in for employees when they miss a shift? If you’re continually paying your higher priced employees to do an entry-level position, your budget doesn’t stand a chance.
2. You’re paying too much overtime.
Overtime for hourly employees is the number one profit-killer for a service-oriented business, particularly for industries with thin margins and distributed workforces like janitorial and security contractors. For security contractors, you should evaluate your scheduling practices for guards to ensure you’re not embedding overtime and you’re stopping the issues before they start. Our Overtime Quick Guide has some additional tips to help you rein in this metric.
If you’re paying a significant amount of overtime week after week, you need to evaluate your headcount because you may not have enough people to cover all shifts. It might also be time to reconsider your recruiting and hiring practices to ensure you have enough staff to fulfill your contracts and keep your customers happy. If you’re struggling to retain your best employees, check out our Retention eBook for tips to improve your retention — and your bottom line.
3. You bid the job inaccurately.
Let’s face it, we all make mistakes. And sometimes, those mistakes can be costly. Bidding a job inaccurately from the start is going to cost you and drive down your profitability until you take the time to correct it. Did you bid the job at a break-even point and expect to make it up on additional work, but that additional work never happened? Did you take seasonal needs into account? Did you miss any square footage? Make sure you’re bidding every job in a way that’s going to positively impact your business and your bottom line. Maybe that means you won’t win every contract, but if you need to bid it at a loss, it might not be a contract you want to win.
4. Your supervisors may be poor managers.
Site managers are critical to your success. They’re entrusted to deliver on your contracts, keep your customers happy and monitor key metrics to keep your sites in budget. If your supervisors aren’t doing their jobs correctly, your budget is going to reflect that. Your supervisors need to be regularly evaluating employee performance, overtime, attendance and other issues that impact your budget and your profitability.
5. You’re losing your top performers.
High turnover leads to more inexperienced people on the job because you needed to fulfill your contractual obligations to your customers. With more inexperienced individuals, you’ll need more supervisors on site and your costs can go through the roof. When you don’t have enough employees to do the work, you’re more likely to lower your hiring standards instead of taking the time necessary to hire quality employees. While high turnover can be costly, it’s also important to remember that some turnover can be good. You don’t want to keep your lower performers solely for the sake of keeping your turnover metric in check. But, if you have a strong pipeline of prospective employees, it’s easier to let go of the bad ones and bring on new employees in their place.
While you’re evaluating your company’s turnover, it’s a great time to also assess your company culture and onboarding process. Why are you losing top performers? Are your supervisors engaging with new employees? Do employees feel valued, respected and appreciated? Think about what it would take to ensure your good employees stick around and don’t leave you for a job that might pay a little more.
6. You’re doing too much rework.
For janitorial contractors, if you’re constantly having to send employees back to your job sites to correct issues or fix deficiencies, you could be sabotaging your budget without even realizing it. You’re essentially paying your employees twice to do one job. And, chances are, you didn’t build that into your budget. Instill a mentality in your employees of doing it right the first time. That can result in significant savings of both costs and time. Quality assurance tools can help along the way to make sure you’re catching any issues before your customer has to report them to you.
7. Your employees received insufficient training.
If your employees don’t receive the proper training upfront, they’re not going to hit the production levels you were expecting when you bid the job. For security contractors, your guards might require additional training shifts you hadn’t budgeted for down the road if they’re not meeting your customers’ expectations. Janitorial contractors might find themselves with jobs that were bid to take four hours but because of insufficient training, they’re actually taking six hours.
Give your employees the tools they need to not just do the job, but to do the job right. Reassess your training process. Do employees need extra training at the beginning before working shifts on their own? Do employees fully understand the job expectations and productivity requirements? Work with your supervisors to ensure new employees are getting the support they need and if they do need extra training, they’re getting it, so they can be a more productive employee going forward.
If you’re consistently going overbudget at your sites, it’s probably because of a combination of the reasons outlined above. Take a step back and look at your recruiting, onboarding and training processes and you’ll find ways you can improve these issues going forward to get back on track and on budget.