Discover where construction firms went wrong with their cost planning and how to avoid their mistakes.

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IMPORTANT LESSONS
ABOUT COST
PLANNING IN
CONTRACTING
COMPANIES
Effective construction cost planning is crucial
for contractors - big or small.

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It was often said that
and the adage was never more true than when
cost planning in the construction industry.
‘CASH IS KING’

3. For decades, contractors paid their builders, roofers and plasterers in
cash every week, and many transactions with suppliers were settled
‘ON THE NAIL’
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Construction will always be a volatile sector, and with
SKILL SHORTAGES
an ever-present threat to stability, companies traditionally
reckoned it made sense to have plenty of money to hand.

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In today’s fiercely competitive
construction landscape, the critical issue
is about how you manage your costs - not
how much cash flows through your books.
CHANGES IN
CONSTRUCTION
COST PLANNING

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Any company without an effective
COST PLANNING
STRATEGY
that provides full visibility of financial data
should reconsider their approach.

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It’s way too late to start managing your cash flow with
clients, subcontractors and suppliers when invoices are
piled high because they haven’t been delivered.
COST PLANNING IS
CRITICAL TO SURVIVAL

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Anyone who still thinks cost planning isn’t crucial should consider
this overview from Staffan Engstrom, former Divisional Managing
Director at Carillion and Tarmac Construction:
‘CASH COMES IN LIKE A TRAIN -
AND GOES OUT LIKE A ROCKET’.

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PURCHASING MATERIALS
Cost planning is especially important today, because
construction is threatened by two major challenges;
SHORTAGES OF RAW MATERIALS
and
SKILLS.

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FINDING ENOUGH
RAW MATERIALS
SUCH AS BRICKS AT
AN AFFORDABLE
PRICE CAN BE A
CHALLENGE.
Not only has demand increased
across the entire industry, but
some recovering companies haven’t
yet geared up for more buoyant times.

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Noble Francis, Economics Director at the Construction Products Association highlights:
“AFTER THE RECESSION, WITH SUBDUED
ACTIVITY LEVELS, HOUSE BUILDERS GOT USED
TO PURCHASING A FEW DAYS IN ADVANCE.
NOW, IT MAY BE THAT HOUSE BUILDERS HAVE
TO GET BACK TO PLANNING CONSTRUCTION
MATERIALS CONSIDERABLY IN ADVANCE”.

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There are also major shortages of all the craft trades;
THROUGHOUT THE
COUNTRY AND
EVEN IN LONDON.

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“ONE-IN-THREE OF THE LARGEST
CONSTRUCTION COMPANIES
ARE HAVING TO TURN DOWN
BIDDING OPPORTUNITIES, DUE TO
A SHORTAGE OF SKILLED LABOUR”
says Mark Cahill, Marketing Director of Manpower Group UK.

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RISING COSTS SQUEEZE MARGINS
Shortages of raw materials and skills mean only one thing:
HIGHER COSTS.These pressures place an even higher premium on effective cost
planning, especially when margins remain mired in single-digits.

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Given the uncertain nature of the recovery,
LATE PAYMENT IS A MAJOR ISSUE,
as the big construction players extend their payment periods, and the
small-medium construction companies are forced to tighten their financial
belts by an extra notch or two.

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This year, one of the West Midlands’ best-known
contractors, Anglo-Holt Construction, called in the
administrators after 45 years of trading despite eight
‘live’ contracts, after trying to ‘trade out’ of its problems.
CASUALTY TOLL
CONTINUES TO RISE

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By the time of its collapse, the West Bromwich-based business
had accrued debts to trade, finance creditors and HMRC of almost
£20 MILLION.

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Anglo-Holt went under just weeks after Southdale Construction Group. With a
£30m turnover from housing schemes across its Yorkshire homeland and the
North-East, the firm folded, blaming
‘CASH FLOW PROBLEMS
from
LOSS-MAKING CONTRACTS’.

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A Birmingham based construction firm went into administration earlier this year.
THE LOSS OF 150 JOBS
resulted from financial struggles. The Parkstone Group cited late payments and
cash running out as main issues. Despite working on large projects such as The
Bullring and Birmingham Children’s Hospital, workers experienced a lack of
payment for work they were carrying out.

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Perhaps, after this latest wave of company failures, the message that
MANAGING AND UNDERSTANDING YOUR
CASH FLOW WHILE MAINTAINING FULL
VISIBILITY OF FINANCIAL DATA IS ESSENTIAL
FOR EVERY CONSTRUCTION BUSINESS
will finally be understood.

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TAKEAWAYS:

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Focus on
managing your
current cash flow
TAKEAWAYS:

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Focus on
managing your
current cash flow
Ensure you have
full visibility of all
financial data
TAKEAWAYS:

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Focus on
managing your
current cash flow
Ensure you have
full visibility of all
financial data
Measure your
margins against
increases in
industry prices
TAKEAWAYS:

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Discover how using data can help you
to manage cash flow challenges by
downloading:
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USING ACCURATE DATA
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