Accurate estimates are essential to the health of any good business. Bad estimates can lead to lost money and, in some cases, the end of companies. According to a survey by QuickBooks, two to five bad estimates could put nearly 50% of companies out of business, and one in five businesses said one bad estimate could sink their business. The QuickBooks survey covers seven U.S. industries, including the remodeling industry, to find the areas companies lose profitability.
Nearly 1 in 4 remodeling businesses say profit is usually less than expected
It might not come as a surprise that nearly a quarter of remodeling businesses report their profit is usually less than expected, considering 31% of them are keeping track of project costs on paper, by hand. And while 82% of that group says their projected costs are very close to the actual costs, 47% of them say it’s impossible to get back on track when a project’s costs go over. Typically, those in remodeling (40%) ask to reduce the scope of the job or renegotiate the contract when costs start to overrun.
Remodeling businesses that use job costing tech recover easily when costs go over
Of the remodeling companies reviewing costs daily, 46% of them are tracking them by hand, on paper. Their job estimates are much closer to the real cost than those who track weekly or monthly, but they have a much harder time getting back on track when costs overrun. 42% said it’s impossible to recover once a project goes over budget.
What’s more interesting is the methods these groups are using to track costs. Even though they’re tracking daily, the majority of that group is doing it by hand. But the group that’s tracking weekly—and has the easiest time getting back on track after costs overrun—is also the group that’s using either accounting software with job costing abilities or a job costing app.
To get results for the survey, QuickBooks surveyed 1,341 in-house accountants/bookkeepers, finance managers and directors, and business owners and partners in May 2019.
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