How to reduce costs in a trades or construction business

Key takeaways

To reduce costs in a trades business, protect billable hours first. The most expensive admin in a trades or construction firm is done by the people who should be on the tools or pricing work. In our example, moving 15 hours a week of calls, quotes and invoicing off the owner returns about £31,200 of chargeable time a year.

• The costliest admin is done by people who should be on site.
• About £31,200 of chargeable time returned in our example.
• Missed calls and late invoices cost more than office wages.
• Invoice on completion to shorten the wait for cash.

Where do costs leak in a trades business?

Costs leak in three places: skilled people doing office work, jobs lost to missed calls and slow quotes, and cash tied up in invoices sent late. Materials and fuel get the attention because they have invoices. The leaks have none, so they go unmanaged.

• How BPO can help businesses reduce operational costs
• Tradesman paperwork time: what the evenings cost
• Cost drivers: what really moves your operating costs

What does owner admin cost?

Take an illustrative firm with eight engineers whose owner spends 15 hours a week on calls, scheduling, quotes and invoicing. If the owner's time is chargeable at £40 an hour, that is £600 a week, or about £31,200 a year of work not done or done in the evenings.

The same 15 hours handled by a managed team at an indicative £12 an hour costs about £9,360 a year. The gap is not a wage saving. It is chargeable time coming back.

• Owner admin: 15 hours a week.
• Value at £40 an hour: about £31,200 a year.
• Managed team at £12 an hour: about £9,360 a year.

• Non-billable hours: how many is too many?
• The cost lever scorecard: find savings process by process

What should you fix first?

Fix the things that lose revenue before the things that cost wages. A call that goes to voicemail while the team is on a roof is often a job that goes to someone else.

• 1. Make sure every call is answered and logged.
• 2. Send quotes within a set time, from a template.
• 3. Invoice on the day a job completes.
• 4. Chase overdue invoices on a weekly schedule.
• 5. Enter job details once, not on paper and again in software.

• Call answering and admin for trades and construction firms
• How to reduce debtor days and the cost of waiting for cash
• Double data entry: what rekeying costs and how to stop it

Which tasks can be handed over?

Tasks that follow rules and can be done from a screen hand over well: call answering and booking, diary management, quote preparation from your price list, invoicing, payment reminders, certificates and compliance paperwork. Pricing complex jobs, site decisions and supplier negotiation stay with you.

Contractors in the Construction Industry Scheme must file monthly returns with HMRC, which is the kind of recurring, rule-based task that benefits from a fixed routine.

• How to reduce back-office costs in a UK small business
• Outsourced appointment booking and diary management
• Outsourced invoicing and credit control

What about late payment?

Late payment is a cost in its own right. Where no payment date is agreed for a business-to-business sale, payment is late 30 days after the customer receives the invoice or the goods or service. Statutory interest of 8% above the Bank of England base rate can be charged on late commercial payments. The bigger win is usually sending the invoice sooner.

• Outsourcing and cash flow: fixed costs to variable

What does not work?

Cutting the office does not work. A firm that saves an administrator's wage and has engineers doing their own paperwork has swapped a low-cost hour for a high-cost one. Nor does outsourcing help if job information is not captured on site. Fix how details are recorded first.

• False economy in business: when the cheap option costs more
• Cost-cutting mistakes that end up costing a business more

What does this look like in practice?

A pattern we see across UK trades: invoices are written up on Sunday evening for work finished two or three weeks earlier, from memory and photos. Details are missed and customers query them. Having job sheets sent in daily and invoices raised the next morning removes the Sunday shift and brings cash in sooner.

Across our client work, owners have got 31 hours a week back.

• See client work
• BPO Solutions for UK businesses

Trades cost checklist

Check these over a typical fortnight.

• Count missed calls and how many were returned.
• Measure days from enquiry to quote.
• Measure days from job completion to invoice.
• Log office hours done by engineers and the owner.
• Calculate debtor days.
• List paperwork entered more than once.

• Run a time audit to find what to outsource
• Operational cost reduction checklist: 20 checks

Next step

Tell us how many engineers you have and who handles calls, quotes and invoices. We will show you what that work is costing in site time and what could be taken off your hands.