Materials Costs Are Soaring: How Construction Businesses Can Protect Their Bottom Line

Construction costs have increased by up to 30% since the onset of the pandemic, and they’re not showing signs of slowing.

Costs in home building will rise at above-average rates in 2022 as timber and metal prices keep increasing, according to CoreLogic.

Recent data from the Master Builders Association of Victoria revealed the average cost of supplies used in home building rose 10.2% in the year to September in Melbourne, compared to 5.9% in Sydney, with steel product prices rising by more than 25% in Victoria.

Supply chain delays have slowed the pace of building by up to 30%. The Age reported that Australia’s biggest home builder, Metricon, is taking four months to build a regular 200 square metre, single-storey home that would ordinarily take three months.

The pressure on construction companies is undeniable; construction-industry insolvencies jumped nearly 40% in the three months to December compared to the September quarter, and were up almost 30% on a year earlier, says the latest data from ASIC. Three major builders went into liquidation or administration at the end of 2021. 

Controlling construction costs has never been more important if companies want to stay competitive and protect their bottom line. 

But while supplier prices might be out of your control, there are other business costs within your control. So-called “soft costs”, such financing, marketing, and professional fees, account for 52% of the cost of constructing a house and are more difficult to allocate to specific builds.  

Here are ways you can manage and reduce costs throughout the organisation to maintain a healthy bottom line:

Make more use of technology and automation

Shift your focus to improving resources rather than cutting costs. When it comes to business processing, the proverb “time is money” couldn’t be more relevant. 

Irrespective of your company size, streamlining and automating workflows will reduce the time spent on manual tasks. This removes opportunities for human error, while also putting those people into better positions and getting the technology to do the repetitive work. 

How much time are employees spending on repetitive processes that could be automated? 

For a construction company, these tasks may include:

• Accounting and bookkeeping
• Onboarding and offboarding staff
• Expense reporting and management
• Procurement processes 

Look at software designed to streamline and automate these workflows in different areas to free up resources throughout the business. 

Use data to make smarter decisions

Having visibility of what’s going on across the organisation enables you to invest and streamline in the right places. It gives more stability and enables you to be more innovative.

That’s where data comes in. 

Data insights are critical for improving efficiencies and lowering construction operating costs. They enable construction companies to achieve visibility of inputs, resources, expenses, and to accurately forecast. 

What kind of data are we talking about?

There are lots of data sources around the business that, used in the right way, can help you make smarter decisions around resourcing, costs and budgets. 

For example, Fleet Card’s comprehensive reporting allows you to analyse spending and drill down to individual vehicles to compare running costs and identify opportunities for even greater cost efficiencies within your fleet. 

Save costs on the road

How much is your fleet costing your business? 

In the current climate with rising fuel costs, there’s a huge opportunity for savings across company fleets. 

One of the main ways to achieve this is with fuel cards. 

Fuel cards allow construction companies to benefit from discounts on fuel, both petrol and diesel, from different brands. The more vehicles you have on the road, the more substantial the savings are. Find out how much you can save with our quick calculator. 

And it’s not just fuel – Fleet Card also offer exclusive discounts on vehicle-related expenses, such as tyres, oil, glass, servicing, parts and more. 

Over to you

Start saving costs in your construction company and improve your bottom line. Talk to one of our friendly team to find out the right Fleet Card for your business.