From XU Magazine, 
Issue 27

Constructing a process to eliminate revenue leakage

Using job management software to control and profit from scope creep

Leaky tap? Call a plumber. Leaky pool? Call a tiler. Leaky roof? Call a builder. Business leaking money? Call a... Bookkeeper, accountant, all of the above?
This article originated from the Xero blog. The XU Hub is an independent news and media platform - for Xero users, by Xero users. Any content, imagery and associated links below are directly from Xero and not produced by the XU Hub.
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Generally, tradies on a job site know the what, when, who and why of the job. 

However, this information is often hand-written on a post-it note or worse, it is just in their head. You, and them, know the business is bleeding money, but you don’t know where from.

How are you meant to help them if the information of every job is being retained somewhere inaccessible. 

In the accounting world, we all know of “scope creep”, it has been discussed time & time again, and of course we are not the only ones affected. 

For the trades it is more commonly referred to as “variations” specifically on a fixed price job. 

Scope creep is not a bad thing, it is unplanned & unexpected growth in the scope of the job - but it can cause a negative impact when there is no system in place to deal with it, or ability to identify it.  

I hear the same scenarios over and over from tradies:

  • “If it is less than $500, then we just write it off” or;
  • “If it takes less than 1 hour, we just get on and do it”
  • “I told the client whilst we were discussing something else”

So, what if there are 10 x “minor” changes requested throughout the job and each cost $450?

That could be $4,500 worth of revenue leaking from the business because it is not tracked.

And what if each variation took 45 minutes? That is 7.5 hours, nearly an entire working day.

The staff still need to get paid for their time, the materials still need to be used but the business is not receiving the additional revenue for the work completed. 

The end result is always the same, the client thought it was $3,500 not $4,500, they are annoyed when it is added to the final invoice with no explanation. They complain, the cost is negotiated, the business loses out and the client has a bad taste in their mouth.

A simple solution is capturing and sending Quote Variations.

Raise a new quote detailing the changes & costs for the client to accept - It might take an extra 5 minutes but it keeps an audit trail.

It can be captured onsite at the time and ensure those dollar leaks are sealed up.

The customer knows their total costs upfront and are happy they have found an “honest tradesperson, the tradesperson is paid what they deserve and you can start reporting on the good news story of increased revenue & accurate profitability. 

So the clients can call you to help fix their money leaks, and you can call us to help put a system in place. 

Why leave it there?

Learn how NextMinute is helping builders fix their businesses

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