WHY ACCURATE RECORD KEEPING IS VITAL
project documentation and inadequate communication between stakeholders.
Financially,“ bad data”- inaccurate, incomplete, or outdated information- cost the global construction industry an estimated $ 1.8 trillion. For a construction company with an annual turnover of $ 1 billion, this could result in $ 165 million lost each year. 1 This leaves plenty of room for improvement.
Poor Documentation Results in Multiple Pain Points
Poor documentation can result in frequent payment disputes and delays, which greatly impacts the contractor’ s bottom line. Without a clear record of work performed, change orders or materials used, project owners may refuse payment. In fact, invoices may be delayed if backup documentation such as time sheets, receipts, and delivery tickets are missing or incomplete.
Cost overruns may also occur. For instance, if labor hours, materials, and subcontractor costs are not accurately tracked, project expenses may be greatly underestimated. Unrecorded change orders or extras can result in work being accomplished without compensation. All of these mistakes mean lost income.
Let’ s say that you submit an invoice to your client, but do not include supporting timecards, material receipts, or daily logs. As a result, the general contractor’ s accounting department puts the invoice on hold. You will now have to wait 60 days or more for payment, while you are still responsible for covering payroll and supplier bills. The financial risk translates into a cash flow strain with a possible need for short-term loans, which charge interest, to cover your costs.
Inadequate documentation also weakens a contractor’ s position in disputes, arbitration, or litigation. The inability to prove scope of work or delays caused by others may result in losing claims for additional time or money. Poor records can also make contractors liable for damages or penalties for which they should not be held responsible.
Bonding and insurance issues may arise from poor documentation as well. Sureties and insurers require accurate financials and records— weak documentation can jeopardize bonding capacity or increase premiums.
Audit and tax risks are also a result of insufficient record keeping. For instance, let’ s say that a contractor installs extra electrical outlets at the owner’ s request but does not receive a signed change order. As a result, the owner disputes the additional cost, saying it was included in the original scope; without written proof, the contractor has to absorb the expense.
20- imwis. com