Time is Money

You've heard the saying, but I would like to put it into some framework regarding the importance of scheduling and profitability.

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You get a monthly profit if you take the total OH&P divided by the full projected time. This number is in the projections and tracked monthly. It is a massive factor in corporate profitability.

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So, to keep the numbers, let's say you have $100,000 of OH&P over a ten-month project, netting $10,000/MO. If the project is completed in 8 months, that would be $12,500/MO; that's a 25%/MO increase! Simple, but we all know that shaving two months off of a ten-month job is not practical, so let's look in the other direction. If this is a cost-plus job and the Client agrees to pay for the supers time to extend the job for two months, then let's look at the numbers. We have a 12-month project earning $100,000 or $8,333/MO; not as good, but it gets worse. The next project to start is pushed out, costing you an additional $10,000/MO (lost opportunity cost). If we factor this back into the current project, we will earn $80,000 over 12 months, yielding $6,667/MO. If it is a fixed-price job, you must include un-reimbursed general conditions; this could add another $30K to the impact for a new OH&P per month of $4,167

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To make this a little more personal, ask yourself, would you prefer to earn $10,000/MO or $4,167/MO. An actual correlation to Time is Money.? ???????IT ADDS UP FAST. A good job can go wrong in two short months.

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This scenario has many numbers, but the net result is accurate, and time is money. You can improve or hurt the bottom line by managing (or not managing) the schedule. Every day is a direct cost of $750; slip a day, 8 hours, and $750 you can never have back. That is a direct cost, not including the OH&P and lost opportunity. You control the budget; control it in your favor.

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Management tip: A schedule is essential, but not everything; poor quality and rework can cost more than the one day gained. Keep the balance in mind, which leads to the other adage of "if you don't have time to do it right, when will you have time to fix it?" the next best management tool there is.