Purchase Orders Can Help Lower Your Costs
If you are doing nothing more with variance purchase orders (VPOs) than adding dollars to your original purchase order, you are missing an important management link that could help you lower your costs and increase your profits.
Your purchase order system has helped speed up payments to your vendors and trade partners, and you’ve even been able to smooth out schedules somewhat. But are you realizing the full potential of your PO system?
According to Mike Benshoof, of SMA Consulting, which provides financial and operational management consulting services for building industry clients and is a member of NAHB's Single Family Production Builders Committee, POs are not merely a different way to pay bills, they are “the most important thing the business uses to communicate internally and externally.”
POs, he said, are a way to monitor your quality- and cost-control systems.
“Accounting for the biggest portion of your business are your direct costs, so you can leverage more dollars there,” Benshoof said.
POs are an effective cost-control tool — when used effectively.
“We’re sending the information out to vendors and trades and setting expectations for our costs,” he said. When a PO doesn’t account for every nickel spent at a job site, Benshoof added, home builders need to take a hard look at why.
According to Benshoof, SMA analysis of a builder client’s PO system indicated that one of the client’s VPOs cost the builder almost 14 times the invoice on the VPO. The VPO included only a lump sum, with no quantity or pricing information. It took the company more than three months to track down the materials discrepancy and get it corrected.
To read more about VPOs as an effective management tool and to learn five ways that a PO system can add long-term value to your business, click here. (This link in the BizTools section of the NAHB Web site is only available to NAHB members.)
NAHB Has More Than 250 Resources to Help You Run Your Business More Profitably
Go to NAHB's Business Management Tools Web pages (available to members only) for instant access to more than 250 timesaving, moneymaking and cost-cutting business resources to help you run your business more profitably. Get guidance on accounting and financial management, business strategy, computers and information technology, customer service, human resources and more.
Resources are added weekly, so bookmark www.nahb.org/biztools to go directly to these vital business management resources.
Local and state home builders associations can link directly to www.nahb.org/biztools from their Web site and give their members instant access to these resources. It will make your HBA's Web site the place to go for the information and guidance that members need to succeed.
Subscribe to NAHB’s Business of Building e/Source
NAHB’s Business of Building e/Source is your monthly electronic guide to the hot issues and emerging trends in home building business management. You’ll find practical advice, tricks of the trade and sound business guidance — all delivered monthly, straight to your desktop, in a quick and easy-to-read format. Business of Building e/Source is available free to NAHB members and their employees.
To subscribe, visit www.nahb.org/BoB on the Members Only side of the NAHB Web site.
NAHB Technology Solutions Directory Now Online
NAHB’s Technology Solutions Directory — an easy-to-use directory that enables builders, remodelers, contractors and other industry professionals to find information on software and IT solutions and services for their businesses — is now online. The directory is sponsored by the Business Management & Information Technology Committee.
Software and technology solutions providers interested in being listed can sign up for:
- Enhanced Listing — Listing includes company name, URL, e-mail address, mailing address, phone number, company/product description, company logo. Click here for more information.
- Standard Listing — Listing includes company name and phone number. Click here for more information.
For more information, e-mail Wil Heslop at NAHB.
The Technology Solutions Directory is solely for educational and informational purposes. Nothing in the directory should be construed as policy, an endorsement, warranty or guaranty by the National Association of Home Builders of the listed software, IT service or the software/IT vendor. The National Association of Home Builders expressly disclaims any responsibility for any damages arising from the use, application or reliance on any information contained in this directory.