Construction equipment comprised one of the largest investments in a construction business. Vital to supporting construction operations, construction machinery can be said as equally important as having the right people in a construction project.
To fully maximised their utilisation and give the business the best return on their investments, builders must first know their actual equipment costs. However, since many factors impact the real utilisation cost of equipment, many builders find this task extremely tedious and challenging.
However, with the presence of construction-specific management software technology these days, monitoring and tracking equipment cost should no longer be a pain for your construction company. Read on as we detail in this infographic the steps and factors to consider when tracking your construction equipment cost.
1. Determine the Total Cost of Ownership
The purchase price isn’t just the only cost that you will incur when you purchase and own a piece of construction equipment.
Other factors also take into account, including:
- Depreciation and loss of value
- Ongoing maintenance
- Repair costs
- Replacement costs
- Spare parts
- Interest (if financed)
- Fuel costs
- Cost of tires/tracks
- Operator cost
- Operator hours
These comprise the total cost of ownership (TCO), the single most important factor to consider when determining the impact of your construction assets to your bottom line.
Tracking TCO is vital to business’ functionality, sustainability, and success. One immediate implication of TCO is whether the company should buy or rent machinery.
TCO helps determine if Machine A is a better choice than Machine B if Machine A has a lower sticker price with the two machines otherwise being the same.
In practical application, TCO enables you to support the decision to buy a machine that costs more initially but has a lower maintenance cost and higher fuel efficiency rates over the long period. It allows you to prove that such a decision is a financially smarter decision than purchasing a machine with low initial cost but higher long-term costs.
Annual use hours have the largest impact on TCO. When machinery is underutilised, costs increase to recover the fixed cost. Otherwise, the cost will decrease. It is believed that the more machinery is used, the faster-fixed costs are recovered, thus lower ownership costs. However, if the equipment is overused, there is a higher probability of incurring additional maintenance, repair, and fuel costs.
total cost of ownership is another factor that contractors must include in the billable rate of their construction equipment. Generally, the more the equipment is used on a project or a series of projects, the equipment depreciates. It is wise to include an allowance in your estimate or billable rate for depreciation so there will be a fund set aside for new equipment when it wears out.
2. Take Advantage of a Construction Management Software
If you don’t have a tool that records the actual maintenance, usage data and costs for your construction equipment, you could be missing out on critical information for efficiently managing your assets.
Fortunately, there are construction management software packages that can enable you to easily track equipment cost per hour and also provides you with automated alerts and reports for when it comes time to perform routine maintenance. The software also records other helpful real-time information each time a piece of equipment is serviced and, as a bonus, it saves you lots of time by automating your machinery inventory.
Construction management software with asset management features such as total cost of ownership also provide insights about critical costs associated with the depreciation and servicing schedules of all your equipment. Such insights will help you to have accurate and comprehensive records for any repair work on existing machinery, and therefore you can finally compare the cost of running existing machinery vs. replacing it with something more efficient.
It all comes down to better decision-making which is the key to making your construction business profitable in the long-run.
Interested in learning more about how to get the most out of your construction equipment? Contact Bizprac today at email@example.com and let us discuss with you how our construction management software can display, track, monitor and support all aspects of your construction projects.