3 ways to reduce revenue leakages in a PEB / Steel fabrication project

Are you getting orders but are not able to get the desired margins after the job execution?

Do you want to step up your game and increase your margins?

Here are 3 ways which will help you improve your margins.

1. Always make a detailed sales order after order finalization

The first and most important part of any steel fabrication industry is to make a sales order. You might need to reverse calculate the Quotation to match the exact price of the sales order with the price finalized.

Sales Order acts as a main document to compare throughout the project execution and makes sure the project costing is as per the order you took from the client. You need to make sure that your sales order contains:

1. Freight Cost ( Approx number of vehicles required X price of each vehicle)
2. Target Erection Cost
3. Payment terms in detail along with any LD /BG if applicable.
4. Bought out items (Like turbo-vents, Insulation etc. )
5. Supply Amount

All these things need to be mentioned separately and not be summed up in one head. This information helps you at a later stage to make sure your project is within the cost. For example, during every dispatch, you can make sure that the total freight till date never exceeds the freight mentioned in the sales order.

2. Compare the weight issued by the design team to the weight mentioned in Sales Order.

With the help of excels or software, you need to create a check in your system such that the design department cannot issue the BOM (Shipping list) if it exceeds the total tonnage of the sales order.

If in any case, the design department needs to issue the shipping list with a weight exceeding the sales order, they should require to take additional approval. This way you already know that your project cost is going to exceed and you can take preventive steps in other departments to reduce the project cost.

3. Create & approve a Dispatch Advice before allowing any dispatch

Ask your sales or CSD (Coordinator) team to create dispatch advice of the job which needs to be dispatched in the coming days.

The following things need to be mentioned in the Dispatch Advice:

1. The total billing done, payment received and the balance payment of the job.
2. Erection contract status (finalized or not) and anchor bolt casting status.
3. The quantity and amount of goods which need to be dispatched.

This dispatch advice needs to be approved by management and accounts team before planning any dispatch.

Dispatch advice helps in many ways. If the payment is not received as per the payment terms, the accounts can deny approval of advice.

Erection contract and anchor bolt status helps in identifying if the material is being sent at the correct time. If the anchor bolt casting is not done, the material would be laid idle without any use of it. If the erection contract is not finalized, there is no use of sending material (and hence doing production) since the erection would not be possible. With the help of dispatch advice, the management can instruct the projects team to speed up the tasks to make sure the erection team is ready when the material arrives.

I would be sharing more ways to reduce revenue leakages covering projects, phase-wise dispatch, raw material, scrap and more.

We at Smaac, have developed an ERP solution designed for the PEB and steel fabrication industry which does all this and many more things without requiring any manual interference. All the checks are automatic, giving you email alerts and more. You can check out at https://s.smaac.in/1M0u

Well, these were a few quick ways to improve your margins!

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