Paying by the yard without counting the yards
Your installers bill by the square yard, you pay whatever they count, and that count has never been laid next to the takeoff.
In an hourly trade, an overrun registers as hours against a budget and somebody notices by Friday. Paying per square foot or square yard turns labor into a purchased quantity, and a quantity is only wrong when somebody counts it, which in flooring almost never happens. The estimate already holds the correct number, so the check is right there. It never gets run.
The size of it
You overpay labor in the 5 to 8 percent range and it never registers as a variance anywhere, and the audit exposure comes as a five figure retro premium in a single letter with no job left to absorb it.
Piece rate is how this trade runs, and it works right up until the invoiced quantity stops matching the estimated quantity. A crew bills 4,200 square feet on a 3,900 square foot room and nothing catches it, because the payable gets coded as subcontract cost and never gets compared to your takeoff. That structure also parks your largest cost line outside of payroll, so your gross margin behaves nothing like a labor heavy trade's and the published benchmarks stop telling you anything useful. On public work those same crews have to be paid hourly with fringes and reported on certified payroll, which the piece rate model doesn't fit at all. If a workers comp or general liability audit reclassifies them as employees, you get a retroactive premium bill for the whole period.
Three moves, in order
Step 08: Standards and accountability
Five hours a month of owner time, spent projecting the work.
What else costs flooring contractors money
The same mechanism in other trades
What flooring owners ask
How do I verify piece rate installer invoices against my flooring takeoff?
Your installers bill by the square yard, you pay whatever they count, and that count has never been laid next to the takeoff.
What does it cost?
You overpay labor in the 5 to 8 percent range and it never registers as a variance anywhere, and the audit exposure comes as a five figure retro premium in a single letter with no job left to absorb it.
What do I do first?
Require the takeoff quantity printed next to the billed quantity on every installer invoice, and hold any invoice that shows only one of them.
What are flooring contractors supposed to be making?
Flooring runs 19% gross margin, 14% overhead and 5% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 2 points below it. The CFOS target is 10%.
Which part of the system fixes it?
The step is number 08, standards and accountability. Five hours a month of owner time, spent projecting the work. It comes from chapter 8 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for flooring contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.