Rising cost of building materials: 3 strategies to protect the profitability of your current construction sites

In construction, margins have always been tight. But for several years, the volatility of raw material prices turns each project into a risky bet. Wood, steel, cement, energy: world prices fluctuate violently, with an upward structural trend. Between the date the quotation was signed and the date the materials were purchased, the difference may exceed 20%. And it's your net margin that pays the difference. Toute building company thus bears an increasing financial risk for each work undertaken. In times of inflationary crisis, even structures equipped with management software are not safe if the right reflexes are not in place.

No margin, no survival: the relentless observation

The situation is simple and brutal. You have achieved the Encryption Of your project six months ago based on current supplier rates. You won the contract, signed the contract, planned the teams. But today, when you place your order, the costs have increased: steel has taken 15%, wood 22%, cement is following the same trend. Your selling price is fixed. Unchangeable. Inflation is something you are going through alone.

The objective is therefore clear: to stop suffering, to secure supplies from the start and to put in place contractual and administrative obstacles to protect the profitability of ongoing projects. Any construction company that does not take these precautions is exposed to Work at a loss on its longest projects, often the most profitable on paper at the time of costing.

Margin erosion: definition and mechanism

Margin erosion is not simply “paying more.” It is the fatal difference between the cost estimated during the initial costing and the real cost at the execution of the work.

To understand the mechanism, let's recall the fundamental equation:

Selling Price − (Labor + Materials + Overheads) = Net Margin

If the selling price remains fixed and the materials explode, the margin falls to zero. Worse: it becomes negative. The calculation is merciless. The company pays more than it bills, and the manager works at a loss. This is precisely the trap that the commodity crisis has set for many building structures since 2021.

It is essential to distinguish between two types of costs. On the one hand, the workforce : stable and predictable, controlled through collective agreements. On the other hand, materials: volatile by nature, subject to the vagaries of global markets. Without reliable data on price trends and without a rigorous calculation at each Project stage, it is impossible to produce an accurate estimate, and therefore to defend your margin on each work.

The 3 anti-inflation shield strategies

Faced with rising costs, there are concrete tools and levers to be activated at each stage of the commercial cycle. These three strategies form a coherent system of financial risk management for any building company that wants to maintain its profitability with its customers.

Strategy 1: Reduce the validity period of quotations

The first protection is also the simplest. In periods of high volatility, maintain a validity of three months on your quotes is equivalent to committing yourself to encryption data that may no longer exist at the time of signing. Reduce this period to a maximum of 15 or 30 days. This delay requires the customer to position themselves quickly and protects you from a market reversal between your estimate and the acceptance of the quote.

This measure may seem uncomfortable, but it is perfectly understandable as long as it is well explained. to your customers. A 30-day estimate in a context of an inflationary crisis is not unreliable: it is proof of rigorous management of your projects.

Strategy 2: Integrate a price review clause

The second strategy is a contractual one. For the works contracts, especially on new construction or major renovation works, it is essential to include a clause to review or update prices. It makes it possible to contractually pass on the increase in materials according to official indices, the BT indexes, and thus to secure the budget of the operation.

The update applies between the award ceremony and the Start of work. The revision takes place during execution to take into account economic variations after notification of the contract. These mechanisms are regulated in public contracts and negotiable in private markets. Their integration reduces financial risks for the business without harming customer relationships.

Strategy 3: Massify and anticipate purchases

The third strategy is operational. As soon as the market is notified, anticipate your material purchases strategic. Negotiate fixed prices with your suppliers over the duration of the project, even if it means storing materials earlier. Group orders from several sites to weigh in the negotiations, reduce your overall expenses and improve the quality of your purchasing management.

The trap to avoid: take stock of the financial results of the site once the work is finished. At this point, encryption errors cannot be recovered. On the contrary, reliable management software makes it possible to monitor the budget in real time and to anticipate any slippage before it compromises the profitability of the structure.

The buying circuit: where the margin evaporates

To understand why the margin is being lost, it is necessary to map the real decision-making circuit of any construction company. Here is the classic channel: the design office figures → the customer signs → the construction manager order → the supplier delivers → accounting pays.

The critical period is the time that elapses between the acceptance of the quotation and the firm order from the supplier. In this period of time, costs can change significantly and risks accumulate. Without formalized and updated figures, it is the door open to all the unexpected and to a silent erosion of budget.

In many Construction SMEs, this circuit is fragmented and poorly traced. Orders are placed verbally, confirmations are slow. Without software that centralizes purchasing data in real time, the risks of cost slippage multiply at each stage, without any alerts going back to the office.

The delivery note at +30%: the moment of truth on the construction site

The scenario is repeated in dozens ofundertakings every week. The truck arrives at the construction site. The delivery note shows a higher price than expected or the supplier has replaced the ordered reference with another, more expensive one. The site manager, under pressure, signs the delivery note (BL) so as not to block the teams.

Three weeks later, the bill arrives at the office. The manager discovers the additional cost. The material is installed, no added value has been negotiated with the customer. The loss is permanent. This scenario is not an exception: it is the daily life of construction companies without a reliable circuit for reporting field data, and without software capable of alerting in real time on cost differences.

The digital solution: tracking costs in real time with Alobees

The key to avoiding these silent losses is to shorten the time between what happens in the field and what the office sees. Every hour that elapses between delivery at the wrong price and its detection is an hour when the dispute window closes. It is an issue of management quality as well as financial security for the company.

That is precisely the objective of the document management (BL and invoices) via the Alobees app. These tools allow the site manager to photograph the BL as the truck unloads. The image is immediately available to the office, which can accurately verify the price applied compared to the original order. If a discrepancy occurs in the data, it is possible to challenge or renegotiate during the project. Not a month later.

The construction site monitoring in real time offers a second level of protection. If a loss of margin is detected on the material item, it becomes possible to act on schedules, avoid dead hours and optimize work costs. A reliable management software makes it possible to compensate for the unforeseen events ofpurchase through better control of the project.

Data reported in real time from the field gives the ability to react before the loss occurs. This is the difference between accurate cost management and a finding of failure in End of project. Find out in concrete terms how Alobees can make you gain in profitability via a free 14-day trial.

Mistakes that cost a lot of money: what to never do

Some practices structurally undermine the profitability of projects. Here are the three most common mistakes in construction companies.

• First mistake: letting BLs build up without treatment. Each handout pending is a missing piece of data in calculating the real costs of the project and a lost opportunity to challenge.
• Second mistake: absorb the Rising prices for fear of losing the market. In times of crisis, it is better to refuse a project or renegotiate quantities than to commit to a loss-making mission.
• Third mistake: not breaking down the “materials” part and the “labor” part in your quotes. Without this distinction in costing, it is impossible to apply a price revision clause. The company then loses all contractual leverage and financial security on its projects that are most exposed to crisis risks.

Conclusion and FAQ: your questions about site profitability

In a period of inflationary crisis, the protection of the margin of a construction company is won on two fronts: contractual forecasting (revision clauses, validity period of quotes) and daily administrative rigor (management of BL, monitoring of costs in real time). These two dimensions are inseparable to secure the profitability of each project. Having reliable software to centralize data, monitor quantities delivered and calculate actual expenses is now a decisive advantage — for the quality of management as well as for the survival of the company.

How can you protect yourself from the rise in materials in the construction industry?

By reducing the validity of quotes, by integrating price revision clauses indexed into the BT indexes, and by massifying purchases as soon as the market is notified. These contractual techniques and tools allow any building company to anticipate increases and to protect its customers as well as herself from financial slippage.

What is the difference between updating and revising prices?

The update applies before the start of work, between the awarding of the price and the notification of the contract. The revision takes place during execution to compensate for economic variations. The reckoning is based on Construction index officials.

What is the validity period indicated on a construction estimate?

In periods of high volatility, limit validity to a maximum of 15 or 30 days. It protects your margin and reflects an accurate and reliable estimate of the real costs of the project at the time of costing.

How to digitize delivery notes on a construction site?

Via dedicated software such as Alobees: the site manager photographs the BL at the reception. Document management (BL and invoices) in real time eliminates processing times and makes project purchase data more reliable.

How to calculate and protect the margin of your construction sites?

By breaking down each Quotation in stages (labour, materials, overheads), by monitoring actual expenses through site monitoring, and by constantly comparing the estimated budget with the calculation of the actual cost.

<H3>What should I do if my supplier increases their prices after ordering?</H3>

Dispute immediately in writing based on the p.o. If a review clause exists, pass the increase on to your customer. If not, negotiate a credit note. Any formalized data is a security tool.