Financial benchmarking is vital to helping field services agencies understand both their internal operations and how they measure up to competitors.
Many agencies are turning to outside sources, such as their sureties, to gain a better understanding of how they compare to the competition.
An article on Construction Executive’s website explains that this helps provide additional context and tailored statistics that offer a rich vein of information.
Customers spend all of their time measuring across margin, variance and other metrics. However, for field service agencies, it’s best to have job cost software that will notify management when these metrics go outside an established tolerance level.
This way, when any project goes outside the parameters, the system will send a red flag. The key to this kind of effort is benchmarking.
Remember, competition is fierce. Agencies need to know their competitors. They must know who is willing to tolerate a smaller margin. Unless the agency has great benchmarking capabilities, they won’t know what their own margins should be. They need service contract management software that helps them understand their numbers.
Then agencies can use sureties to see how they stack up against other similar-sized firms.
“When a surety assesses and evaluates financial information across its accounts of similar size and type, this pool of accounts and data can be used as a benchmark for measuring relative performance,” according to the Construction Executive article.
An agency’s individual results then can be compared to a set of similar outcomes, turning previously flat statistics into actionable guideposts.
It’s important to “seek a surety with a broad-based book of various-sized business across many diverse” disciplines. For example, sureties with accounts in every state will help to broaden the sample.
Depending on how extensive the data is, benchmarking can compare job types, size and location. A capable surety with a well-diversified pool should produce a report that takes an agency’s financial data from a general overview to specific comparisons.
Source: Construction Executive, November 2012