Penny Wise and Pound Foolish

Everyone has heard the phrase “Penny Wise and Pound Foolish”.  Most people equate it to someone dropping their habit of a $3 latte in the morning “to save money”, but then you find out they have a $450 monthly car payment and outrageous rent that they can barely afford…

In the construction industry, this phrase runs rampant.   Only, the penalties of not heeding the advise can cost the job tens of thousands of dollars over the course of a year.

Case in point:  we rented out a rock crusher, crushed what we thought was all the rock, and sent it back.  Two weeks later, we found a pile of rocks that needed to be crushed that we had forgotten about.  We had to re-rent the crusher for one day.  No biggie you would think…

We rent the crusher on a daily basis of $300 per day.  But the kicker is the rental company charges $1500 to drop off the crusher and $1500 to pick it up.  That was a $3300 “oops!” for not accounting for all the rock that has to be crushed onsite and making sure it was in the “to be crushed” pile.  Now imagine the money lost on scheduling errors like that, across a whole job (with 25+ pieces of equipment) over the course of a year, and you get the picture.

Now for the “penny-wise” part…

Going over some vendor invoices with my project manager, he came across a purchase order I had written to a trucking company that we had used in a pinch one day.  I had written the invoice for $72 per hour.  My project manager pointed out that on previous jobs, the trucking company only charged $70 per hour.

He had me call the trucking company and ask about the price increase (the trucking guy said it was just a yearly increase for their services) and then tell them that we will only be paying them the $70 per hour that was charged on previous jobs.  Then I had to go into the invoicing system and change the purchase order.  Then my project manager had to go into the system and approve the change.  Because the invoice was already in the system, I also had to call our accounts payable department and have one of them track down the original copy of the invoice and make a note on it that we will be short paying it.  Then the accounts payable people had to change the amount to be paid in the system on their end.   So all in all, three or four phone calls, about 20 minutes on the system between me and the project manager, another 10 minutes on the system for the accounts payable person, plus the time spent tracking the original invoice down and discussion, we’re talking about 45 minutes worth of work between 4 people for the company.  For a difference of $2 an hour.

Oh and did I mention the monthly invoice was for 5 hours?  So that makes it a $10 difference.  Big whoop.

This happens over and over again all day long.  About a third of what I do onsite is vendor invoices and this is a constant phenomenon.  And although we do it to the big invoices and sometimes (rightfully) short pay thousands on an invoice, it happens more often for invoices where the difference is less than $50.  Let’s just say that the company pays me (the lowest guy on the totem pole) more per hour than the $10 four people working for the company collectively saved by short paying an invoice for 5 hours of trucking time.  Not too Penny Wise.

About the author

The Builder Babe

Builder Babe works in the construction industry and is full of fun stories.