Why Construction Companies Struggle With Thin Margins: 7 Common Mistakes

Construction businesses often complete projects on time but still struggle with razor-thin profit margins. One of the most common reasons is poor expense management. Small, untracked costs add up quickly across job sites, crews, and projects, quietly reducing profitability.

‍

Below are the seven most common expense management mistakes in construction and how they negatively impact margins.

‍

Why Expense Management Matters in Construction

Expense management directly impacts construction job profitability.
‍

When expenses are not tracked in real time, assigned to the correct job, or reviewed before money is spent, businesses lose visibility into true project costs. This leads to budget overruns, inaccurate job costing, and reduced margins.

‍

Mistake #1: Using Shared Corporate Cards

Shared corporate cards reduce accountability and increase misuse.
‍

When multiple employees use the same card, it becomes difficult to assign expenses to the correct job or crew. This lack of visibility often leads to incorrect job costing, inflated budgets, and higher risk of unauthorized spending.

‍

Mistake #2: Not Assigning Expenses Immediately

Delaying expense allocation increases errors.
‍

Expenses that are not assigned at the time of purchase are more likely to be forgotten or incorrectly categorized. In construction, where costs must be tied to specific job sites, delayed allocation leads to inaccurate financial data and distorted project profitability.

‍

Mistake #3: Approving Expenses After the Fact

Reviewing expenses after money is spent limits control.
‍

Traditional reimbursement and expense approval processes review transactions after payment has already occurred. If a problematic expense is discovered, recovering funds is often difficult or impossible, resulting in unnecessary financial loss.

‍

Mistake #4: Relying on Paper Receipts

Paper receipts increase errors and audit risk.
‍

Receipts get lost, damaged, or forgotten. Missing receipts make expenses harder to verify, increase administrative frustration, and can raise the risk of an IRS audit. Digital receipt capture significantly improves accuracy and compliance.

‍

Mistake #5: Using Incorrect Spending Classifications

Overly broad categories hide budget problems.
‍

Using categories like “miscellaneous” or “overhead” may simplify bookkeeping, but they obscure spending trends. Without detailed classifications, businesses cannot identify cost overruns, inefficiencies, or opportunities to improve margins.

‍

Mistake #6: Reviewing Expenses Only Once a Month

Infrequent reviews delay corrective action.
‍

Waiting until the end of the month to review expenses allows wasteful spending to go unnoticed. Daily or real-time expense reviews improve budget awareness, prevent overspending, and help project managers adjust costs before margins are impacted.

‍

Mistake #7: Using Generic Expense Management Tools

Generic tools are not built for construction workflows.
‍

Most expense platforms are designed for office-based businesses. Construction companies need tools that support job cost coding, multi-job allocations, project-based card controls, and field-friendly workflows. Without these features, expense tracking remains inefficient and inaccurate.

‍

Key Takeaways for Construction Business Owners

• Thin margins are often caused by small, unmanaged expenses
  
  
• Real-time expense tracking improves job costing accuracy
  
  
• Accountability and job-level visibility protect profitability
  
  
• Construction-specific tools outperform generic platforms
  
  

Expense Management Software Built for the Trades

Outpave is an expense management platform designed specifically for construction and trades businesses.
It allows companies to:

‍

• Assign cards to specific jobs
  
  
• Cost code expenses in real time
  
  
• Capture receipts digitally
  
  
• Maintain accurate job-level financial visibility
  
  

To see how construction-focused expense management can improve your profitability, schedule a demo with Outpave.

‍