Al Levi: Money from the scrap heap
Contractors have several options when it comes to handling scrap metal.
A client called me awhile back because he wanted to know what my family did with the scrap metal from jobsites, and he wanted to know what the other companies I work with do on this matter too. The reason he was asking is he was looking to work out a procedure and a policy that would be fair and equitable to himself, the company and to all his staff.
It was a really great question that I hadn’t thought about in years. And although I’m still very active in my work with clients in person and in online programs, nobody had brought this subject up to me until the day he and I were on the phone.
I responded to him the way I had been trained to do when I don’t know enough and replied, “That’s a great question. It deserves a great answer. Give me two days and I’ll call you back with my feedback.”
After we hung up, I took a second to reflect back on what we had done to address this issue because we addressed it such a long time ago. I checked back with my brothers and it all came back to me. And even though it hadn’t even been a question from other consulting clients, I’m a person with great curiosity. So, I was excited to ask my clients and industry friends about how they addressed this issue.
Here’s a quick recap of what I shared with my client who had asked how my family handled this. I’m starting here with how my company handled it and including what my clients said they’ve done.
For years and years before my brothers and I entered the business, my dad kept the scrap money and put it to work at the company. It was at a time when he was building the company and every penny counted.
When my brothers and I came onboard full-time, and the money from scrap metal from jobs became less meaningful, we decided we’d just let the guys keep it. But that backfired. The reason is, suddenly the guys were changing perfectly good pipe and replacing material way beyond the scope of work figured in the bid process ... all for their own purposes! That’s when I told my brothers that we should require that all scrap be returned to the shop and the exact install instructions were to be followed. We also told them we would pool what was collected to throw a party or setup a fishing trip with the money at the end of the year — and that all of the money would be used for the staff ’s benefit. This solution worked the best at our own shop.
Some contractors I have worked with told me they have chosen to split it 50/50. The collection process is the same when it comes to strict guidelines for what is deemed to be scrap, what is not and how to sort it out when they get to the shop so it can be carted off properly to the recycling center. The funds are segregated so they can be split at the end of the year between company and team members.
And yes, there are those contractors who rightfully feel the legitimate scrap is company property to do as they see fit. That means all scrap gets turned in and sorted so it too can go to the recycling center, and the reimbursement check ends up in the corporate bank account to add profits and income to the company.
I’m not a lawyer or an accountant, so I’m not telling you something here that you can take as legal and/or as approved accounting practice. That’s for you to determine. Just know, I don’t have an overly strong opinion about which of these three approaches is best when it comes to your company. What I do know is until you have a written policy to spell it out and everyone is trained on the process from start to finish, issues and hard feeling are sure to crop up and money will go missing.
Here’s a funny thing. Shortly after this call to share what I had learned, I was working with another contractor who shared on the first day of us working together how much it ticked him off when it came to getting all the scrap back from the jobsites so he could turn it into money. He’s a numbers guy who owns a really big shop with locations in 10 states. To him, it was no small thing.
I shared with him the same information I’ve shared here with you, and he has found a lot of money from option No. 3 becoming a way of gathering money from scrap and putting it to work in the business.
So, get busy on this subject and be proactive so you too can find money from scrap!