Jeff Head wasn't thrilled when he found his installers had deposited about 2 squares of shingles at the town dump — there went at least $200 off his bottom-line profit. He understood why, though, says the owner of Head Roofing Contractors, in Evansville, Ind. “They're paid by the square.”

Head, at least, is aware of the problem; many home improvement company owners are baffled, wondering where profits went. Wasted deck boards, shingles, siding panels, and a whole raft of other materials can add up to thousands of dollars per month.

PRICED ACCORDINGLY Some companies, such as Schmidt Siding & Window Co., in Mankato, Minn., simply keep track of anything and everything employees take. In Schmidt Siding & Window's case, the waste on a siding job is not so much a function of installer carelessness as it is of the challenge of installing seamless steel siding. Company estimators are good at anticipating problems — such as recognizing foundation or rotten-wood replacement issues — and building them into the price.

Jacob Conoyer, general manager of Choice Remodeling, an O'Fallon, Mo., company that does mostly siding and windows, says company estimators routinely add 2 squares worth of waste to a siding job. That extra $300 of waste results, he says, when installers hit an area such as gables, peaks, or windows and decide “to use a fresh sheet of vinyl, as opposed to grabbing a piece of scrap that would fit.”

SOLUTIONS Dennis Schaefer, owner of Creative Wood Products, a deck and sunroom builder in Fenton, Mich., says the best way to control materials waste is to train employees. “If they grab the wrong board, it's the cost of the board plus the cost of downtime,” Schaefer says. “When they get to where that board should go, they don't have it. They have to go get it or we have to get it out to them.” The company solved the problem by color-coding boards according to lumber dimension in its deck plans.

Controls are key. At Head Roofing Contractors for instance, a roofing or siding job that consumes 1 square or more over the estimate is remeasured. And Head says he now pays installing subcontractors 90% when the job is complete, and the remaining 10% when unused materials are returned to the supplier. These measures were put in place two years ago when, in one month, the company got a $7,000 bill for incidentals — pieces of wood, house wrap, drip edge — from its supply house. To eliminate the supply-house spending spree, Head also hired someone to clean up jobsites and run materials out when crews are short.

Many companies find it smart to couple strong controls with incentives. Conoyer says Choice Remodeling is considering splitting, among crew members, a percentage of the value of whatever materials are returned to the warehouse or supplier after the job's through.

Creative Wood has a profit-sharing plan and holds monthly meetings where materials waste, which cuts into profits, is regularly discussed. Everyone at the company knows gross-profit slippage means smaller profit-sharing checks at the end of the year.