It’s inclining to the end of the year and most construction companies are aiming to the ‘builders break” period and for every CFO it’s time to take stock of where the project budgets are and where they should be. From your accounts or cash/receipts books, over/under budget report, backlog and pipeline, you probably have a very good idea how this year will turn out financially.
Time to take account of the state of your budget affairs.
The single most important document you can create and maintain for your Construction Business is a Budget
If you’re generating surplus profits from taking on too much work and stretching your back office and field crews too thin, that’s just not sustainable. It can be a dangerous way to operate and actually hurt you in the long run if any of them blow up.
The definition of a project manager in a construction company is very accurately described by the Project Management Institute(PMI) “the art of directing and coordinating human and material resources throughout the life of a project by using modern management techniques to achieve predetermined objectives of scope, cost, time, quality, and participating objectives.”
Planning the budget for a construction project is a tremendous undertaking. Even the most experienced of CFO’s struggle with setting proper expectations for construction projects given the unforeseen hiccups that can occur. There’s no way to be 100 percent prepared for the realities of a construction project. Contractors may encounter changes in site conditions and need to adjust plans, or there might be sudden shortages in important building materials. This places even more stress on the project CFO as these unforeseen circumstances create unforeseen costs.
But that shouldn’t stop you from making your plan as watertight as possible. It is important to make a long term decision for all the company projects instead of grinding your teeth every time you hear the words ‘new project’.
Setting parameters at each quarter of the budget year would be the best guideline to follow to ensure your budgets are on target at all times. With the right kind of system in place these goals can easily be reached, while you have time to focus on other sectors of the project.
A properly maintained budget allows you to determine how much revenue you need to generate in order to be profitable. A Budget protects the business because it forces the Project Manager to be a better decision-maker and planner. Your budget business plan needs to take advantage of profitable opportunities in the market. The budget should be aligned to the size of your market, the prices your market will pay and the cost of serving its needs.
The Cost Control Problem
During the course of a project, procedures for project control and record keeping become indispensable tools to CFOs and other managers in the construction process. These tools serve the dual purpose of recording the financial transactions that occur as well as giving managers an indication of the progress and problems associated with a project.
Consider the problems associated with resource utilization, accounting, monitoring and control during a project. Interpretation of the project accounts is generally not straightforward until a project is completed, and then it is too late to save the outcome of the budget. Project control procedures are primarily intended to identify deviations from the project plan rather than to suggest possible areas for cost savings.
The time at which major cost savings can be achieved is during planning and design for the project. During the actual construction, changes are likely to delay the project and lead to unforeseen cost increases.
How to save your budget
For cost control on a project, the construction plan and the associated cash flow estimates can provide the baseline reference for subsequent project monitoring and control. Progress on individual activities and the achievement of milestone completions can be compared with the project schedule to monitor the progress of activities.
Contract and job specifications provide the criteria by which to assess and assure the required quality of construction. The final or detailed cost estimate provides a baseline for the assessment of financial performance during the project.
It is imperative to keep track of all expenses and changes in the budget project by all departments of the project. A budget is a planning tool and should be prepared well in advance. Once the budget is prepared and approved, don’t put it away in a dark corner. For the budget to be useful and effective, everyone should take it seriously.
Finding an easy to use timesaving system to help you through the difficult decision-making days of a construction project can help to alleviate your stress.
Our Procurementexpress.com purchase order management app has all the right ingredients to give you the freedom you need to run your budget the way you want to. It’s a straightforward easy to use application that anyone of your staff members can master in a few minutes. We achieve this by running all purchases through a set approval routing by budget and project.
The efficient 1 click approval system secures every aspect of the process. Not to mention have and award winning concierge support team available 24 hour a day.
Tailored reports, quick and easy approvals and a customizable Pdf makes our app very adaptable.
Don’t take our word for it:
Madison Equities Review of Procurementexpress.com
Jul 18, 2016
Michael Nielsen, Project Manage
Real Estate, 51-200 employees Employees
Comments: Ease of use!!!! I love it. There aren’t many bells and whistles. That’s what I like. To get building engineers, property managers, and accountants to actually use a system, it has to be easy to use. We have a work order program that everyone hates because it is so complicated. We wanted Procurementexpress.com so we could keep track of our spending and make sure our Vice President knows what is being spent. It simply works. And we love it.
Is your budget already near its end and there are more expenses?
Is there no time left on the clock and you need an escape plan?