As I get closer to the end of the year I start looking at costs and revenue and planning next years budgets. Although this process can be tiresome and difficult – it is very important. When you start this process many parts of your business needs to be thought about; your position in the market, your competition, the economy, and where your opportunities for growth and new clients are.
While many businesses go through the budgeting process just once a year, the construction industry demands budgeting with each and every project, and therefore projections are fluid. Budgeting is an on-going task in construction management, and shouldn’t be taken lightly.
Job Costing
The start of each job is an estimate, which eventually becomes a budget, but the facts and figuring don’t stop there. During the entire job – the work, the costs and the income received – everything is entered, measured and compared to the budget that was made.
Collecting data carefully and charging each individual job correctly is necessary to keep your company afloat. Labor and materials are easy costs to compute, but there are incidental costs that need to be realized as well. As an example, if you are installing electric wiring, are you including the cost of all of the items involved in those installations? Hundreds of fasteners and connectors add up, and they will eat up your profits if you don’t budget correctly for them.
Budgeting Tools
Having the correct processes in the office and at the job site will allow you to track all the direct and non-direct costs. Tracking the data is just the start. Taking labor, material and other project cost data and turning it into information you can use, means having the proper processes for the needs of the construction industry. This information is necessary to make accurate budget comparisons and therefore help create accurate predictions.
Job cost accounting is required to perform this type of processing. Any construction software program you use needs to be designed in such a way that it allows for integration with this process. At the very least, costs will be accurately placed on each project as they are incurred.
Just as office personal needs accounting information, project managers do as well. Project managers need operational data, as does the office personal. Your construction software needs to combine financial and operational data so that everyone working on a project gets the whole picture, and not just small snippits of information.
The most current construction software not only takes in information, it allows for the development of “what-if” scenarios. It allows for comparison to decide better way to improve job profitability. By looking at the “what-ifs,” problems can be identified before the project has been started, therefore saving time and money.
When looking for a software program for your construction company, make sure it allows for identifying, tracking and reacting to any problems that may occur. When actual costs start drifting away from budgets and predictions, you will be prepared.