Here’s a sobering fact: Only the top 19 percent of contractors and subcontractors set specific overhead, profit and sales targets for the year, and then track their progress monthly.
That means 4 out of 5 contractors are just winging it. How on earth do you think you’re going to stay on budget if you’re not even tracking it properly?
There’s no reason to feel bad. Many of us are guilty of doing this in all facets of our lives (especially when it comes to personal finances). But there is a better way, and there are tools to help you.
Today there is a wealth of powerful construction software options available to you to help you track and manage your construction firm’s budget, and there’s just no excuse not to take advantage of them. You should use construction budgeting software within the next quarter in order to identify potential savings and significantly boost profits.
So let’s break down how exactly you can use construction software to get those profits that you know can be within reach if you just take the necessary steps.
1. Conduct a Thorough Cost Analysis
The success of your project depends on how well you analyze and anticipate the costs, so this is one step you don’t want to skip.
First, you’ll need to identify all the key players in your budget. Don’t try to do the budget on your own: You will fail. Anyone else who is going to be involved in making spending decisions—whether that be your chief engineer or just some subcontractor you know you’re going to need to, say, do the electrical work—should be involved in this phase.
Meet with each separately to break out their portion of the budget, then double-back at a later date with all of them to ensure you haven’t missed anything. Your goal in this phase is not to come up with an exact budget, just to identify cost drivers and create estimates that will be adjusted as you refine them with exact totals in the design phase.
Here’s a brief list of some of the basic costs you should be factoring in:
- Contingency costs (reserve about 5 percent of the budget for unforeseen issues)
- Site prep
How construction software can help: There is a whole subcategory of construction software that can help you here: construction estimating software. For example, some software options are cloud-based and allow users to either input their own prices or request the software team to do that work, and others electronically update the vendor and market pricing for items.
2. Design the Project
Now comes the time to design your project and refine those numbers you came up with in the previous phase.
In this phase, you’ll want to meet with your architect to talk about the scope of the project and go over the figures you came up with your team.
Based on your conversation with the architect, come up with a detailed list of materials you’ll need for the project. Then use that as a baseline to lay out full estimates for labor, and do a run-through of all the costs you brainstormed with your team to see if any of those need to be adjusted. Bring in an outside consultant, if possible, to check that your numbers are correct, because if you get it wrong you risk going way over budget.
How construction software can help: Software is excellent for creating a finalized budget and timeline for your project. Some construction software options out there will make the tedious process of filling out the budget easier, including one option that creates and pre-populates databases with costs, and allows you to create default templates to streamline the process.
Another software option in our directory automates repetitive tasks by using tracking data from past estimates and standardized libraries. Users can run price calculations automatically to spot problems before the project kicks off.
3. Conduct a Final Pre-Production Check
This phase has a few purposes: to get all of your stakeholders on board and on the same page, to make sure you haven’t missed anything critical, and to collect all the documentation needed before you start a project.
Gather documentation of all permits, regulations, contracts and anything else that should be in place before you start construction.
Call a meeting with all stakeholders—your team, subcontractors, the client etc.—and review the final budget and timeline with them. Or, compose a detailed budget and timeline and share with all of them through email or group chat, and request feedback.
This will make sure everyone is in agreement on this budget, and it’s also a good opportunity for someone to chime in in case you’ve missed something.
How construction software can help: Use software with document management in order to keep all documentation readily accessible during the course of your project.
One software option in our directory provides project teams with access to all critical documents, from project drawings to progress photos, while another offers a handy document management dashboard that allows you to quickly and easily dial up whatever you need.
4. Monitor Costs Properly During Construction
The budgeting work doesn’t stop when construction begins. Now comes the hard part of keeping the budget on track, which means plenty of vigilance from you as a construction manager.
Visit your construction site often to determine that your team is meeting the parameters you set during the design phase, and that everything is being correctly documented so you can be confident you have the right figures. This is especially important if you go over budget so you have a full and complete record of why it happened, and therefore can figure out how to keep it from happening again.
How construction software can help: Construction apps are a great way to keep an eye on the budget while you’re out in the field. Lots of construction software options out there offer an app, including one app in our directory that will let you track daily logs, schedules and plans. Another app lets you instant message your crew and view drawings.
5. Post-Construction Breakdown
The construction project is over, so the budget is just a footnote, right? Wrong. There is no better time than now to conduct a budgeting analysis, because now you have actual data to examine on what happened during your project. This is vital info that should not be wasted.
Have a post-production breakdown meeting with your team. Present side-by-side numbers showing what you predicted during the planning phase and what the actual figures were. Discuss why there were discrepancies, and talk about what happened during the project that resulted in those figures and brainstorm ways to improve them.
With each construction project, you will find that these meetings are vital to the success of future projects. This phase might be the most important of all of them, so record the results of this meeting and bring them with you when you go back to Phase 1 for the next construction project.
How construction software can help: One great thing about modern construction software is powerful reporting features. You should use software that has a custom reporting option that can produce a breakdown of your costs.
One software option in our directory offers reports that cover a multitude of categories, from payroll to billing to job costing. Another produces automated reports that cover purchasing, inventory, accounts receivable, and many other categories.
It’s Time to Roll Up Your Sleeves and Crunch Some Numbers
Why is this stuff so important? If you aren’t thoroughly and accurately budgeting, you have no idea what you’re spending and the likelihood of you overspending dramatically increases.
By finding good software now and using it, you can absolutely improve your budgeting within the quarter—a month to find a good solution, another month to integrate it in your firm and a third month to get comfortable with the new system.
The time to improve your budgeting is now if you want to cut costs and boost your profits in the next quarter, so take these steps now to make it happen:
- Call a meeting with your team to begin the planning phase for your next construction project.
- Set aside a day in the next week or two to crunch the numbers yourself.
- Identify all stakeholders and set up a meeting with them to go through pre-production.
- Settle on software that will help you accomplish your goals. Call our advisors at (855) 998-8505 for a free software consultation, and let them know you need software that can handle cost estimating, documentation, and customized reports.