How to Keep a Construction Budget Under Control
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Budgets are easy to lose track of when you’re in the midst of a project. You start to focus on the end goal and getting there in the most efficient way possible, so you might forget about the finances you planned out ahead of time.
Every business must adhere to a budget to make a profit. Whether your budget is rigid or fluid, you should know every cent that goes out of your funds. Use these techniques to help you stay on budget for your next project and every other after it.
1. Set a Firm Construction Budget
An essential part of keeping a budget under control is setting a designated budget. While it might seem obvious, construction project costs can expand quickly without monitoring — labor and material costs rise, and unexpected downtime hits. You can’t always control these factors, but building contingencies into your budget can help you adapt.
A budget only works if you pay attention to it, and it can help you understand more about the projects you take on, like what to prioritize and what can wait a bit as you keep an eye on material prices.
A construction budget can be broken down into hard costs, like equipment operation and materials, and soft costs, like professional consulting fees and banking concerns. Hard costs are easier to solidify at the start, while soft costs might need tighter management to stay in line.
Keep the construction budget updated throughout the project and keep the client and other consultants informed of changes and developments for approval. This will help your company stay adaptable and streamlined.
2. Follow the Project Manager
Every project should have a project manager. Without a project manager, you have no way of knowing whether your team is performing on track or lagging behind in some areas.
A project manager helps you understand where you need to dedicate more staff and helps you resolve any communication issues between task holders. Project managers are specially trained in keeping track of every aspect of a project, so everyone on your team should follow their word.
They say “what gets measured gets managed.” With an experienced project manager on top of the details, it’s easier to keep various subcontractors and deliverables on track.
3. Define and Examine KPIs
Key performance indicators (KPIs) can help you understand how effectively your project is moving along. Your return on investment (ROI) should be the greatest indicator of how smoothly your project is going.
You can also examine the cost variance of the project, which allows you to see whether the project you’re currently working on is around the same cost as other projects like it or if you’ve gone under or over the budget. Having well-thought-out KPIs can help you keep track of your budget and overall success.
4. Analyze Materials Routinely
Over time, some materials will be affected by inflation, while others may not. As a construction professional, you should stay on top of trends so you’ll know which materials you need to watch prices for.
Watching these trends can help you prepare for future projects with uncertain materials to keep your costs lower than if you bought everything exactly when you needed it.
5. Review the Budget Regularly
You never know if something has changed until you review it. At every step of the process, you should be reviewing the budget to ensure you’re staying within it. If inflation has affected some materials, you need to adjust that in your budget and see if there’s any other room where you can save costs.
If your ultimate goal is to stay within budget, you’ll need to review it constantly to keep tabs on where funds are going.
6. Take Care of Your Staff
An unengaged or unreliable staff can send a construction project off the rails — missing details, disregarding Jobsite safety, or missing shift times. While everyone has off days, having a better idea of an employee’s benchmark for productivity can help you determine whether they’re contributing their best, and help you make decisions about pay raises and incentives.
In a competitive labor market like construction, expanding labor costs might be necessary to retain quality staff. Higher pay might serve as a great incentive to get your employees or contractors to work a little harder. Implementing incentives or bonuses for successful KPIs can also serve to keep a construction project on time.
7. Use Project Management Software
Even the greatest project manager needs a little help sometimes. Project management software can help you monitor progress on a certain task and help you assign people to work on certain things. In the construction field, you may be the only one who accesses the software, but it can still help you know who is working on what and how much time you can estimate for certain tasks.
Having all this information in one place can work as great reference material for you and it can help you see past projects and the work your team has completed so far.
Sticking to a Budget in Construction
With all the tools at your disposal, you should find it easy to stick to a budget. Any software or new people you bring in might have an adjustment period, but they should work to the benefit of your company and its projects.
Once you learn project management effectively, you’ll be sure to stick to your budget while considering other factors like your employees’ productivity levels and the cost of materials. You’ll find that staying within your project budget is easier than ever just by altering a few methods.
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Evelyn Long is a writer and editor focused on home building and construction. She is the co-founder of Renovated, a web magazine for the home industry.
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