Managing a construction project budget can be a daunting task for any project manager. Staying within budget is essential to ensure the project is completed successfully and profitably. In this blog, we will discuss five ways to manage a construction project budget and how an ERP system can help with project tracking management.
Define the Budget
A construction budget is a statement of the amount of money available to spend over a period of time, or on a specific project such as a building, a bridge, or an interior design. The first step to managing a construction project budget is to define it clearly. There are three main categories included in all construction project costs.
- Direct costs include all material, labour, and equipment costs associated with the direct construction of a project.
- Indirect costs are all soft costs incurred and not directly involved in the project. This could be bonds (bid bond, performance bond, payment bond), insurance (builders risk, general and worker liability, commercial vehicle, worker compensation, umbrella coverage). Reconstruction and operation costs are also necessary for a specific project.
- Profit is the amount of money earned on a construction project versus the amount spent.
Additionally, it is also essential to allocate a contingency budget to cover any unexpected expenses that may arise during the project. Builders must keep in mind Utilities and Taxes, Consulting and Inspection Services, Unforeseen Costs, and Debt Financing.
An ERP solution for Building and Construction industry can help with budget definition by providing a integrated hub to create and manage budgets. The solution can also provide real-time visibility into budget performance, allowing project managers to monitor expenses and adjust the budget accordingly.
Tracking expenses is critical to managing a construction project budget. Project managers should have a clear understanding of how much they have spent, how much is remaining, and where they spend the money. Keeping accurate records of all expenses, including receipts and invoices, is essential to track expenses effectively.
ERP solutions can help with expense tracking by automating the process. The solution can capture expenses from multiple sources, such as invoices, timesheets, and receipts, and consolidate them into a synchronised platform. Moreover, expense reports allow project managers to monitor expenses and adjust the budget accordingly.
In addition to tracking expenses, monitoring progress is also essential in the construction project budget. Similar to tracking, builders should define how much work has been completed, how much work is remaining, and how much it will cost to complete the project. Monitoring progress can also help identify any potential delays or issues that may impact the budget.
An ERP system can help with progress monitoring by providing visibility into project performance. The solution can capture project data, such as completed and remaining work and consolidate it into a single base. With real-time progress reports, project managers are able to monitor progress and make informed financial decisions better.
Forecasting in construction is the process of making predictions of a construction project’s possible costs and outcomes. It is advisable for construction firms to figure out how much the project will cost to complete, including any potential cost overruns. Forecasting expenses can help identify any potential issues that may impact the budget and allow project managers to take proactive steps to mitigate them.
ERP software can help with expense forecasting by providing data business analytics. The system can analyse project data, such as expenses and progress, and provide insights into potential cost overruns. Project managers can also leverage expense forecasting reports to have proper adjustments to the budget.
Collaborate with Stakeholders
Collaborating with stakeholders is a must in construction cost management. Stakeholders or partners such as contractors and vendors are on the same page regarding the budget. Collaboration can help identify potential cost savings and ensure that all expenses are accounted for in the budget.
An ERP solution can help with stakeholder collaboration by providing a virtual central for communication. The solution can facilitate communication between project managers and stakeholders, allowing them to collaborate on budget-related issues. Besides, real-time updates on-budget performance enables stakeholders to stay informed and engaged in the budget management process.
Managing a construction project budget requires a proactive approach and the use of effective tools and strategies. Defining the budget, tracking expenses, monitoring progress, forecasting expenses, and collaborating with stakeholders are all essential to managing a construction project budget successfully. Synergix Technologies proudly offers you our Project Costing Management solution that can help you easily track and manage your project budget via a centralised platform. Should you have any concerns, drop us a line today!