How to Effectively Manage Project Cost Control in Construction
Tracking costs is essential to staying within the budget of a construction project.
But with constantly changing variables and numerous people involved in the financial details, controlling costs can be challenging and daunting.
You need tools — not screwdrivers and hammers — but construction management software tools to help you track costs and keep the budget in check.
Construction management software with cost control reports can be the key to success.
Keep reading to learn what cost control in construction is, how to use cost control reports and top methods for maximum cost control impact.
- CM Fusion: Making Construction Project Cost Control Reports Easy With Cost Tracking and Document Management Software
- What Exactly Is Project Cost Control in Construction?
- What Challenges Do Contractors Face With Construction Project Cost Control Reporting?
- What Is the Best Method for Construction Project Cost Control Reporting?
- CM Fusion: The Best Construction Management Software for Managing Construction Project Cost Control
CM Fusion: Making Construction Project Cost Control Reports Easy With Cost Tracking and Document Management Software
Construction projects are complex.
Any project — even the smallest one — involves numerous people, various timelines, lots of documentation, and loads of financial budgeting and figures.
The key to a successful construction business is efficiently and economically managing all of the parts and processes of each job.
CM Fusion helps make complex jobs manageable by keeping all the parts of the project connected with every member of the team.
And when it comes to cost tracking and document tracking, we’ve got you covered.
Our document management features include:
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Real-time status tracking
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Timestamping and download history
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Ability to manage permissions
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Mobile and tablet capabilities
CM Fusion’s cost tracking features allow contractors to:
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Track over/under costs in real-time
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Track labor materials and fixed costs
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Customize codes and categories according to each project
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Do it all from a mobile device or tablet
Of course, you could choose to run your construction business the hard way and deal with mountains of paperwork. But why would you do that with CM Fusion tools at your fingertips that are efficient and easy to use?
Click here to request a demo and then get started with our 30-day free trial.
What Exactly Is Project Cost Control in Construction?
Budgets are one of the most essential parts of a construction project. An owner and contractor may spend hours together planning for every expense and hammering out the details. Without a clear budget, a job can get off-track quickly.
But a budget is only the first step in a successful project. Once the budget is set, the spending starts. And if we’re honest, costs are rarely, if ever, exactly what we had planned for.
That’s where a construction project cost control report comes in.
A cost control report helps to track the costs of the project from day to day to help anticipate overages, assess overlooked needs, or identify costs deemed unnecessary after the project is underway.
A cost control report is crucial to alert the contractor when the budget needs to be adjusted or other actions need to be taken to correct overspending.
The 4 Stages of Cost Control in Construction
The key to making a construction cost control report work for you is to work properly within the stages of the cost control process. Following these four stages will keep a tight rein on the budget by always knowing what’s already been spent as well as other current and future costs.
#1: Create the Budget
Without a budget, you won’t have anything to control, so creating a realistic budget is key.
When creating the budget, contractors need to keep three things in mind:
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Project cash flow
A construction budget should contain detailed figures of costs that generally fall into two categories — direct and indirect costs.
Direct costs are those expenses dealing directly with the project — things like:
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Materials
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Supplies
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Labor costs
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Equipment
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Subcontractors
Completing a construction project also involves other costs that are indirectly related to the job, including:
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Site supervision salaries
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Site office costs
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Home office costs
Considering the costs of a project (cash going out) is obviously an essential part of the budget, but you must also consider the available funds (cash coming in).
A contractor may deliver a quote of $100,000 to a client, and the contractor knows he needs to design his budget around that number. But contractors also know that the full $100,000 won’t be available to them at the beginning of the project.
Most projects involve several payments scheduled for specified times during the life of the project, so to successfully manage the budget, contractors also need to track when funds will be received in relation to when expense costs are due.
#2: Get Progress Updates
After the budget is set and the project is underway, the only way to have an accurate picture of the budget, money already spent, and upcoming costs is to get regular progress updates.
For these updates to be optimally helpful, they need to be fast and accurate.
The best way to do this is to have an automated system that tracks invoices, materials costs, and the costs of other indirect expenses.
Construction management software, like CM Fusion, can help keep all of these details together and in one place so it’s easy to get a progress update that’s accurate and timely.
#3: Analyze the Project Summary Report
This is where you get to “see” what’s actually going on. After getting a project update, a cost control report can be generated that takes all the pertinent financial parts of the project and puts them together in one place.
Analyzing the cost control report helps team leaders identify:
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Activities that might be causing delays
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Costs that aren’t being accounted for properly
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Areas of the budget that are in danger of overspending
#4: Make Corrections as Needed
Once you’ve had a chance to scrutinize the cost control report, you can pinpoint issues that may be causing concern. Then you’ll need to take action to correct the problem.
For example, let’s say you look at a construction project cost control report, and you see that the cost of kitchen cabinets is 20% higher than what was budgeted. So, you continue looking through the report to find a budget item that has excess funds available. After conferring with the team, the contractor may then decide to alter the budget to make adjustments in those areas.
What Challenges Do Contractors Face With Construction Project Cost Control Reporting?
Construction projects involve countless details, and all of the details are important.
Challenges that contractors face typically involve:
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Receipts
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Losing receipts
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Untimely recording of receipts
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Invoicing
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Timeliness of sending invoices or receiving payment
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Lost invoices
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Expenses
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Inaccurate expense estimates
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Not including indirect costs
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Change orders
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Multiple change orders
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Not including change order details in the contract
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Labor costs
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Underestimating labor needed for a project
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Overtime expenses
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Material orders
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Underestimating the cost of materials
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Unexpected material cost increases
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Subcontractor costs
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Timely paying of subcontractors due to cash flow issues
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Long projects
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Handling paperwork and administrative details for up to 18-24 months
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All of these challenges can be confidently met head-on with CRM (Client Relationship Management) software. Without CRM software, contractors would manually have to keep track of each receipt and invoice, which means keeping track of loads of paperwork.
There is an easier way.
What Is the Best Method for Construction Project Cost Control Reporting?
Using the wrong construction management software — or worse yet, none at all — makes running your construction business more challenging than it needs to be.
CM Fusion offers the best features to make all aspects of running your business more streamlined, efficient, and thorough.
7 Methods for Project Cost Control
#1: Comprehensive Estimates
Construction project cost control reports won’t do any good if your cost estimates are inaccurate or if your budget isn’t thorough.
Take your time in the planning phase to determine comprehensive and realistic estimates that include costs for:
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Materials
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Equipment
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Labor
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Permits
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Overhead; and
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Other costs you may need to meet
One thing that can help to create a realistic budget is to look over the expenditures of past jobs to see where hidden or unexpected costs may come from. It’s better to plan ahead for hidden costs and not encounter any than to be met with surprises without the funds to cover those costs.
#2: Daily Reporting and Updates
If updates are infrequent or spread apart, you can be caught by surprise that some expenditures are out of control.
Daily reports and regular monitoring will help you quickly identify:
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Costs that are beginning to get out of control; and
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Potential delays in the construction schedule
Knowing about these problems early can give you plenty of time to find solutions.
To make the most of reports and updates, make sure they contain adequate detail to aid in decision-making.
Rather than a broad report, consider a report with specifics on things like:
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Equipment usage
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Labor hours
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Materials used
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Other specific actions
#3: Contingency Planning
Unexpected things happen that may harm the budget:
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Equipment breaks down.
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Inspections take a long time to schedule.
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Subcontractors pull out.
When those things happen, having a contingency plan can be the difference between the project halting or continuing.
In the initial planning stages of the project, take the time to identify areas of potential risk. Or think about similar projects you’ve done in the past and issues that developed that you can learn from.
Considering potential complications, develop some plans detailing how you’ll deal with those potential issues if they arise.
For example, you think your forklift may be on the fritz, so you may want to consider locating another one to keep on standby in case yours stops working in the middle of the job.
#4: Minimizing Change Orders
Change orders can cause huge cost increases, and limiting them is key to staying within your budget.
Change orders can be minimized by:
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Reserving them for emergencies only
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Making your own change order terms
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Creating a thorough statement of work
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Communicating well with the client regarding expectations
#5: Open Communication With Subcontractors
Good communication can go a long way toward keeping costs within the budget, especially when it concerns subcontractors.
Subcontractors need to know:
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Exactly what you need them to do; and
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When you need them to do it
Unclear expectations with subcontractors may mean calling in someone else to finish a subcontractor’s incomplete job.
Or if you aren’t clear on timelines, you may end up not getting the subcontractor when you need them. In that case, it may be a good idea to have other trusted subcontractors on standby, who may be able to step in to complete a job in the middle of a project.
#6: Post-Project Review
Evaluating is always a good idea, whether you succeed in staying on budget or not.
After the project is completed, gathering key team members together to look over the initial budget and compare it to the final expenditures is an excellent way to:
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Discuss what went right
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Discuss what went wrong
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Learn what to adjust for the next project
#7: Construction Management Software
You can try to keep your records on spreadsheets, but if your project is of any substantial size at all, spreadsheets aren’t going to cut it.
You need construction management software to:
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Provide valuable cost control reports
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Generate daily reports
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Help with scheduling
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Manage documents
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Streamline workflows
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And more
You have options when it comes to choosing construction management software. Before choosing one, you should evaluate your needs, technical abilities, and budget. Before being locked into a plan, choose a software you can use on a trial basis to see if it’s the best fit for your business.
CM Fusion: The Best Construction Management Software for Managing Construction Project Cost Control
CM Fusion should be your first choice when you start shopping for construction management software. You may like it so much that it may be your first and only choice.
That’s because CM Fusion is a cloud-based software with all the features you need to run your construction business:
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Document managing
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Scheduling
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Daily field reports
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Project tasks
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Time tracking
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Cost tracking
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Change orders
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Submittals
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Bidding
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Image management
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And more
CM Fusion is easy to use and doesn’t require hours of training. But if you get stumped and need help, you can contact our support team and speak to a real, live person whenever you need them.
With two affordable plans, there are no commitments or contracts, and you won’t pay any set-up fees.
Take advantage of our 30-day free trial and see if CM Fusion is right for your construction business.
Try CM Fusion, risk free for 30 Days – Your first project is FREE!
If you are trying to figure out where to look now, our company CM Fusion offers a free version of Construction Project Management Software. Not to mention, our customers brag about it’s ease of use, so you should be able to sign up and start managing your projects in minutes.