Accurate Construction Estimation when it comes to the construction business is essential because it is often associated with extensive overhead costs and unachievable revenue goals. And the only significant reason why contractors tend to deviate from their goals is improper budget forecasting.
However, quality budget forecasting is vital for effective project management and expense control. Budget forecasting enables contractors to understand the time required to complete the project, its costs, and all other project critical data that can affect the cash flow. As forecasting or estimation is the primary stage of the project lifecycle, it should be worked in the most effective manner to avoid any disruption to the funding of the project.
Forecasting is also important for determining anticipated revenue because companies will want to know how much they stand to make before taking on a project. Additionally, an accurate forecast will provide insight into future cash flow, which is especially important in an industry where the funding for a new project may likely come from the revenue of a previous one.
Moreover, a large number of variables associated with a project makes it more difficult for the contractors to determine the actual position of the project finances and resource allocation while considering factors like likeliness of change orders, weather conditions, shutdowns due to pandemic, etc.
Since, it is necessary for contractors to understand the right process to improve budget forecasting for improved control on the projects, here we bring you a list of 4 winning tips that can help contractors and project managers to aim at Accurate Construction Estimation. Let’s find out what they are.
Review & Update
The construction business is full of uncertainties and unpredictable results. Even if a project is planned in a most careful manner, challenges can suddenly appear from nowhere. This is why it is important that project managers, site supervisors, and contractors should all keep a pulse on project progress ensuring the project is moving in the right direction.
Besides this, initial forecasts should be worked in an effective manner to gauge the project and identify any risks that must be worked beforehand to avoid loss in the future. Also, you can aim for improving the dates and calendar to work on forecasts that can under-state or over-state future projects.
Direct & Indirect Costs
The next thing that you to have accuracy in your construction project forecasts for 2021 is working on all the direct and indirect costs involved. From direct costs, here we refer to the costs that are related to producing a product or completing the activities to achieve the final goals. These must include all the expenses related to labor, material, equipment, logistics, etc.
On the other hand, indirect costs include expenses that are not directly related to the development process of a construction project. Indirect costs are not easy to trace and therefore need intense involvement from field and office teams to locate any costs that a particular department, activity, or project could involve.
Most of the time, these indirect costs are overhead costs i.e. insurance, salaries, change in supply requirements, Equipment costs i.e. repairs, depreciation, and maintenance, and lastly the labor burdens i.e. taxes, compensation, etc. As these costs make a large portion of the overall project expenses, it is crucial to work on these costs to produce accurate forecasts.
Recall On Historical Data
Another thing you need to do to work on quality estimates is feed on the historical data related to the projects. This data must be used to have a foresight of the project while taking a review of the historical data to locate errors with the past projects and prevent repeating the same in the existing and upcoming projects.
This approach to practice hindsight can also help to create predictable trends related to a project that can benefit in resisting any activities that might hamper the project progress while giving the benefit of creating accurate budget and forecasts.
Using An Integrated Construction Software
A Construction project lifecycle usually involves so many activities which increases the chances of skipping any important information in the planning process. Though many construction firms are already having access to construction solutions to work on such gaps, working on disparate solutions creates a lag in the information.
However, using an integrated system helps to monitor and manage all the issues related to job costing, accounting, and other resources that have a direct or indirect effect on the budget of the project. Using the right construction project management software that offers cloud capabilities could even help contractors to have a single source of truth for all their forecasting and project reporting goals. With all such features available on mobile, contractors could create custom project reports that could be used in the future to process forecasts for similar projects in a more efficient manner.
All in all, the usefulness of a forecast entirely depends on its accuracy, and to achieve such precision, contractors need to work on a well-defined process that feeds on every stage and activity associated with the project.
Also, quality forecasting can even help to use the time and resources for maximum business benefit achieving the scope of the project and offering deliverables on time. However, meeting such goals need contractors to target the review process, identify direct and indirect costs, check on historical data, and lastly taking access to the right construction accounting and project management software.
Once done with implementing and achieving the process in the workflow, contractors and project managers only need to polish these skills in order to enjoy exact budgets, optimized cash flow, and boosted revenue.
Author bio: Ed Williams is the Senior Team Lead at ProjectPro, an integrated construction accounting software. He holds a massive industry experience and is a Microsoft Dynamics expert who is focused on successful implementations. He is a visionary leader and always aim to deliver the best to the construction and project-oriented industries.