Strategies that Move the Needle: Construction Projects Completed on Time AND Budget.

Most of us are all too familiar with budget overruns. Construction projects have a dreadful reputation of going over budget and taking longer than predicted. Construction professionals know there are good reasons why this happens; material prices and availability are volatile, accidents, unpredictable difficulties with the site location or labor, and more. You often discover issues once you start a new build or renovation that you could never have foreseen these issues. In addition, it’s almost inevitable clients will make changes as you proceed forward, which can increase project duration and costs. There can be contingencies within contracts to deter this, however when you’re the ‘a builder who gets the job done’, you want to ensure your client is satisfied and no harm comes to your reputation. In order to alleviate the impact of these common occcuraences, we’ve outlined several strategies to consider in order to keep your construction project on budget and delivered on time.

Integrate technology into your estimates for improved accuracy

Attention to detail saves you money. For construction projects of any size, accurate estimates are essential to protect profits, control risks and mitigate against blown deadlines. The estimation process is something of a tightrope. Too high an estimate could cost the company bids. Too low, and the profit margin disappears. It’s a process that has evolved with technology, and today, companies can deliver more accurate estimates faster than ever, which means more competitive bidding, fewer cost overruns and improved collaboration.

Consider contingency costs

There are many variables of a construction project; as a results, changes are bound to happen. Issues reveal themselves, whether it’s a problem in the foundation or zoning issue. It’s almost inevitable that the scope of your initial contract will change. It’s always best practice to get confirmed quotes for materials and sub-contractors for the quote for each individual job; however consider contingency costs to offset challenges should they arise. This also deters clients from unsurprised expenses—which can lower morale and impact client relationships.

Use project accounting practices

Unlike traditional accounting, project accounting measures the financial performance of specific projects. It requires collecting key data throughout a project, such as time and expense information. Project accounting provides real-time data, giving firms the financial insights they need to thrive. In many cases, small decisions at key times can have a big impact on staying within a project budget.

Utilize comprehensive project management software

More than ever, software solutions are providing valuable business insights for project accounting and project management. Such tools help pinpoint where projects are going over budget and give project managers the structure they need to strategically utilize their teams. BQE Core is an innovative project management software with time billing, project accounting, and expense tracking. It is a valuable tool in tracking staff time and calculating key performance indicators, such as your effective bill rate, utilization rate, and profitability.

Invest in labor and training

With a labor shortage in the construction industry, you may be tempted to skimp on the training. Properly trained workers mean fewer costly mistakes and callbacks. Skilled workers may cost you more, but they are faster, safer and more likely to ensure you don’t spend a fortune fixing mistakes. Also when you hire the same team time and time again for each job, you spend less time recruiting the skilled labor you need for the next job. Long-standing woking relationship also boosts company morale and encourages your team to always perform in your firm’s best interest.

Consider your effective bill rate

One of the more important metrics to monitor in a professional services firm is the effective bill rate. The effective bill rate is calculated by dividing the total revenue generated from a project by the total number of hours worked on it. Most firms cannot bill for every hour of time and calculating your effective bill rate highlights this fact. Let’s say a member of your team worked 40 hours last week but only billed for 30 at a rate of $100 an hour. This means that your effective bill rate is $75 because it takes the non-billable time into account. Knowing your effective bill rate makes it easier to accurately price jobs and create budgets. If specific clients or types of projects require a disproportionate amount of non-billable time, price the work accordingly. There are software solutions that can make this process simple and easy.

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