9 Tips to Increase Your Profit and Save Time through Construction Job Costing

For every successful construction company, accurate job costing is a must. Without an efficient job tracking process, your business is like a ship lost at sea. The earlier you identify your risks and deviations from the budget, the more time you have to adjust course and get back on track. Many avoidable problems in business arise due to lack of good processes – job costing is one powerful tool to prevent losing money and time.

Here’s how construction job costing can help you increase profit and free up time:

  1. Make sure you give your project managers the right budget
  2. Accurately track subcontractor commitments and contracts
  3. Monitor purchase invoices carefully
  4. Handle client change orders with efficiency
  5. Manage the knock-on effect of change orders on subcontractors
  6. Carry out regular forecasting
  7. Make sure you’re using the right formula (margin vs. markup)
  8. Predict completion accurately
  9. Time is everything so spend it wisely

 

1. Make sure you give your project managers the right budget

Often when estimating job costs, a firm will calculate the direct cost and add markup or margin. The budget with margin is then passed to the project managers along with an indication of how much he or she can spend from it. However, with the budget plus margin subconsciously in mind, our brains will often justify overspending as long as it doesn’t break the subtotal of the total estimate. Unfortunately, however, these projects will eat up non-direct and profit. If, on the other hand, the project manager sees only the allowed spending budget, they will be more motivated to hit the target – this is even more effective when the goal is linked to a reward system.  You’ll then find that your project managers are doing whatever it takes to stick to the budget or even improve upon it.

 

2. Accurately track subcontractor commitments and contracts

One important aspect of job costing is to identify how much of the budget is already committed. In bigger construction projects, there are a lot of subcontractors and suppliers. The first rule is not to start work without a written agreement. It might be tempting to tie a subcontractor in with the intention of later negotiating the scope of the work as well as better prices. However, not having a fixed agreement regarding work to be carried out is a slippery slope and often leads to losing both time and money. Having a contract in place ensures the subcontractor has assumed responsibility for the job and reduces the risk in terms of finalizing the project. Any construction job costing software should allow agreed commitments to be added and then automatically update the forecast to show the potential risk or extra earnings.

 

3. Monitor purchase invoices carefully

If you have agreed the price for a particular job, you also need to ensure that the subcontractor is not invoicing you for more than originally quoted. The easiest way to do this is to use the pay application and track the progress claims online. This process will prevent project managers hiding costs on the budget line where the profit margin is higher. It is also sometimes the case that subcontractors may manipulate the figures, either by accident or design. A good job costing system will help to avoid these pitfalls.

 

4. Handle client change orders with efficiency

Client change orders can be a blessing or a curse. They’re a critical juncture that can provide opportunities but are often difficult to track or predict. While change orders can be a turning point where the unprofitable project becomes a profitable project, they can also work the other way and turn a profitable project into one that loses money if poorly managed. When all’s said and done, the main question at the management meeting will be: have we gained or lost money from the change order? An excellent job costing software can show you exactly how much profit you earned from change orders. But more importantly, it can show you overall trends in relation to change orders.

 

5. Manage the knock-on effect of change orders on subcontractors

So now we have identified some ways to track the variations on the client side. But how these changes will affect the subcontractors or suppliers is an even more complicated question.  If a general contractor is a leading force in the negotiation of change orders with your subcontractors, it is absolutely critical that these change orders are accurately tracked – if not, you are leaving yourself open to a world of problems. The main concern behind change orders is how much extra money the client will be paying and how much of that will go to the subcontractors. A good system will make a huge difference when it comes to managing this.

 

6. Carry out regular forecasting

What do we mean by forecasting? It means that the project manager will add new information and their best estimates of what may affect the budget into a job costing system. Everything in the universe is continuously moving, and projects are no different. Just as when you drive along the road the GPS will continuously update itself to show you when to turn, the same should apply to a construction job. As you progress, you need to adjust the budget to ensure you make the right turns when needed. Proper job tracking software allows project managers to update the forecast on a regular basis for tasks that haven’t got a concrete commitment, while forecasts are automatically updated when commitments or purchase orders are entered into the system.

 

7. Make sure you’re using the right formula (margin vs. markup)

There are many companies who confuse the margin and markup. That’s not to say one is better than the other, but it’s important to understand that cost + markup is not the profit margin. For example, if you buy something for $100 and add 20% markup it equals $120 – but if you calculate the gross profit you get $100/$120 = 16.666%. If you want to add the margin it needs to be calculated correctly. For example, if you add 20% margin your revenue should be $125. If you’re not sure, it’s important to look up the correct formula for your business and check the numbers are accurate. Bauwise job costing software uses margin calculations, not markup calculations.  Don’t lose money by using the wrong formula.

 

8. Predict completion accurately

What can we do with information about expenses when we don’t know how far along we are with our job? There are many methods for calculating the completion of a construction projectbased on revenue, on costs or observational completion. However you calculate it, it should show you whether your costs and income are in line with the completion. This is critical for understanding the true picture of a construction job.

 

9. Time is everything so spend it wisely

Time is the most precious asset we have. We can lose money and earn it back but we can never recover lost time. Managing your job costing process in Excel or some other complicated system will definitely lose you time. Not having the right information at the right time will also lose you money. Time equals money so you need to spend it even more wisely.

 

One extra tip: Learn to say NO to things that don’t matter. You can’t do two things at the same time. If you say YES to one thing you are saying no to something else. Choosing to say YES to the right things and NO to everything else will help you reach your goals, increase your profit and free up time.

Bauwise is a construction job costing software what can help you with efficiency and earn more profit.

Please let us know how you have benefited from the job costing system and feel free to share this post if you have found it useful.

5 must have software for general contractors in 2019

The internet is offering dozens of software options for the construction industry and particularly for general contractors. On the one hand, there is a number of big players such as Procore or Jonas Construction, that is mainly focused on large companies and offers “all-inclusive” construction management software. On the other hand, there are a lot of standalone/entry-level tools, that fills the gap for general contractors that outgrow paper or Excel-based work process and are not ready or don’t want to invest in expensive, complicated, “all in one” large scale systems. Also, some general contractors already have some software in place and don’t see a need to replace it. They made a decision to use specialized software to automate different processes and feels more flexible to choose software that works best for their needs.

Here is the short list of the software for general contractors:

  1. Estimating software
  2. Budget tracking & construction cost management software
  3. Project planning & scheduling software
  4. Document & drawing management software
  5. Daily reporting software

Actually, it’s not so important what choose, the most important does it solves your pains in the easiest possible way and helps your business be more profitable. We made internet research and choose 5 must have standalone/entry-level software for general contractors in 2019. In this article, you can also see other great alternatives for your consideration. This is the main categories and top selections so far:

Takeoff & estimating – STACK takeoff & estimating software

  • STACK is online takeoff and estimating software. It helps general contractors to speed up the bidding process and avoid costly errors. STACK has a great market response from customers on SoftwareAdvice and Capterra.
  • Most general contractors getting their works by bidding on construction projects. Some general contractors creating bids based on self-performed estimates while others rely on subcontractor bids. In both scenarios STACK takeoff & estimating software can help you. For example, you can double-check your subcontractor bids.
  • Major benefits of STACK software based on customers responses is easiness of use and speed. The software helps to do accurate & fast quantity takeoffs and calculate detailed material and labor estimates. All data are saved in the cloud and your team can collaborate online (so all plans and related information is online – you can access it from anywhere, anytime). With STACK you can create professional looking bids straight from the system. Also, it has integration with Excel, prebuilt reports and material base.
  • Other alternatives: ProEst, Sage Estimating, Cubit 9, Square Takeoff, Clear Estimates, PlanSwift, B2W

 

 

Budget tracking & construction cost management – Bauwise software

  • Bauwise is cloud-based budget tracking & cost control software designed for general contractors. A number of them are using it daily to track original budget vs costs from accounting, profitability and control costs to avoid budget overrun.
  • Worldwide markets are quite different in terms of general contractors and construction accounting. Bauwise is the best fit for general contractors that have no or little amount of own stuff and all or most of the works gives away to subcontractors. It will also best serves for companies that are advanced in construction accounting and focuses to manage construction projects costs efficiently.
  • Beside core functions, such as budget tracking, Bauwise is a great tool for cash flow planning, it has online cost approval workflow, portfolio reporting, and great features to manage your subcontractor contracts. Customers highlighting that Bauwise has a nice user interface and it’s natural to use for construction professionals.
  • Other alternatives: Google Sheets, Microsoft Excel Online, SmartSheet

 

 

Project planning & scheduling – TeamGantt software

  • TeamGantt is an online solution for project planning & scheduling. This software is a good choice for general contractors that are looking for a simple solution to professionally plan project on the Gantt chart and assign tasks to the team members. TeamGantt has a lot of positive reviews from customers on SoftwareAdvice and Capterra, you can check it out.
  • It’s important to mention to mention that planning defining what is to be done and how, and scheduling is answering the question when it should be done. TeamGantt will answer these questions for you in the fastest and simplest way.
  • TeamGantt has a lovely and intuitive user interface, it allows to change task dates, duration and rearrange them with a drag & drop on a Gantt chart, you can also create dependencies and plan resources. With a TeamGantt it’s easy to assign tasks to your team members, upload files to tasks and collaborate with your colleagues online. You can see how many tasks are assigned to you and your team. TeamGantt equipped with a mobile app that allows collaborating with your team straight from the phone.
  • Other alternatives: GenieBelt, GanttPRO, Microsoft Project

 

 

Document & drawing management – PlanGrid software

  • PlanGrid cloud-based document & drawing management software gives a construction team access from anywhere to project drawings and related documents, such as specs, submittals, RFI responses, schedules or installation instructions. It’s a great tool to share project information across all the team and collaborate in real time. PlanGrid customers left a lot of good responses about this software on SoftwareAdvice and Capterra.
  • Document and drawing management is definitely a priority for most construction companies. The market is offering different DMS, but the construction industry has own specifics, so specialized tools as PlanGrid usually works the best for them.
  • PlanGrid includes industry-specific features, such as comfortable sheets & revisions management, markups handling, a great feature is that any document can be added as a custom hyperlink to your plans. With PlanGrid you can also notify teammates or ask for updates by mentioning their names in comments. Beside drawings and documents management, the system offers the ability to assign tasks and track them on the mobile phone, also with PlanGrid you can create nice field reports and attach photos and other documents.
  • Other alternatives: Bauhub, Skysite, Folderit, PlanRadar, eFileCabinet

 

 

Daily reporting – Raken software

  • Raken is a cloud-based daily reporting software which allows you to know what’s happening on your job site no matter where you are. It helps to track projects daily progress and what is even more relevant to general contractors, it enables to collect and manage subcontractor daily reports. Raken has a nice market response from customers on SoftwareAdvice and Capterra.
  • Daily reporting is very important for the construction industry. Besides the ability to track daily progress, it also allows you to report another field related information, such as safety incidents. Paper reporting is going to the past, so it’s time to look around for online tools, and you can confidently start with Raken software.
  • Raken construction daily report software will help superintends to create branded, professional daily reports including photos, videos, voice messages and weather conditions. Raken also allows simply track hours in the field, create and assign tasks to the users and analyze your project progress via dashboard & visual reports. Super Daily feature is specially designed to collect subcontractors daily reports and easily present it for project stakeholders.
  • Other alternatives: CDR, Fieldactive, iNeoSyte, Fieldlens

 

 

So this was our list of must-have software for general contractors, and now it is your turn to let us know which software is the best fit for you.

5 tips for construction software project management

A proper construction software project management is vital when new software is implemented and it might be a hard and long-lasting process, especially when software project management best practices are not followed. When it comes to the implementation of new construction software, you need to have in mind even more factors that can affect the implementation process. For example, the timing and seasoning play a significant role while there is a high season and low season in Construction. Functionality scope, different needs of your team members are also questions that you need to deal with. In this post, we will share 5 simple tips for construction software project management and make this process smooth and successful.

 

5 simple tips for construction software project management:

  1. Choose a Project manager (product owner)
  2. Choose the right timing for the implementation phase
  3. Take smaller bites at the time
  4. Agree on a software usage process and stick to it
  5. Be consistent

 

1. Choose a Project manager (product owner)

In construction software project management a project manager or so-called product owner is the first thing you need to decide. A construction software product owner is a person who is personally responsible for the implementation of the new Construction Management Software. The best person would be someone who understands not only the software solution and its functions, but knows the business and the needs from different roles in the construction business. A construction software project manager should communicate with the tool provider and help the internal team with questions and problem-solving. We have seen many times, that too many people are involved in making the decision on how to use the new tool. Too many different opinions create delays and to organize a meeting with the full team can be “Mission Impossible.” This doesn’t mean that you should not rely on Project managers opinion or exclude them from the process, that would be a mistake. It only means, that best practice is to have a manageable project team for the Implementation and a great balance between actual need and nice to have ideas. A suitable product owner should be able to manage all these challenges.

2. Choose the right timing for the implementation phase

In construction, there are low and high seasons when people are the busiest. For e.g. in the summertime, the project team has the most active period and in the wintertime, people are on vacations. The time is never right for construction software project management, but you as the project manager can still choose the most suitable time if you plan it in advance. When trying to implement new software during the highest season, it might be a fast way to failure. A poorly executed process will not give expected results. Another challenge is to try to transfer all historical data to the new system before starting. This is one reason why people procrastinate, while the idea of manually transferring past information seems to be a significant amount of work. Instead, you can start using the new Construction tool with new beginning projects and projects that will not end soon. This way has some disadvantages either, but much more advantages and saves time and your money also.

3. Take smaller bites at the time. Understand the company most important needs and split the implementation into parts

It is common that peoples think that more complex and more expensive construction software is, better it is. In fact, it can be exactly the opposite. Large scale and highly complex software implementation and project management is riskier, takes longer, peoples hardly learn it, and what is most disappointing – a significant number of functions remains not used. Think of your own experience – how much software functions do you usually use? For sure, it depends, but usually, we stick on some reasonable amount of main features. So how to apply these principles while managing a construction software in a quite complex construction business with many processes? Well, how you would eat the elephant? Peace by pease, right? So, first of all, decide what the most important and critical needs/functions in your construction company are. And implement only these main functions in the beginning. Do it with Agile principles, step by step, piece by piece. Sometimes it can even mean to implement several different software solutions that does exactly what you need now and in the amount that you can “eat” at once. Remember the 20/80 rule, 20% from the construction system will give 80% of effects. Try to do less and implement your new tool peace by peace, and you will avoid high scale failures.

4. Agree on a software usage process and stick to it

Often you can use one software product in multiple ways. In construction software project management it is necessary to find the best usage process of the new construction software, write it down, agree on it with the team, and stick to it. To adopt a unified process can be a bit harder for existing employees, whit their own habits, but it will be much faster to teach new employees and makes life easier in the end. Even the management meetings will be smoother while everyone is working on the same process and speak the “same language”. After implementation of new software, take time to review how people are using the Software solution and if they are not using it as agreed, talk to them. Try to find out why they are not using it as agreed, do they have different need or expectation or they just don’t know how to use it. The success of implementation depends on how effectively software is used in a daily life.

5. Be consistent

One of the most crucial thing in construction software project management is to be consistent and push it until everyone on your team gets it. People are used to their old habits; change is not easy for them and sometimes even scary. We all feel that the “old good way” was better and more comfortable and we often don’t have enough time to learn something new. Usually, none of the software is built to make someone’s life harder, or at least it shouldn’t be this way. It’s just a very human, that to get used to a new way of doing things is a difficult task for our brain until it becomes a habit. So be consistent until everyone feels it as a habit, then you can say that your implementation project was successful.

Drones in construction: why to invest?

If you run a construction business, why you should hurry to invest in drones today? Read examples where drones in construction are used and what is an industry trend. Journalist Clay Dillow, in the Fortune article, provided interesting statistics and insights on the prospects of using drones in the construction industry. That encouraged me to make some research on how the construction companies are adopting this technology today. So what is the construction industry trend?

INDUSTRY TREND

Goldman Sachs research says that the fastest growth opportunity for drones comes from businesses and civil governments. Researchers expect that businesses and civil governments will spend $13 billion on drones between 2016 and 2020. Herewith, John Patterson in the article “An Aerial View of the Future – Drones in Construction” visually represents the charts which shows which industries are the largest adopters of drones according to PwC and how much of the market they control. The construction industry is included in the infrastructure sector and is between the largest drone adopters (infrastructure – 35,5% percent of the market, second largest in agriculture sector – 25,5%). On the other hand, it seems that there are no fully reliable data on how much exactly construction companies are spending for the drones today. However, proves come itself. E.g. Constructiondive portal announce interesting fact that drone manufacturer DJI is selling 1,000 drones with Skycatch imaging technology to Komatsu (Japanese construction equipment giant). DJI said that the map data will be used for Komatsu Smart Construction’s new data service, which will allow for robotic earth-moving equipment to correctly dig, bulldoze and grade land autonomously, reported DroneLife.

Overall, I would say that the facts speak for themselves – the construction sector is investing in drones and definitely not because it’s a fancy toy. Where drones are used or supposed to be used in the construction industry?

LAND SURVEYS & SITE MODELING

It is obvious that drones in the construction industry are widely used to do the land survey and to create maps. They do the surveying process faster than traditional ways. Drones accurately collect a huge amount of data about the relief of the land, including detailed surface characteristics, and becomes a solid data source for a BIM software and 3D modeling.

Using drones’ collected data and adopting specific software, companies are creating high-quality 3D maps. Take a look at the video bellow, where Hoverscape explains how their clients use drone-collected data. The company claims that their maps are up to 15 times higher resolution than Google Earth and that the software enables to analyze surveyed area with a great accuracy. Well, looks pretty nice.

TRACKING OF BUILDING PROGRESS
Another popular area where drones are used in the construction industry is a building progress tracking. Despite various explanations (and some are really complex!), I would probably highlight two main perspectives to track building progress – from the contractor viewpoint and the client. Construction companies are using drones regularly to track the progress of the construction, analyzing drone created photos, maps, and 3D models. Using different software they can track construction specific details, such as compliance with a project, planned materials usage, scheduled works progress and etc.
On the other hand, most of the clients want to track building progress also. If they are not able to visit the construction site often, drones are a great option to provide building progress information. They are not only making great quality pictures or videos (even live stream!) but also they are doing it from the positions that can’t be seen from the ground. Just look at this video to get the point.
SITE MONITORING, SAFETY, AND SECURITY
Drones have necessary “qualification” to be “employed as managers’ eyes” to monitor not only construction progress on different construction areas or sites but also they help to monitor safety standards, workers performance and the use of the construction materials. As some articles point out, drones can help project managers to track different job sites and see whether the team have work and are they productive enough.
 
Also, a very important part is to make sure that all safety requirements are met. E.g. using drone you can make a quick survey of whether all workers wear helmets and other necessary equipment, is the scaffolding structures looks solid enough, have all construction parts attached correctly and so on. If something rises concerns – immediate actions could be taken. Even if an accident would happen, the quality recordings help to analyze the situation.
 
Drones can also be used as anti-theft protection. According to National Equipment Register (NER) annual estimates of the cost of equipment theft in US vary from about $300 million to $1 billion, with most estimates in the range of $400 million. That estimate is for equipment only (wow!) and do not include tools and building materials. Drones are doing a great job monitoring job sites and ensuring security. E.g. in one article it was said that using drone it is possible to make a calculation on how many soil or gravel was excavated from the quarry just by flying over and processing the data. Collected information can be sent for analysis and control, so any deviation is caught immediately.
INSPECTIONS
Inspections are an inseparable part of the constructions. And it looks, that using drones in this area is a big step forward. Imagine if you are going to renovate the 12-floor apartment and you need to analyze carefully what kind of outer wall cracks are on the 10th floor? Or if you need to do yearly inspection of the huge warehouse that your company has recently build? These are situations where drones jump in. It saves time, money and the most important – it saves construction workers from unnecessary risky works and helps easily to get to the places where access in traditional ways would be way complicated.
Drones also do thermal imaging of the buildings. It is explained in the video bellow, what was inspection findings after drone deployed infrared thermographic survey. Inspection has been done when the client reported about water entering office space.
The software that analyzes drones data also allows to mark and create a report of areas of concern during inspections (not only creating photos but also attaching records of GPS coordinates and other data). Look at this video bellow, how the drone was used for inspection on the wall that is around 600 m. long and 20 m. high – imagine doing it old way 🙂
Other cases of use of drones in construction
There are much more areas in the construction where drones become an irreplaceable tool. E.g. drones’ collected data is helping designers and architects to analyze view from feature building. Using drone data they can create a better building and ensure it has the best view from every single point. Drone’s created videos and photos also can be used as a selling point – high-quality video and photo information from your construction sites is a great material that can be used in sales. With relatively small costs (it is not always necessary to have an expensive drone) it is possible to present your business in an innovative way. Besides that, some construction companies already are using drones as a part of their offers and that is definitely adding them extra points to win more business.
Resume
Despite the fact that drones are not on every construction site yet, it is clear that the use of drones in construction is growing and will grow further. Taking into account a wide range of areas where drones already adopted in the construction today, also considering expensive workforce, safety regulations, rising security issues and the fact that commercial drones experiencing a high competition vs “hobbyists” drones and prices are more affordable than a few years ago, drones become an interesting and valuable investment. Maybe it is a right time to add it to your construction budget?
* Main photo by Sorasak on Unsplash

5 simple tips to follow for implementing a Construction Management Software

Implementation of a new software might be a hard and long-lasting process, especially when not following best practices. And when it comes to the implementation of a Construction Management software, you need to have in mind even more factors that can affect the implementation process. For example, the timing and seasoning play a significant role while there is a high season and low season in Construction. Functionality scope, different needs of your team members are also questions that you need to deal with. In this article, we will share 5 tips on how to implement Construction Management software and make this process smooth and successful.

1. Do not try to do everything at once. Understand your company most important needs and split the implementation into parts

It is common that peoples think that more complex and more expensive software is, better it is. In fact, not rarely, it can be exactly the opposite. Large scale and highly complex software implementation is riskier, takes longer, peoples hardly learn it, and what is most disappointing – a significant number of functions remains not used. Think of your own experience – how much software functions do you usually use? For sure, it depends, but usually, we stock on some reasonable amount of main features. So how to apply these principles while implementing software in a quite complex construction business with many processes? Well, how you would eat the elephant? Peace by pease, right? So, first of all, decide what the most important and critical needs/functions in your construction company are. And implement only these main functions in the beginning. Do it with Agile principles, step by step, piece by piece. Sometimes it can even mean to implement several different software solutions that does exactly what you need now and in the amount that you can “eat” at once. Remember the 20/80 rule, 20% from the construction system will give 80% of effects. Try to do less and implement your new tool peace by peace, and you will avoid high scale failures.

2. Choose the right timing and don’t try to transfer the full history

In construction, there are low and high seasons when people are the busiest. For e.g. in the summertime, the project team has the most active period and in the wintertime, people are on vacations. The time is never right for all people, but you can still choose the most suitable time if you plan it in advance. When trying to implement new software during the highest season, it might be a fast way to failure. A poorly executed process will not give expected results. Another challenge is to try to transfer all historical data to the new system before starting. This is one reason why people procrastinate, while the idea of manually transferring past information seems to be a significant amount of work. Instead, you can start using the new Construction tool with new beginning projects and projects that will not end soon. This way has some disadvantages either, but much more advantages and saves time and your money also.

3. Choose the Product owner

A product owner is a person who is personally responsible for the implementation of the new Construction Management Software. The best person would be someone who understands not only the software but also knows the business and the needs from different roles in the company. A product owner should communicate with the software provider and help the internal team with questions and problem-solving. Also, many times we have seen that too many people are involved in making the decision on how to use the new tool. Too many different opinions create delays and to organize a meeting with the full team can be “Mission Impossible.” This doesn’t mean that you should not rely on Project managers opinion or exclude them from the process, that would be a mistake. It only means, that best practice is to have a manageable project team for the Implementation and a great balance between actual need and nice to have ideas. A suitable product owner should be able to manage all these challenges.

4. Agree on a process and stick to it

Often you can use one software product in multiple ways. If you have found your best way during implementation, agree with the team, write it down, and stick to it. To adopt a unified process can be a bit harder for existing employees, but it will be much faster to teach new employees and makes life easier in the end. Even the management meetings will be smoother while everyone is working on the same process and speak the “same language”. After implementation of new software, take time to review how people are using the Software solution and if they are not using it as agreed, talk to them. Try to find out why they are not using it as agreed, do they have different need or expectation or they just don’t know how to use it. The success of implementation depends on how effectively software is used in a daily life.

5. Be consistent

One of the most crucial thing when implementing a new Construction management solution is to be consistent and push it until everyone on your team gets it. People are used to their old habits; change is not easy for them and sometimes even scary. We all feel that the “old good way” was better and more comfortable and we often don’t have enough time to learn something new. Usually, none of the software is built to make someone’s life harder, or at least it shouldn’t be this way. It’s just a very human, that to get used to a new way of doing things is a difficult task for our brain until it becomes a habit. So be consistent until everyone feels it as a habit, then you can say that your implementation project was successful.

6 tips to have better control of your construction projects financials

Does your construction company suffer from project cost overruns? Read 6 tips that helped your colleagues that are using construction cost management software “Bauwise” to better control their projects financials & track construction projects budget.

1. Control budget in a real-time – track actuals vs planned budget

Construction companies are suffering from over budget projects. It is not only a “pain”, but it can also sometimes be a serious “illness with a fatal outcome”. How to avoid it? There are many components, but one major is to control your planned construction project budget vs actuals in a real-time, daily. Keeping your hand on “project pulse” will help to avoid significant budget deviation and let you take the right decision on time. “Bauwise” users can control planned construction project budget vs actuals in a real-time – they can see expenses data automatically gathered from the accounting system straight on the budget lines and compare them vs planned budget. Also, they can visually observe negative budget numbers and monitor essential project financial indicators.

2. Predict feature – forecast your additional expenses daily

If you want to keep your project “health” good, it’s important to monitor it regularly. But if you want to anticipate problems in the future – it’s critical to “catch bad symptoms” in the earliest possible stage and take timely actions. It means you should be able daily forecast budget deviations or additional expenses, such as the rising cost of raw materials, reworks, overspending or scope changes. Knowing it in advance you will be able to take timely actions, e.g. minimize the negative result to your project bottom line. “Bauwise” users can do a daily forecast on every budget line with a single click and immediately see how does this influence project result. They are predicting project end result and work smart to improve the project bottom line.

3. Control subcontractors – manage subcontractors contracts, track bills

It is industry demand to hire subcontractors. The construction business is extremely dynamic and it is challenging to fill in all projects capacity with your own resources or in another hand always supply uninterrupted 100% employment for your big stuff. Subcontracting is growing – so more subcontractors, more contracts you need to manage & control, more invoices you get and need to track them. “Bauwise” users can easily track & manage how much exactly works/budget they have contracted and how much still left. A project team is always aware of the agreed contract price, subcontractor invoices, remaining amounts to pay and they never overpay.

4. Plan your money with confidence – precisely forecast your cash flow

Do you exactly know how much money you will need to spend next month? Or how much incomes you will get? Sure you know, because this is like an “air” for your organization and the projects you run. But how much time it takes for your team to generate a cash flow report? How precise is it? Would you be more confident if you would know your cash flow far in advance? “Bauwise” users can use a simple cash flow report with a colorful chart to see month by month cash flow plan until the end of the project. A report is taking data from project income & costs forecast and compared to the actuals from the accounting system. Cash flow report takes into account payment terms and besides, “Bauwise” users can use Gantt chart functionality for more precise cash flow planning, so they can trust numbers and plan their money with confidence.

5. Automate paperwork – allocate and approve expenses online

Allocating costs on the right project/budget line is a crucial task, that enables you to get a real picture of every project. If you wrongly allocate your costs, or if you do it on a very high level, e.g. on a project level only, you can miss the details and this can lead to the wrong decisions. It’s like setting a “wrong diagnosis”. Besides that, you also have an expenses approval process in place which is usually mandatory routine paperwork, e.g. your project managers need to collect paper invoices and bring them for signing to a manager which controls & approves project expenses. “Bauwise” users can easily & precisely allocate costs on a different project level and use two levels of approval workflow – allocate expenses and get managers approvals online, without any papers.

6. Monitor all your projects “health” – track daily your projects portfolio

Ability to monitor the “health” of all your projects portfolio daily & in real-time is essential for a construction business. Outdated data doesn’t give a value, even worse, you can miss valuable time to make the right decisions. Real control comes from real up to date data and the ability to see the whole picture. “Bauwise” users can use management oriented single page Portfolio report, which enables them to see all projects in one place along with their key indicators such as profit, costs forecast, completion percentage and others. It’s easy to explore every financial detail related to the projects, even drill down to every single invoice. This single page report gives a user a full overview of the real-time “health” of all projects portfolio.

“Bauwise” is a proven “cure” for construction companies “pains”. We would be glad to share our industry know-how and to discuss how does our construction cost management software can help you better control your project financials and keep your projects “healthy”.

portrait of handsome young man architect on a building industry construction site
portrait of handsome young man architect on a building industry construction site

9 tips to manage construction budget and control costs with a smile

Here are 9 ways, how bauwise.com helps construction teams to manage projects budgets and control costs with a smile, wonder how? These are the main points: 

1. It’s understandable for all
2. Project forecast and initial budget vs fact comparison “on hands”
3. Easy budget import from Microsoft Excel, Google Spreadsheet

4. Clear financial project budget indicators
5. Simple tracking of subcontractors contracts
6. No “unknown” extra works
7. Useful cost allocation tool
8. Simplified main project documents management
9. Work from anywhere

1. Simplicity, understandable for allbauwise.com online cost control software for construction business is build with a brilliant idea – no unnecessary functions! That’s why it contains only those features, which your team will actually use. It will usually take up to one day for your team to learn the software basics, just because of it so simple! The system interface is clean and clear, no unnecessary buttons and options, not too many indicators, just what is needed most. All that is important to notice – would that be extra works or costs higher than the planned budget – it will be clearly highlighted, everything visible and clear, enough just to take a look!

2. Project financial result forecast and comparison of 3 types of budgets, just to make sure your team is on the right track – finding out project end result only when the project is finished? Not able to compare & track the initial budget, adjusted budget by the project manager and budget that agreed and assigned for subcontractor or internal team? Not anymore! bauwise.com in a simple way allows teams to track ongoing costs and in a professional way forecast project end result! It is possible at any moment to see what profit or loss is forecasted and take necessary actions to improve the bottom line. It is also possible to compare three types of budgets, so your team always can track in which area they need to improve – does sales team or management setting, not realistic budgets? Does project managers do not hit the right costs forecast? Or maybe subcontractors are too expensive? Your team will be able to keep and track projects history, learn from it, and make the next project budget much better!

3. Easy budget import from Microsoft Excel, Google Spreadsheet or any other spreadsheet, no need to change everything again – construction industry still use a lot of spreadsheets for estimates and budgets, and bauwise.com helps teams to use what they already have and know in a best possible way. Construction project budget can be made in any spreadsheet and simply copy – paste into the bauwise.com! What can be easier? No complicated imports – simple copy & paste! bauwise.come project budget template is simple and easy to adapt, your team will like it.

4. Project budget indicators, only which are really needed and integration with accounting software, why to bother accountant again?  bauwise.com set of indicators consist only of a must have indicators, including final cost forecast, completion in Euros, also some other indicators that give a project team calculated values, e.g. difference between initial budget and final costs forecast. And what is the most beautiful – it is possible to integrate bauwise.com with accounting software, which allows receiving information about costs from accounting system straight to the project budget lines! This is a superior function which ensures project managers to control and see costs information from accounting without bothering accountants or log in to the accounting system, does this will not make your team happier?

5. Tracking subcontractors or internal team budget performance, nobody wants to overpay – with a simple built-in functionality it is easy to see which work your subcontractor or internal team is doing, what is assigned budget for the works, what is agreed price with subcontractor, what is actuals from accounting system and what is the completion percentage of works. Simple functionality allows allocating project budget contract with the subcontractor. This functionality is especially useful for construction companies that have a lot of subcontractors or doing purely general contracting. It is possible to track an unlimited amount of contracts with subcontractors and always be aware does subcontractors correctly invoicing for their works, to compare agreed budget and actuals from accounting.

6. No “unknown” extra works, no surprises at the bottom line – Most probably there are no construction projects without extra works. Maybe project manager forget to add the budget for work or maybe unexpected situation have arisen – doesn’t matter what happens – bauwise.com will help to manage this task without stress and lose of a smile. It is very simple to add any extra work and always be aware of extra works, as they will be highlighted in the project budget. Also, it is possible to track who, when and why have added extra works. So no more questions – where does this work comes from? Even more – bauwise.com gives you a clue how does this will influence the project bottom line and helps to take necessary actions to keep project profitable.

7. Cost allocation on budget lines, that has never been easier, a way to make accountant and project manager become friends – does your project managers spend a lot of time writing on paper invoices to which project accountant should assign purchase invoice costs? Does your accountants and project managers communicate a lot and this communication not always brings a smile for all? Not anymore! bauwise.com have simple built-in workflow which allows with a simple drag & drop functionality to add scanned or digital invoices to the system (this can be done by a project manager, assistant or anyone else), assign who should allocate the costs, allocate amounts on budget lines and send invoice allocation data straight to the accounting system for accountant review and confirmation! You can easily allocate any type of cost – such as purchase invoices, payroll, sales costs, and others. Dual level approval workflow allows you to set who can allocate costs and who gives them the final approval.

8. No lost project documents and ability always answer a question “why”, saved a bit more time for team coffee time – do you remember when the last time your project manager was running around the office trying to find the invoice, works performance act, or agreement with subcontractor? Have you seen the situation that somebody has changed the budget line amount and later nobody can remember why? This will not happen again! bauwise.com allows easily attach files and post comments to every single budget line – attach contracts, invoices, offers, warranty documents and etc., it is also easy to add comments for every budget change or to the budget lines that necessary to keep eye on.

9. Work from anywhere makes project team smiling, happy team, happy manager – the world is changing. It is not possible to work in the same way as yesterday, actually, it could be that there already is no way of yesterday. Does your project manager is more happy to work from the construction site next to the forest or lake, does he likes work from home or he is better performing working on the roof of your office, does this makes him smile? With bouwise.com it is possible! The solution is cloud-based, so the project team can work from anywhere. Also, there is no need to care about servers, software, and IT stuff – your team will log in online and start working.

“Like all magnificent things, it’s very simple” said Natalie Babbitt, American writer. Most people like simple things, that’s why you can be sure, that bauwise.com solution for project budget management and cost control will make your team smile.

7 effective tips on how to deal with project cost overruns

Many resources are sharing advice on how to avoid budget overrun, but as we all know, people tendency is not to learn from other peoples mistakes, rather make the mistakes themselves. But how to deal with project cost overrun when you already are it the situation? In this article, I’m sharing some valuable suggestions that have helped me and can be helpful for your construction company.

When I started my first company, I soon got into trouble with projects budget overruns. You know that feeling when you want to get new customers and you trying to do everything to please them, including going extra miles and working on very thin margins. And this is a direct way to get into budget overrun. Since I have been in this situation personally and talking with many construction industry people I listed 7 key actions you can take really help when you face project budget overrun.

If you already experiencing construction project cost overrun, take these actions:

  1. Understand the real reasons why your budget overrun
  2. Create an action plan
  3. Be responsive to your customers and subcontractors
  4. Talk to your team honestly and agree on the priorities
  5. Try to retrieve budget, but don’t be greedy
  6. Stop works when payments are late
  7. Set up cost control system

1. Understand the real reasons of budget overrun

Usually, you can’t solve a problem when you don’t know the reason what is causing it. There are many reasons why expenses can exceed the planned cost. The key is to understand what’s causing it. In construction projects, it might be that the budget overrun is a combination of multiple reasons and the list below will give you some ideas for better understanding the causes:

  • Underestimated or wrong calculation.
  • One of the major reason for cost overrun is a wrong estimation of the budget. Without change orders, it can be difficult to turn the situation in your favor. Now the real lesson you can learn from this mistake is to understand the error in the estimate. It could be that the project was underestimated on purpose, hoping to turn it around in long run. Whatever the reason it needs to be clear and to avoid it in future.
  • Scope creep. Some customers continuously asking for small changes, explaining how easy it would be for you as a contractor to do them, at the same time not expecting to get billed or promising bigger junks of work for that in the future. But in reality, these “small requests” sooner or later go out of control. Going the extra mile will quickly become an expectation for the customer. It’s like “feeding the monster”. Instead, you should agree on the scope with the client, finish what you have promised and get paid for all what is out of the scope. And by the way, never use the words easy, fast, simple when talking about your works. These are the words explaining other peoples works.
  • Long-term economic effect. This can be a budget overrun reason when your project is very long, it was stopped for some period or the project calculation was done at the low economy time and the economy now is growing fast. It would be wise to have some “fuse” in your contract for such situations. Some standard contracts have standard conditions, so you can take a closer look at your contract and see if you can review your budget with customer according to contract conditions.
  • Bad cost management & cost control. The worst thing is when you find out that your project is over budget at the end of a project. Usually, it is closely related to a bad budget management. It is very common when the times are good, less attention is paid for budget and cost control. Everybody feel confident and the overview looks nice. But if you don’t pay attention to your project expenses, it can happen that you will be invoiced higher than agreed from subcontractors, scope changes are not counted accordingly, and some big unpaid invoices was forgotten into a desk drawer, what would eat the project’s profit just like that. Make sure that you have a trustful real-time information about your budget situation, and if not, take actions to have it as soon as possible.
  • Bauwise cost management software is easy to use tools for monitoring and controlling construction expenses and in real-time.
  • Bad resource utilization. Bad management or unproductive use of resources “eats” your margin and leads to budget overrun. It may don’t mean that your employees or subcontractors are doing a bad work, but it might mean that they are constantly switching between projects and/or construction sites not fully finishing the tasks and this makes a work non-productive. This is common if the business is booming and hard to find subcontractors.
  • Time overrun. It is directly connected to the budget overrun. More time means more overhead, more rental and it all means more costs. This is a fast way to an over cost in your construction project. Make sure you forecast that your works will be late, so you can take timely actions and avoid additional expenses because you are late.

There are other reasons for the project overrun, but these examples will help you to get the idea and find out your own reasons.

2. Create an action plan

Now if you understand what is causing your budget overrun you can create an action plan, for getting the thing on the right track. Sometimes company management just trying to extinguish the fire. But the most important thing is to take the time to focus, create a plan and start implementing it immediately. As Seneca said, “If one does not know to which port one is sailing, no wind is favorable”. You and your team should know exactly what should be done to get things better. Sometimes, planning will also show that there is no another good way from the situation, even so, it will save you from getting in more troubles.

3. Be responsive to your customers and subcontractors

When things are going wrong, it would be the bad decision to avoid talking with your customers or subcontractors. It may be that you don’t know what to say or you are afraid of the reaction, however – be responsive and show up a willingness to communicate. This will create more trust and credit. Do not try to hide things or even worse, do not lie. Instead, you can openly say: “I know that things look [is] bad and the reason is… I’m working on a plan right now and I will get back to you [specify term]…”. Keep on your promise despite any circumstance. If people do not reach you or you are not keeping your promises, peoples become nervous and this makes things much worse.

4. Talk to your team honestly and agree on the priorities

Sometimes business owners are trying to save a team from the bad news. Maybe it is because we all want our team to be motivated or maybe we want to save our own value in the eyes of the team. I think this is wrong. If you have a good team, they might come up with good ideas and even help you to save the business. Also, they will understand the priorities and will be able to act in a more effective way and concentrate on the most important things.

5. Try to regain budget, but don’t be too greedy

When costs are running over the first thing you should to is stopping scope creeping. Instead, you should manage and track the change orders with care. Be sure that without the permission nothing will is done.  One way to regain additional budget is to negotiate better pricing or terms for materials, works, renegotiate contracts with subcontractors, etc. But don’t be too greedy, this might ruin the relationship with your parties. Keeping fair pricing and good relations with customers & subcontractors – is a long-term strategy for winners.

6. Stop works when payments are late

I have seen situations when the owner is not paying the invoices on time, and the General Contractor is patiently proceeding with construction. Then suddenly the customer goes to bankruptcy, and the court journey starts, creating even more expenses. If the customer does not pay invoices on time – immediately talk with the customer and try to understand the reason why he is late. It might be that this customer is not liquidity or not getting payments from their creditor. The rational solution in this situation is to stop works until you get paid, and this gives you the chance to suggest for them someone who can take it over.  Be sure that you don’t invest a dangerous amount of money into a spooky project.

7. Set up cost management with the cost control system

If a project suffers budget overrun it is critical to set up a cost control system like bauwise cost management software to have better control over the budget vs actuals, subcontractor agreements, change orders, cashflow and including the ability to approve purchase invoices online. Project managers and company management should be able to operate real-time data and control key indicators, such as profit, completion percentage, cost forecast, and others. Outdated data can cost you crucial time and do not give you a real picture. Cost management system helps you to save time, track your expenses and have more control.

Bonus tip

In real life, despite proper planning and all your efforts, you will still sometimes get in the project cost overrun. You need to learn from your mistakes, but even more importantly learn from your successes and continue improving them so you will minimize the risks for the budget overrun in the future. These steps I described above have helped me a lot and I believe these will also help you.

Smart companies “under promise and over deliver”.