Budgeting often creates challenges in creating profits for new and upcoming projects. Budgetary constraints lead a project manager to fight inflation, supply chain transportation costs, increasing labour charges, etc. Overall, these factors influence the calculation of large marginal profits of the constitution project. Read this blog to know how project managers can efficiently work on cost control in construction and secure previously unrealized profits.
How does cost control work in a construction project?
The general contractor collaborates with the stakeholders and the project team members to estimate the project budget based on the scope, goal, and cost constraints. This can cover all aspects of the project, such as labour, material costs, equipment and tools, etc. Accounting must be done frequently, considering market fluctuations.
For example, a contractor chooses a material within their budget for their project. However, they cannot use this material after two months due to market fluctuations, as it increases the project cost. Now, they can use the same material, even though it increases the project cost or choose the next option.
What are some tips for effective cost control in construction?
Inaccurate cost management may result in a cost overrun. While meeting deadlines, contractors, stakeholders, and project managers may face serious budgeting issues. Updating your cost management plan helps optimize the budget and standardize profit margins.
1. Use efficient software tools
Construction cost management generates accurate estimations, increasing project profitability while eliminating human error. The integration of BIM models allows for the incorporation of the design and planning details. Develop deeper project insights by connecting field data with BIM and GIS models for 3D visualizations with InnPMIS.
2. Update your cost control plan regularly
The daily cost management report includes the actual and estimated project costs. Consistently analyze and reevaluate the budgeting to make necessary changes. If the costs are higher than expected, try to balance them by procuring another material. Using your cost management software, you can promptly oversee the overall project cost with real-time data. Get a clear picture of your project’s costs and performance through the automated generation of reports with InnPMIS.
3. Constantly update cost control reports
A cost control report includes labour charges, equipment and tools, material procurement, subcontractors, profits, etc. Each should be broken down into different categories, and the required details should be added. Ensure all stakeholders receive the cost control report daily. This way, they can stay updated about the construction progress and help you make informed decisions during any changes in the budgeting. Regularly updating the cost management plan may allow you to control cost overruns when you face unforeseen challenges.
InnPMIS keeps all stakeholders aligned on one platform while validating invoices against work certifications to ensure that only approved work is paid for. You also get instant visibility into all financial transactions, allowing you to easily track payment statuses, cash flow, and outstanding balances.
4. Prepare and review your contingency budgeting
Remember to add your contingency cost to the cost control plan to meet any unexpected events during the construction project. However, the plan may not include changes that occur in the project scope since they will be covered in the change orders. InnPMIS comes with mobile access and automated work logs, meaning your team can work with real-time updates, ensuring better budgeting.
5. Motivate your project team to design a plan within the project budget
The design specifications control the overall project budget. Ensure the design department has access to the cost management report, enabling it to follow the project owner's guidelines within the budget. With InnPMIS, your team can manage all the drawings on a single platform and directly add comments, annotations and markups for transparency.
6. Utilize AI for better cost control
Budgeting can be done by analyzing competitors' budgets. Here, AI can provide highly accurate cost-control estimations to boost project profitability and productivity.
7. Set the correct performance indicators
Reviewing KPIs regularly offers clear insights into future trends and the adaptability of your business. While managing large-scale construction projects, it can be challenging to handle all the factors simultaneously. However, these metrics will allow you to build an effective cost-control plan. The common key performance indicators for cost management are -
- Profit
- Cash flow
- Cost variance
- Working capital
- Accounting
- Quick ratio
- Planned hours vs. actual
- Percentage of labour downtime
Be confident in your project data and make timely decisions by setting up sequential or parallel approval workflows with InnPMIS.
Wrapping up
Tracking cost control metrics may help a project manager or contractor learn more about their business health. Depending on your priorities, figure out more ways to be more efficient, even while facing unexpected potential risks.
Manage and track your budgeting precisely with Inncircles. Schedule a demo today to learn how.