Construction Budget Planning Strategies

The last quarter of the year started. 2022 is just around the corner. For almost everyone who works in the financial department of the construction company (or who deals with a spending plan), the end of every year means one thing: it’s time to start planning the new budget.

However, before you rush into cost analysis and filling out the first Excel Spreadsheet, we simply want you to stop and think for a moment about your budget.

• Do you manage to stay within the budget throughout the whole year?

• Does your project include all the processes going on in the company along with the associated costs and profits?

• Do you feel you have control over your company’s budget and that you can adjust it according to the changing situation on the construction market?

We want to help you out sharing our construction budget preparation strategies to make your 2022’s budget even better. Let's start!

What Is a Construction Budget?

A construction budget means a sum of money planned and intended to be spent on a specific construction project or the whole construction company. The budget is prepared in advance, but some cost specifications might appear later during execution. The primary purpose of the construction budget is to assure the company's profitability as it is a fundamental tool for controlling financial health.

We need to highlight one more aspect. It is crucial to differentiate the project budget from the company budget. The first one relates to a specific investment and usually contains more precise cost categories. In contrast, the company budget is the value of all projects costs along with the value of the company’s operating costs.

Why Is Construction Budget Preparation Important?

As a part of the construction industry, you probably make decisions impacting your finances every day: hiring new employees, ordering new materials, outsourcing the processes. Even minor decisions can change your cost level and might impact profits.

That is why a properly planned and executed budget is a must-have for your business! The budget plan should be like a map that guides you throughout the whole year of projects, investments and activities. However, to respond to your needs, it must be adequately prepared. And this is something we can help you with!

A Construction Budget Planning

• 01

  Analyse your previous budgets
  Before you jump into the new budget preparation, you should take a step back. Inside your financial documents, there is a lot of useful information! Apart from the obvious piece of information, like cost categories or the amount of money per department, you can find much more!
  
  Have you ever heard about the lessons learned? In the project management terminology, the term refers to knowledge gained from the completed process or project. Your financial documents are the perfect source of that knowledge. So dive into the data and find out which practices you should avoid or how you can modify them so that your business benefits.

• 02

  Save extra funds for unexpected costs
  Of course, you cannot predict the future. Nobody can. However, we all know that it’s better to be safe than sorry. Last year’s events with the coronavirus pandemic, remote work and closed construction sites taught us that there are things that we simply cannot predict. However, we should prepare for them as much as we can.
  
  One of the strategies would be to save some funds in the budget for unexpected costs. But, of course, it does not always have to be a new cost. For example, nowadays, the construction industry has to deal with the rising cost of construction materials, and the prices are rising more than the economists predicted. But, with the budget containing extra funds, you can take it easy.

• 03

  Assure a clear overview of the budget
  Another crucial aspect is budget monitoring. Many companies plan, analyse and create a perfect budget, but use it only to close the financial year and summarise the costs. Do not repeat their mistake! The budget should be the core of your financial management.
  
  What does it mean? You should be able to see your budget and the main indicators (like costs and profits) on a daily basis. It is crucial to determine how your company is managing and whether any additional action is required from your side. It might be challenging, but there are many solutions on the market that can support your financial management.

• 04

  Treat your budget in a flexible way
  Okay,
  

  • you analysed previous financial documents,

  • you saved some extra funds in the budget for unexpected costs,

  • you know exactly how budget execution is doing,

  
  So what’s left? Now, it is time to take action!
  
  Of course, there are some cost categories and expenses you cannot change.
  However, you should not treat the whole budget as a fixed group of numbers. Especially in today's reality, when the situation on the market is changing so rapidly! In such circumstances, it is essential to keep an eye on what is happening in construction and adjust.

How Can You Support Budget Planning?

Creating and, more importantly, trying to stay within the budget might be tricky, especially if you want to calculate it on your own or use Excel Spreadsheets. Luckily, you don’t have to! A modern construction management platform can support you with your financial management.

At the company level, and specifically regarding financial management, construction management software, like Archdesk:

• Gathers all data in one place accessible anytime, from any device with a stable internet connection

• Assures working on up-to-date information, as the numbers are automatically updated

• Helps monitor the financial situation as it presents the company's financial position in easy-to-comprehend charts and dashboards

• Can be a golden thread for your business as it connects different departments in your company with streamlined financial data flow

And how about you? Have you already started planning the budgeting process for 2022 for your company? We hope that our tips for better budget preparation will make the whole process easier!

We can also support you throughout the entire process.
Are you curious to know how our construction management solutions can help you improve the financial management process?

Schedule a call with us!