14 October 2021 5 min read

Valuations Under Control

Why Investing in a Proper Management Tool Is Worth It


Do you use Valuation reports in your projects? Do you feel that they are crucial for both your internal use and external communication with clients? Discover all you need to know about Valuation in construction and find out how a proper management tool can help you streamline the whole process!

Costs, money, prices, payments - almost all construction activities are connected to dealing with money. Moreover, every decision taken during the project impacts your financial stability, no matter if it is a small purchase or a significant decision about the future investment. That is why today, we are going to discuss a new topic connected to financial management, namely: valuations.

The Challenges of Financial Management

Financial Management refers to all processes (actions, decisions) involving a company's financial resources.

The company's financial resources consist of:

  • The costs related to the functioning of the company

  • The company's profits from its products and services

  • The ratio between these two numbers that indicates the financial stability and the possibility of some new investments

Like we have already mentioned in our previous article, financial management can be a challenge for construction companies. Dealing with costs, managing sales, and assuring the company's profitability is a challenge itself. On top of that, we can distinguish the construction market challenges that can make financial management at your company much harder:

  1. Late payments

  2. The rising cost of materials in construction

  3. Lack of overview of the current situation of the project (and of the whole company)

So, taking all of the above points into consideration, how can you deal with your financial management? One of the useful tools could be Valuations.

What is a Valuation in Construction?

Valuation, which comes from the word “value”, refers in the construction industry to the project's estimated cost. When created at a specific moment, it also indicates the progress of the project.

Depending on the purpose of the valuation, we can distinguish two different types of a document:

  • Valuation on the purchase order - the document sums up all the project costs (up to the moment when it was created). This type of valuation is helpful for internal purposes as it clearly shows the progress of the project versus the costs of its execution.

  • Valuation on quotes - this type of valuation is created for external purposes as you can send it to your client. The document shows the project's costs (the sum is different from the valuation on the purchase order as in this case, it includes the overall project profit).

The Benefits of Using Valuation in Construction

  • 01

    Clear view over project progress and completion
    Do you sometimes feel that you do not know what is happening inside your projects? Or maybe, you calculate the project costs and final profits only at the very end of the execution? Well, if that’s the case then you must introduce some changes to truly take care of your construction finances.

    The first step towards the change is introducing a valuation report into your projects. The documents clearly show how your project is performing at the specific moment of execution (including work progress, costs, etc.). As you can see, it is a beneficial tool because it allows you to not only react faster, but also make all important decisions regarding exact data.

  • 02

    Additional control over the budget
    Budget control is closely connected to the previous point. After all, the more precise control over project execution you have, the better you can take care of the budget. However, it is worth mentioning one more Valuation report feature!

    In the Valuation, we can clearly see if some costs were exceeded or not (and what was the reason behind it). Thanks to such precise documentation, you can adjust the expenses in other cost categories or present the project’s situation to your clients and negotiate changes or adjustments within the budget.

  • 03

    Support in the payment process
    Did you know that the usual time of getting paid varies between 40 and 60 days? Slow payments are an issue in the construction industry. Especially that without being paid for the completed work, you cannot really start a new project.

    The Construction Valuation can constitute a significant support in the payment process. Firstly, it gives information to the client about the project cost at a specific stage of the execution. Also, if you are using construction management software, you can apply for the payment once the client approves the valuation.This would speed up the process from your side.

How Can You Support Your Valuation Process?

Okay, we hope that we managed to convince you that valuations can be beneficial for your company. However, we are aware that taking care of construction finances, in general, is not an easy task (especially considering all the challenges of the market!)

Luckily, there are solutions that can support your financial management! One of them is construction management software that allows you to keep track of a project's financial health, monitor budget spendings and support your invoicing process. Thanks to digital solutions, you can better manage your construction finances and faster create financial documents.

How Can Construction Management Software Support You?

Taking as an example Archdesk, our construction management software, there are many solutions that can support your financial management. Moreover, many of them can be customised to your needs thanks to the modularity feature.

Considering today's topic, which is the Valuation report, we can distinguish some specific solutions. Archdesk can help you with:

  1. Controlling your valuation process - you can set a customisable approval process depending on your procedure. You do not have to worry that some documents might be sent to the client by mistake! Also, you can see at what stage your approval process is and what you should do next to speed up the process.

  2. Supporting you in the payment process - as we mentioned before, construction management software can help you prepare documents for the client. Once the valuation is approved, you can ask for payment either by downloading the app from the system or by sending it directly to the client.

  3. Speeding up process automation - nobody likes calculating financial indicators on their own. This is what Archdesk can help you with! Type all the info (the work progress, material procurement), and the system will automatically calculate the value of your project and the specific costs.

  4. Gathering all necessary financial information - having all financial data in one place with up-to-date information and crucial company's indicators sounds like a dream, doesn’t it? Well, with a proper financial tool, you can achieve that! Software, such as Archdesk, offers a financial dashboard that shows you all data in easy-to-comprehend charts and allows you to check your project status with only a few clicks.

Not convinced? Want to learn more? Schedule a call with us, and we will show you all the features of our software and solutions suitable for your business!

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2024-03-02 00:05:46