Embarking on a construction project can be overwhelming if you’re unsure of what to expect. Your construction finances are dynamic, where each item is interconnected and influences the others. It’s like a well-coordinated ecosystem where changes in one aspect can have a ripple effect on the rest.
While every project can differ slightly, there is a common lifecycle that the finances in a project will follow. Here’s what you need to know:
Capital Planning/Budget Allocation
This is where the lifecycle of a typical construction project begins. Knowing how to allocate project funds is key to a project’s overall success. Project management software helps you narrow down and organize your fund sources according to phase, project, and fiscal year, just to name a few. You can then group them according to an arrangement that best fits your team’s workflow.
Project Budgeting
As a project owner, it’s crucial to establish a construction budget to gain a clear understanding of your available funds. This phase of the construction project is vital to its success. By creating a construction budget, you’ll have a roadmap for expenses and know exactly where every dollar will be spent. Using project management software gives you real-time insight into change orders, pay apps, and anticipated and actual costs. Roll-ups are calculated automatically and you are notified of any budget conflicts allowing you to make data-driven decisions and take necessary actions before proceeding further. This way, you can efficiently manage your project’s finances while staying well-informed throughout the process.
Bid Management
During this phase of your construction project’s financial lifecycle, bid packages are created and contractors are invited to bid on your project. With project management software, this is a digital process and can be done directly from your budget. Contractors can download the construction documents, submit bid RFIs, and upload their proposals. Project owners are able to see who is interested in bidding on a project, review submitted proposals, and then award the contract to the best match.
Contract Creation and Management
Serving as a legally binding agreement, the construction contract defines the scope of work to be undertaken. This agreement ensures that everyone is on the same page and provides a solid foundation for the smooth execution of the project. Project management software streamlines the contract creation process by enabling you to directly generate contracts right from winning bid packages or budget items. With just one simple click, the automated approval process is initiated. Moreover, you can save these contracts for future use in similar projects, saving you valuable time. And with cloud-based software, you can approve or reject contracts from anywhere, and digital signatures ensure a quick and efficient signing process.
RFIs and PCOs
With project management software, you can easily link to RFIs (requests for information) to PCOs (potential change orders). This feature allows you to assess the budgetary impact of any proposed changes before giving your approval. Plus, you have the convenience of consolidating all PCOs into a single change order. By leveraging software, you can proactively manage your expenses, staying well-informed and in control throughout the project to ensure a smooth financial process.
Change Orders
Owners know that in construction, change is inevitable. Being able to manage changes effectively will make all the difference to your budget. The more quickly pivots are made, the safer your budget will be. You, or other designated stakeholders, are notified immediately of any potential changes when you use a trusted project management information software platform. Once change orders are approved or denied, contractors are promptly notified to keep the project on track.
Invoices/Pay Apps
Leveraging project management software during this financial lifecycle phase streamlines your invoicing process and ensures timely vendor payments. It also helps you avoid common problems like double billing and overpayment that often occur in the construction industry. Software can also auto-populate the schedule of values and retainage from contracts. All vendors need to do is submit their percentage of work completed and information on materials stored. And once approved, your team can attach any relevant documents required and then push the pay app through to your organization’s ERP system.
Analytics and Reporting
Having accurate, real-time information helps project owners track progress, make well-informed decisions, and improve forecasting. Project management software equips you with comprehensive tools to gain the insights necessary for sustained growth. You can easily track budgets, compare actual costs to anticipated costs, and gain a clear view of project expenses by department. Moreover, the software allows you to delve deeper and identify the root causes of change orders. By leveraging this data, you can recognize patterns and forecast the performance of future projects.
In a construction project’s financial lifecycle, each stage has unique requirements, yet they are all interlinked. As an owner, opting for project management software is a smart decision. At Projectmates, we recognize the importance of dependable and trustworthy software solutions tailored to your needs. With Projectmates, you can seamlessly navigate through the various stages of your project’s financial lifecycle, ensuring smooth coordination and effective management. Contact us to learn how we can help you deliver your projects on time and on budget.
