As a project owner, an important aspect of every construction project is analyzing budget projections. This will help you not only during your current project but also lays the groundwork for successful future projects. So before you begin your next project, make sure you understand how to analyze budget projections and the tools you need to do so.
Here’s what you need to know about analyzing budget projections for construction:
Implement Project Management Software
To begin effectively analyzing budget projections, your first step should be adopting the right project management information software (PMIS). This is the most reliable way to keep all project information, budget, and schedules in one place. Using a PMIS provides you the ability to create and analyze construction project expenses, manage project and program budgets, and use earned value analysis to evaluate project performance. By keeping meticulous records in each of these areas, you gain the ability of data-driven planning for your spending for future projects.
Understanding How Budgets Work
When you have a specific amount of money allocated for a construction project, it’s essential to outline your anticipated costs and expenses to create your budget. You allocate a specific amount to each area. What many people don’t account for is that costs can change. This means that budgets need to be adjusted.
After completing a construction project, you gain valuable experience that allows you to plan more effectively for future projects. It’s important to be flexible and include contingency funds in your budget to cover any unexpected expenses that may come up. Having a budget is extremely helpful, but it will evolve as your projects progress.
Choose an Analysis Frequency
Regular budget analysis is crucial in order to stay on top of and adapt to any necessary changes. You can conduct analysis monthly, quarterly, or biannually. In a PMIS like Projectmates, you have the flexibility to schedule reports for automatic email delivery to yourself and other project stakeholders at the frequency that best suits your needs. It may take a bit of experimentation to determine which works best for your organization.
Through this process, you will learn to adapt to changes that pop up and learn how to correct overspending before it becomes an issue that impacts your overall budget and ultimate project success. Once a project stabilizes, you can usually transition to a less frequent analysis schedule.
Gather Valuable Data
Project management software is invaluable for capturing and recording data collected throughout the entire lifecycle of a construction project. This data can be categorized for future reference, allowing for a granular breakdown of master budget figures into monthly or quarterly performance metrics. With project management software, you can quickly group, summarize, and apply advanced filtering logic to tailor your reports, ensuring they include the specific data you require in them.
Understanding Budget Variance
Budget variance is the difference between the anticipated costs, also known as the budget, and the actual costs. If you end up spending $50,000 more than was budgeted during a specific time frame, that is your budget variance.
Conducting a budget variance analysis can provide valuable insights into project performance. This proactive approach allows owners to implement risk mitigation strategies to avoid major cost overruns. Analyzing budget variances over time can help you accurately forecast future expenses and shows you how the project has performed. A budget variance allowance allows you to make adjustments where necessary and gain insight into how resources were used and how the budget was managed. This information can help you not only during the current project but in future projects as well.
Analyzing budget projects can seem like an overwhelming task, but it doesn’t have to be. By using the right construction project management software, you can keep track of all important details related to your project’s budget. Projectmates understands the importance of analyzing budget projections. Contact us to learn more about how we can help you.
