When you decide to take on a big building project costs can quickly spiral. It doesn’t matter how much experience you do or don’t have, escalating prices and accidental overspends will happen. Here is what you can do to manage those financial costs during your building project.
Managing finances effectively is a huge part of succeeding in the construction industry. If you consistently overspend your budget, you will soon go bankrupt. If you earn a reputation for increasing your quotes as a building company, you run the risk of alienating future clients. This article will help you manage the financial costs of your building project so you can get more for your money.
The Importance of Budgeting in Construction
You can’t neglect construction financial management. If you fail to budget accordingly, your whole project could grind to a halt. Worse, spend too much and you will overshoot what the client is paying you. Do this and you lose your profits. It’s also important for your budget that you discuss changes and setbacks with the client. If a job is going to cost more than you initially thought, tell the client about it. You can soak the cost of small things yourself, but bigger items require client awareness.
Managing cash flow in the construction industry is a tricky subject. You will have funds tied up in materials, you will wait for payments, you may even find workers refusing to operate without a pay rise. There is money in the sector sure, but not if you cannot get to it. This is the reason why budgeting should be at the top of the list of priorities of things to learn if you want to have a successful career in project management.
How To Budget Effectively?
Besides from downloading software that can help you stay ahead, there are other ways to effectively manage budget restrictions during construction projects. Here are industry-backed tips that will help you stay on target.
Always Over-Allocate
Some people think accurate budgeting means definitively pricing each part, supply, or tradesperson, from the outset. Unfortunately, prices change. Usually mid project. If you need 5,000 floor tiles at £1 each and that price rises to £1.10 each per tile mid-project, you will run into issues. Instead, estimate how much the purchase will cost, then over allocate your budget to cover unexpected increases.
Choose Contractors Wisely
Whether you are collaborating with subcontractors or new workers, choose your team wisely. We recommend that you get at least three quotes on each job from different suppliers/workers. This way you make sure nobody is ripping you off.
Always Include Safety and Codes
It is one thing to build your new conservatory on the side of your house, it is quite another to go down the rout of planning permission for an outhouse. If you don’t maintain safety standards, you could find yourself in legal hot water. Budget for following codes and inspections.
Don’t Forget your Time
Once you have priced the job and planned out exactly where the spending will be, don’t forget to add in the cost of your time. Your time is as valuable as you make it. Budget accordingly.
