Budget planning is a crucial aspect of all types of construction projects, be it residential or commercial. However, the reality is that budget overrun is often the main reason for project failure. When it comes to effective budgeting, construction contract management software with the best budget creation and tracking features can be the ultimate solution.
Keep reading to find out how a budget can make or break a project and why you need to use project management software to ensure you don’t exceed your project budget.
Why Budget Management Is So Important for Project Success
All project managers have one common goal: to deliver projects successfully. And, the success of a project is defined by the overall cost performance and ability to meet project deadlines.
A project management software with its enhanced capabilities makes this possible for project teams.
- Having a budget allows you to clearly establish the main goals and milestones of a project. It sets some budgetary restrictions to make sure that funds are allocated to the right activities and teams don’t run out of budget. Budgeting helps limit unnecessary expenditure by ensuring that revenue and cash flow are balanced.
- Another advantage of budgeting is that it ensures that project objectives can be prioritized according to the availability of resources at any given point. If the funds are not available to carry out all aspects of the project, having a budget in place will help project managers to see which aspects need to be prioritized according to their position in the life cycle and impact on project completion.
- A well-drafted budget plan ensures that the entire management is aware of how the project will be executed. Reports, dashboards, and forecasts can be shared with all the necessary stakeholders so that input can be received from everyone. This also improves communication between project members and promotes a shared vision.
Why Should You Track Budgets Through Project Management Software?
Project budgeting is critical, no matter which industry you work in. This is especially true for the construction industry, where the applications are endless.
Typically, a budget may include several different costs associated with the construction project, including land acquisition costs, taxes, insurance, material and labor costs, and more. Therefore, using cost control software in construction is becoming increasingly important.
Project budgeting helps outline expected expenses, income, and profitability of the project. The budget determines the type of resources needed and the timeline for that project. It provides an understanding of how the budget will be utilized and expensed overtime for various activities and stages throughout the project life cycle.
This way, you will know how much of the budget has been spent and how much is left, at any point during the project life cycle so you can make changes to it wherever necessary. It also allows you to keep a close check on the project scope. For example, if, at any point, the client requests for some extra work, its financial impact can be properly assessed before it’s added to the project.
Let’s have a look at some more capabilities of project management software that can help project managers to meet their budget targets.
How Project Management Software Can Help with Budgeting
Here are important ways project management software can help with budget planning, tracking, and management.
Comparative Analysis Is Easy
Advanced project management software can be used to measure actual versus expected costs, expenses, and project profit margins. Project managers can also use a work-in-progress view of the project to know exactly how much time has been allocated to each activity and identify if extra time has been spent on a certain activity and how it has impacted the project costs.
Keeps Expenses under Control
Project managers can calculate how much a project should cost to remain profitable by factoring in billing rates, scheduled hours, unexpected delays and any additional expenses that may be incurred. This helps to stay within budget as the project progresses. It also brings transparency and accountability to the project because all activities can be traced and tracked.
Project Members Can Access Dashboards and Reports to Get a Quick View of the Project Budget Status
Project status reports, dashboards, work-in-progress views, expense reports, and profitability analysis are easily viewed by all the stakeholders so that everyone is on the same page as far as project progress is concerned. It will also help in optimum resource allocation to keep the project running smoothly.
The latest software enables users to create customized reports of the budget, in addition to standard reports. Project managers can also share dashboards and reports with external partners as well as clients through the live links.
Planning and Forecasting is Far More Accurate
In a highly competitive construction industry, the key to long-term success lies in ensuring accurate project planning, budgeting, and forecasting results. A good project management software provides managers with greater visibility over their cash flows, revenue streams, and expenses, which has an impact on business’ revenue and profits.
In addition, project managers can have a better idea of how to manage and budget for future projects once they get to track ongoing projects with greater depth and clarity.
With project management software, it’s only a matter of a few clicks to generate entire reports on actual versus budgeted expenses once the project has been completed.
This means construction teams can have on-hand accurate information and a breakdown of all the costs. It will cover all categories from material to billing to job costing.
Team members can discuss why there were discrepancies and brainstorm ways to improve them. This analysis will be useful when they go back to phase 1 for the next construction project in line.
The Final Word
A budgeting plan serves as a control mechanism for any project and has a huge impact on its success. Realistic and data-driven budgeting will improve business decision-making through the help of accurate and relevant financial information.