How to financially plan for future construction projects
Contents |
[edit] Introduction
From a few thousand to millions of pounds to construct and finish a project, it is easy to think that you have ample room within the budget. But, increasingly, we hear horror stories of large-scale construction projects going over budget by thousands, sometimes millions of pounds. Is this poor financial planning and management or the result of unrealistic expectations?
There is no doubt that a tight hold on the construction budget is critical but how do clients go about bringing a project in on budget? Here are 5 tips for efficient financial planning.
[edit] Look back
Look at past projects and how they performed in terms of the budget allocated to the build. What were the main financial problems? Was it not keeping an eye on the budget or not enough detail in the planning stage?
Taking time to look at past projects and similar projects undertaken by other companies, you may offer valuable lessons for future projects.
[edit] Detailed budget
The budget figure is not a ‘ball park’ one, it is fixed and firm. Projects are expected to come in on budget or under budget, but not over.
A detailed breakdown of the budget, where it needs to be spent, and how much, is critical to the success of the project.
A small emergency fund (contingency) – usually around 10 to 15% of the overall budget – should be kept back to meet unexpected or unforeseen budgetary issues.
[edit] Cost monitoring tools
Cost monitoring tools are a worthwhile investment. Set the parameters by inputting the detailed budget as the benchmark and input data (invoice amounts, for example) against individual headings, also known as departments.
It is then possible to see where the budget is heading, and to monitor spending in key areas - giving valuable information for future projects too.
[edit] Real time reporting
As well as monitoring expenditure, there will be times when it is necessary to discuss the budget with key members of the build. The more accurate and up to date this financial information, the more useful it will be.
Real time reporting also helps determine where money is being spent, making it possible to monitor the value of expenditure. It also highlights where unforeseen expense happened and helps, not only determine why but cheaper, more cost-effective ways of doing things without compromising on quality or build time.
[edit] Don’t be frightened of new build technology
Building with bricks, mortar, concrete and breeze block may, to some people, be the accepted norm, the only way of doing things. Just because someone is more comfortable and familiar with a build technology doesn’t mean it is the only way of doing things.
Some of these accepted and traditional build methods are expensive today. When the budget is buckling under the weight of the project, it may be appropriate to try new build technologies that shave pounds and pence from costs.
[edit] Find out more
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Dr Nicholas Falk, director of the URBED Trust, explains why metro cities are the future of urbanisation.
From next week, UK firms can bid for a share of a £12.5m fund to boost productivity, performance and quality.
A right to light generally refers to the right to receive sufficient light through an opening.
Interference and compatibility - the effects of electromagnetic fields in the workplace.
Important action is being taken to inspire young people to train as engineers.
A survey of Leicester’s historic buildings resulted in local listing being taken more seriously.
Demolition is the most high risk activity in the construction sector. Read our introductory article here.
BSRIA report on the domestic boiler market, with China recording the most 'dynamic market uptake'.
Social value of infrastructure
Do we really know everything important about the impacts of our infrastructure projects? And if we don’t, does it matter?
Former Chief executive Richard Howson blames government for being 'poor payers'.