Construction is a complex domain. Even the smallest of projects have a web of interconnected processes. These processes need to be initiated, monitored, managed and completed effectively to ensure success for the project. At the same time, every element of the company’s operations affects the others.
You can view them all as a stack of dominoes; even a simple disruption can throw the entire project off balance. Therefore, it becomes absolutely imperative for project managers to have a holistic view of operations from the beginning to the very end.
Using a comprehensive project management software solution definitely makes sense as it enables them to keep track of systems and processes used for managing aspects such as cost, materials, and scheduling.
Cost Control- Where to Start
Money is what essentially drives construction projects. It keeps the operations up and running, defines the success of the project, and if judiciously utilized, also fetches high returns for the stakeholders. With a continuous inflow and outflow of money involved, cost control management ends up being an inescapable aspect for project managers.
Essentially, cost control involves collecting and measuring cost records, creating a buffer for uncertainties, and tracking the work progress. It also encompasses a comparison of the actual progress with the planned metrics against how the deviations might impact the future.
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The process continues throughout the construction period, right from idea conception to the ultimate completion. The core objectives of cost control are:
- Maximizing profits within the designated period of time and agreed on the project budget.
- Keeping the expenditure within the limits agreed with the client.
- Giving the client value for money with a sound layout.
Considering the significance of cost control, no project manager and contractor can afford to ignore it. And this is the very reason that cost control management is an indispensable part of every project management software solution.
Cost control systems are capable of gathering data and analyzing practices to enable companies to see the granular details of project costs at all stages.
Why Businesses Should Pay Attention to Cost Control?
Now that enough has been explained about cost control, it becomes imperative to understand why it should really matter for site owners, contractors, and construction consultants. Here are the consequences of ineffective cost control management:
Cost Confusion May Happen
Cost control is meant to help project managers identify the areas where they can reduce expenditure. They can achieve this by comparing the budgeted costs with the actual expenses and highlighting cost trends.
What they get are valuable insights that empower them to manage the ongoing projects and prepare for future ones as well. If cost controls go haywire, confusion will prevail.
Obviously, sub-par cost control systems can cast doubt on the accuracy and reliability of cost reports. Even something as trivial as a data entry error can actually put the potency of the entire budget in questionable circumstances.
This is critical because ultimately, it is the project managers who are answerable to the clients and are accountable for the judicious utilization of project funds.
On the other hand, advanced controls go the extra mile for unifying and automating the project’s financial management for transparency and accuracy. Ideally, financial project controls should include the following features:
- Reliable forecasting with in-depth and relevant data
- Flexible billing and invoicing billing formats
- Customized cost strategies that are based on project, requirements, and location
- Cross-regional budget management that is compliant with different standards and regulations
Materials and Supplies Could Go Out Of Control
One of the most complex aspects of construction project management is materials management and it has implications on cost control too. Project managers have to navigate a fine line between over or under purchasing materials for the projects. Simply put, they are responsible for ensuring that the stock levels are adequate, but not excessive.
Underinvestment brings the risk of shortage while overinvestment can block the investment and hamper other operations. To make things even more challenging, there is always an apprehension of cost uncertainties, forcing managers to find alternative materials or suppliers mid-project. Project managers may want to downsize quickly to avoid excessive costs.
Though managing materials is a constant juggling act, it can bring challenges for cost control as well. Inventory levels affect scheduling, which can have an impact on the cost of the project. The solution is to have a cost control management solution with the following features:
- Automation of requisition management and purchase orders
- Tracking of compliance control
- Automation of general ledger updating
Businesses Are Not Prepared For Change
If project managers are not paying enough attention to cost control, there is always a risk that the individual projects or the business as a whole will not be prepared for the change. Last-minute changes are a common occurrence in this domain.
A number of things can happen even within a single project, skyrocketing budgets while leaving managers in a fix. From clients submitting change orders to vendors modifying schedules, rising material costs and never-ending scope creeps.
Even the smallest change can have an enormous butterfly effect putting the project in a hot soup. Something as simple as having a plan for your office move can alleviate stress, confusion, and costs.
When such unexpected things happen, incompetent cost control can make things worse for project schedules and budgets. Obviously, an optimal level of cost control can save a lot of trouble when it comes to facilitating agile change management quickly and confidently. Typically, robust cost control allows managers to:
- View the updated project costs automatically to avoid overruns and misinformation
- Monitor and approve fresh requests from a single location
- Manage change orders online for quick approvals
Why Does Cost Control Matter In The Long Run?
Now that the challenges of overlooking cost control management have been explained, it is vital to understand why it really matters in the long run. The emphasis on construction economics and cost control has increased in recent years and it will be all the more important in the future due to the following reasons:
- The rapid pace of development and growing competition in the industry has made clients less tolerant of delays and cost deviations.
- Client requirements are more complex than ever today, which makes an effective cost control system desirable, right from inception to the completion of projects.
- Typically, clients of the industry represent large organizations and institutions that lay great emphasis on accountability, making cost control a norm.
- Profit margins for contractors have reduced significantly during the past decade, which has led to a greater cost-consciousness in an attempt to remain competitive and address possible losses.
Considering the immense value of cost control for construction companies, investing in project management software that is empowered with the features discussed above makes for a smart business decision. Although the migration looks like a long road, the ever-evolving technology can transform it into a smooth walk that yields consistent returns year after year. Maybe in the form of enhanced efficiency, saved time, efficient cost control, or heightened visibility.
Finding Help with Moving Professionals
We hope you found Why Construction Businesses Should Bother About Cost Control useful. Make sure to read Business Owner’s Expectations on the Commercial Construction Process for more helpful tips.
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