Why is using construction cost management software important?
August 24, 2020
“What’s on track? What needs my attention?” Project managers and contractors face these questions every day. And while they may not always be easy to answer, it basically comes down to costs. Managing these costs help determine whether a project can be completed on time, on budget and within scope. In an industry in which construction budget overruns are more common than not, having insight into real costs can give you more control over them. Which is why one of the main tools for measuring progress — and success — is construction cost management.
This is critical to monitoring project efficiency in terms of time, resources and, of course, money. It’s an ongoing process spanning the lifecycle of a build: from the pre-build cost estimating, to ongoing tracking of actual costs, to analyzing the impact of changes on the overall budget, to accounting for potential risks, to monitoring your progress at turning a profit.
Cost management software tools that simplify and streamline this process introduce more certainty behind the numbers and provide better visibility into the anticipated success of your build.
Let’s look at why construction cost management software is a good idea:
More confidence in bidding with precise estimates
It almost seems counterintuitive that a pre-build cost estimate requires so much accuracy, doesn’t it? But guesstimates don’t cut it in construction, especially when there are variable costs and unknowns to account for. With so many things to factor in — labor costs, insurances, permits, materials, vendors, equipment, software, etc. — having as much data up front as possible can help deliver a more precise estimate. And the more costs to consider, the more complex it becomes to manage and the more difficult it becomes to calculate an accurate estimate.
A robust construction cost management software solution addresses many of these complexities. . It can take details from a variety of estimation models — such as bottom-up (task-level) or top-down (historical data from past projects) — and assemble projections that can be updated as confirmed costs become known. This can help reduce the amount of fluctuation between pre-build estimates and actual costs — giving you, and your clients, confidence in your bid proposal.
No budget overruns with regular updates on expenses
Many construction cost management tools can send you periodic notifications about project expenses. This kind of proactive reporting gives you the opportunity to monitor actual costs against the overall budget so you can track that nothing will lead to an overrun. Even more, you may be able to establish a threshold that each expense shouldn’t exceed, along with a corresponding alert notifying you as those expenses approach those limits. You’ll have a heads up to determine what’s behind any escalating costs and to make any necessary adjustments. Preventing overruns goes a long way toward preserving your profit margin.
No manual calculation errors with automated cost calculation
Manual calculation is the last thing anyone wants to be stuck doing. . That simply invites the very likely risk of an error and wasted time — we’re human, after all. Instead, the automated cost calculation feature found in most cost management software takes over this oft-dreaded task. Results are generated immediately using built-in or customized formulas with values already entered into the software system.
What types of values can be measured? Things like labor hours (even broken down by trade and level), materials usage, equipment costs, overhead expenditures, profit. So for example, an on-site laborer can enter their work hours via a mobile app, so their day’s productivity can be calculated instantly using hourly wage data unique to them that is already in the system.
Taking a broader view, you know immediately actual costs for labor, materials and equipment used to that point, and how that tracks against the project’s budget over time. All this adds up to cost management that is more accurate, more immediate and therefore more actionable.
Better decision-making with real-time cost analysis and forecasting
Regular real-time cost analysis provides a snapshot of the performance of the project at any given moment. And when integrated with accounting or other productivity tools, project teams and stakeholders can get valuable insight into what the data is telling them about costs and productivity levels.
Equally as valuable are forecasting tools. They’re like the crystal ball of a construction project, creating a picture of how well a build is on track to meet original schedule and cost projections based on various what-if scenarios as well as actual changes during the build.
When compared to original estimates or ongoing snapshots of progress, forecasts can reveal underlying trends or problems which, if left unfound or unresolved, could jeopardize an otherwise on-time, on-budget project. This could be particularly helpful if considerable variance in actual expenses versus original estimates is discovered. When detected early enough, project teams and/or other key stakeholders can decide how best to course-correct when faced with a potential schedule delay or budget overrun.
And that’s what construction cost management comes down to: The ability to make better decisions by having more accurate, actionable data.
We know you have options when it comes to construction software. It’s all based on the capabilities you need for the projects you do. Explore what InEight’s options have to offer, and how they integrate with its other industry-specific software, including third-party, to optimize efficiencies across your entire build processes.
Learn more about InEight’s project cost management solutions.