Top 5 Things to Know When Creating a Construction Budget
A construction project is a huge drain on your time and money, so it is important to ensure that you use your resources as well as possible. In addition to materials and labor, you also have to worry about permit fees and the interior finishes. Creating a budget before you start construction will save you a lot of money and help the project to go smoothly.
With so many moving pieces during a project, it can seem like a daunting task to take the time to create a functional and accurate budget for the entire project. Taking on this task will be well worth the time spent if you take the time to do it right. Good money management skills can make the difference between falling behind schedule and finishing quickly within the budget. Here are several things to consider when working on your budget.
1. Be Accurate With Your Estimates
Creating a large estimate for your project is not going to be possible without first breaking the project down into manageable pieces. The little areas of constructions like permit fees and materials to buy add up quickly, so making an accurate measurement for an itemized budget will help you to make sure you are not underestimating the total cost.
It can be very easy to make a budget with inaccurate estimates if you are not careful. Contractors want to win the bid, so sometimes their bids can be lower than what actually pans out. Other complications can also raise the bid number if problems are uncovered during construction.
Working with a professional who knows what you can expect during construction can be a huge help when making a budget. A consultation can put your mind at ease because you will know that you have accurate numbers for your budget. There is also construction estimation software if you would prefer to run the numbers yourself.
2. Find a Good Project Management Software
Managing a large project with so many different moving pieces can be overwhelming, especially if it is not something you do very often. Using the right software tools can help you stay on budget, and it gives project managers a way to coordinate effectively.
There are many budgeting and accounting tools that can help you both create an initial budget and update it as you work. There are features that will allow you to keep track of the invoices and expenses that you incur along the way. Keeping track of all the details during your project will help you to estimate future expenses and any changes you will need to make for your project.
When choosing a software to help you manage your project budget, you should consider which features and tools are available and what you will use most on your project. At the very least, you are going to want to find a service that will help you manage payments, track invoices, and store documentation. This will help keep your budget realistic.
3. Be Flexible During Construction
Some construction managers fail to take into consideration that the project is going to change, and the budget will need to be flexible. Not cushioning the budget to allow for these changes can have disastrous consequences, and a lot of added stress in your life.
It doesn’t matter how much you plan and design a project before you start; you cannot foresee everything that is going to happen. Projects will always need to be adjusted as modifications are needed to compensate for unexpected changes. Sometimes these changes are going to be small, like adjusting the height of a counter or a change in materials used in a project. Sometimes those changes will be bigger, but adjusting with those changes is necessary.
It may seem like creating a budget when it is going to change is a waste of time, but it is still going to help you keep on track—seeing all the numbers laid out before you is going to help you adjust other areas of your budget to compensate for overages in other areas. It is a good idea to understand about the changes and not be surprised by it at the end of the project.
4. Know the Difference Between Hard and Soft Costs
There are different types of construction costs, and you cannot make an accurate budget without understanding the differences. Hard prices of construction costs involve the physical aspects of the project. This would be things like HVAC, mechanical, electrical, site preparation, and plumbing. These are straightforward and are the first things we think about when we list the costs of a construction project.
Soft costs are a little harder to see and account for when making a budget. Even though they are harder to see, it is important to not forget about factoring them into the budget. Soft costs include financing, insurance, taxes, LEED certifications, and fees related to management, design, and legal documents.
In addition to these hard and soft costs, demolition of existing structures, environmental compliance, land costs, and surveys also need to be added. Once you consider all of these expenses, you are prepared to create an accurate budget that will help you during your project.
5. Utilize Historical Data for Budgeting Purposes
Using historical data to predict the costs of construction projects is possible and can help you with your project. Every project is unique in its details, but can still be benefited by looking at similar project projections. There will be past projects with similar goals and objectives, and looking at their trajectory will give you an idea about the course of your own project.
You can analyze past projects to look for discrepancies in their budgets to make yours more accurate. This will help give you a general notion of any changes you should anticipate. When you look at past projects, you want to make sure that you take into consideration inflation and natural changes that happen into the construction industry.
Any project that is successful will need the input of experts and have a schedule. Having a mentor or manager for your project will give you insight into the construction industry that you will not get any other way. Making a schedule will help you stay in budget and make adjustments as needed effectively.