7 Common Budgeting Mistakes to Avoid for Construction Businesses

While it’s not the most fun aspect of a construction process, the budget is absolutely essential to the overall success of any project. 

When a budget isn’t handled properly there will be major consequences down the line. That could even mean not being able to finish the project. As a construction business, it’s your job to keep track of the budget and make sure everything runs smoothly. 

We’ve compiled the seven most common budgeting mistakes made in construction. Avoid these and you’ll have great success! 

1. Skipping Budget Planning

The biggest mistake that will cost you the most money, in the long run, is failing to create a budget at all. 

A budget provides you with an outline of how much the project will cost. It should include all the different kinds of expenses from labor to parts to permits. When this plan is fully formed you can get a clear view of what will happen and what is possible. 

Many choose to skip this step altogether and get right into the project. This is very detrimental as then you can’t pace the project and make sure money is divided up to cover everything needed. 

Create a budgeting team to make sure everything has been covered and planned for. 

2. Incomplete Estimates

Estimates for projects are a critical part of helpful budgeting. An estimate is given by a contractor for their specific jobs in the project. For example, the plumber will give the price for their portion of the job. 

These estimates are what make up the budget. They help the team see what they can and can’t afford. 

Many times there will be pieces of the job left out of the estimate just by being overlooked. An incomplete estimate throws the whole budget off when the oversight is realized, usually mid-project. 

Double-checking every estimate to make sure all the parts, equipment, and labor is covered will make everything run more smoothly. 

3. Not Keeping Records of Spending

Even if a complete, precise budget is created before the project, there can still be room for error throughout the project. 

A budget means nothing if it isn’t followed and things aren’t recorded. All spending should be meticulously recorded and tracked. All of the little details of a project can add up and change the budget. 

Many construction businesses struggle to keep track of money between all of the members of their team and sub-contractors. 

New programs make the detailed tracking that’s necessary for a major construction process simple. Automating the process and making it as easy as possible for every member to log their purchases so you can keep an accurate record and adjust as needed. 

4. Expanding the Project

It’s very common that in the process of completing a construction project the scope of the project expands. 

That means that there are additional aspects added on, whether out of necessity or pure desire. This addition isn’t always necessarily a bad thing but it can change the overall budget. 

Any time there is a significant change in the project outline, then there needs to be a budget meeting to adjust. The key is to continually be manipulating the budget, taking things away, or using cheaper options, to keep the bottom line the same. 

Changing the scope of the project isn’t the problem with a budget, it’s not adjusting the overall to fit that change that has negative consequences. 

5. Poor Communication 

A construction job can be a little difficult to keep under control, as it is a unique working environment. There can be several groups that are working individually on pieces of the project. But everyone together is going towards the same goal. 

This unique environment can make it very difficult to keep a detailed, precise budget without proper communication.  

It’s critical that there are open lines of communication between the project manager, all the other contractors and workers, and the client. When this happens it’s more likely that spending and budgeting issues will be reported. 

When everyone is working together and communicating, issues that come up with the project and the budget can be dealt with quickly and efficiently.

6. Management Flaws

It’s just inevitable that things won’t go exactly according to plan during a construction job. There are just too many variables and things are bound to change throughout the project. 

Managing those changes well is a crucial part of a working budget. 

If the manager of the project isn’t doing a good job of keeping track of everything, it’s likely that the budget will go out the window. 

Delays, incorrectly planned (or executed) design elements, and missing pieces of the project can all add items to the budget that may not fit. It’s the manager’s job to keep everyone on the same page, making adjustments as needed, and letting everyone know of each change. 

The project manager needs to be problem-solving along the way to keep the budget in-tact. 

7. Leave No Room for Changes

Everyone knows that things are going to change throughout the project. Surprises will come up or things won’t work the way they were planned. It’s just a fact of life in construction. 

So when all types of construction projects don’t add in a little extra to their budget they can have real problems. 

When there is that extra money in the budget without an assignment, these changes or issues can be handled properly without worrying about over-spending. It’s a great protection program for the project to ensure it’s done right. 

And in the best-case scenario when nothing goes wrong, there’s a little extra money to spend elsewhere in the end!

Avoid These Common Budgeting Mistakes 

The budget is one of the most important aspects of a project. It should be figured out and nailed down as quickly as possible before starting construction. 

A budget done correctly will keep the project moving forward, avoiding delays, and give the client peace of mind throughout the process. There are many common budgeting mistakes that can derail progress. But with some simple strategies, you can avoid those altogether. 

If you’d like to learn more about our revolutionary budgeting and management techniques, contact us today! 

LMS Project

https://www.lmsproject.com

LMS Project is an online platform for managing payments and budgets for construction projects. We provide a simple to use solution for contractors to keep project budgets on track, reduce paperwork, and get subs paid fast without breaking their own bank account!