Many construction companies report they don’t have a good way to track costs once the project starts. This is because the costs of operations are not directly tied to their financial system. The problem is it takes time for someone to report the status of all the project tasks and then associate costs to those specific tasks.

In every project, there are two basic types of costs: direct costs and time. Direct costs are the materials, space or subcontractors used for a project that have an explicit cost contractors can allocate to the project. The time cost is in the form of labor, machinery or other resources. Many people treat these costs differently because they can be tracked or managed in different systems.

By governing all project costs together, contractors get a holistic view of the entire project costs, allowing them to manage the financial aspects of their projects more effectively.

Always Know Exactly Where the Project Stands Financially

Effectively managing project costs is crucial to the success of the company. When searching for a complete project cost management solution, here are the key capabilities required.

Precision
Don’t rely on guesswork. From building estimations and budgets to tracking costs at every step of the project, contractors need accuracy. They need to search for a solution that connects all the sources of different costs and provides an accurate cost across the project.

Cost Breakdown Structure
The CBS is the central planning structure against which all financial activities are planned and managed. It’s a multi-level hierarchy that allows contractors to be as detailed as needed to be to efficiently manage a project. The CBS is different from the work breakdown structure. Contractors should not manage costs at the level of the WBS; it is too granular and repetitive. Contractors need a CBS that is linked to their WBS, but groups costs together at a higher level, which makes them easier to manage.

Estimate at Completion
EAC is key to understanding how a project is expected to finish and make any corrections necessary. More specifically, it represents the final project cost given the costs incurred to date and the expected costs to complete the project. To manage project costs effectively, contractors need a formal and automated method for conducting EAC.

Change Orders
Projects constantly change, and they rarely finish the way they are planned. A project cost management solution should include a way to track and incorporate change orders into the project automatically.

Cost Controls
In any project, it’s important to be able to quickly see when costs and associated margins deviate from the acceptable limits. The solution contractors implement should allow them to set up thresholds for key cost metrics and be alerted instantly when they go off track.

Real-Time Reporting
In a typical company, reporting the financial status of projects takes a lot of time and effort, mainly because it takes time to manually consolidate and integrate data. Contractors need to find a way to get real-time project financial reporting that gives the right people the right information at the right time to maximize control over the business.

Your Projects Need to Take Center Stage

Successful construction companies understand the importance of being able to see the financial impact of operational issues in their projects. The only way to effectively manage project financials is to put projects front and center.

Project business automation, a new category of software solutions built specifically for any company that considers projects an important part of their business, is the way forward to guaranteeing project success. It enables real-time visibility into the financial status of projects, cost control to track and evaluate costs across all projects, and risk readiness so contractors are able to predict and record cost variances before they materialize.

When contractors are able to manage project costs in one system, they achieve better business performance overall.