Construction forecasting is an art rather than a science. Find out how you can find all the facts to eliminate the guesswork.
The construction sector is uniquely vulnerable to unexpected events and fluctuating variables. From weather conditions to insolvent subcontractors, construction forecasting can be one of the biggest headaches in this industry, especially given the slender margins currently on offer. Such unpredictability is particularly challenging for the financial managers who have to adjust their budgets whenever the sums change. However, the steps below can make a real difference to the accuracy of forecasting and the effectiveness of cash-flow management.
The full facts at your fingertips
Accurate construction forecasting is difficult, but if you know which tools to use, you can make life much easier – or at least more organised. Forecasting packages can include a complete spectrum of analysis and budgeting tools, covering everything from margin control to tax liabilities. Costs can be broken down in detail, enabling real-time analysis of vital areas like margin forecasts and subcontractor payments, alongside full risk analysis.
As PricewaterhouseCoopers recently acknowledged, construction projects are high risk. They present “Enormous fiscal requirements and unusual logistical challenges for companies”, and can potentially lead to poor procurement strategies or bad decision-making.
Profit from debt management
Between clients, subcontractors, intermediaries and overheads, it can be challenging to keep on top of a company’s debts at any given moment. If you can use software to make instant interrogations of a firm’s financial affairs, allowing creditor deadlines to be met, and ensuring that cash flow is available, the task is much easier. Effective budget and cost management can be maintained throughout the lifecycle of each and every project, from initial tendering to final snagging and handover.
A material world
The availability of materials and their fluctuating prices can be the bane of a project manager’s life. Keeping track of the quantities and costs of required materials, as well as checking funding and cash-flow information will ensure that a large order of materials will fit into available budgets, and economies of scale can be maximised to improve profit margins.
Corporate advisory firm A.T. Kearney has observed that “Raw material prices are experiencing unprecedented volatility” at the moment, and as a consequence, “Mastering raw material [price] volatility has become essential to short-term growth and long-term competitive advantage.”
Keep it simple
Quite often, companies fail to streamline their computer software, ending up with multiple programs and packages that either conflict with each other, are incompatible, or duplicate one another’s work. This can create a situation where a company’s financial controller is viewing different spreadsheet data to an on-site manager, without realising or being able to correct these mistakes. By installing a comprehensive financial software package throughout a company, construction forecasting can be undertaken far more efficiently and effectively.
Out of the box integration is critical to business performance and the ability to achieve flexible forecasting. Microsoft Excel could be used as a presentation layer for simplicity, but your ERP must be the central location for all information.
To do list
- Standardise the company’s software into one comprehensive and user-friendly package.
- Train all junior or off-site staff to make real-time updates whenever necessary.
- Plan ahead to avoid delays being caused by foreseeable issues.