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Without the right analysis, a construction project cost report is just a huge sheet of numbers. Unless you’re able to look at the right numbers and draw actionable conclusions, these reports might as well not exist.
This guide will help you analyze your project cost reports for better performance. That’ll keep those cost reports from being just another piece of paper on your desk.
So, you have your reports in front of you. Now what?
What Is a Construction Project Cost Report?
A construction project cost report is a detailed review of the actual costs of a construction project, compared to the project’s original budget. For small business owners, it’s easy to overlook these reports. After all, the project is already done.
In large construction companies, these project cost reports are dozens upon dozens of pages. But if you’re taking on smaller jobs, each construction report may just be a small sheet outlining costs such as materials, labor, and equipment.
Even though the job has already been finished, you shouldn’t ignore these reports. They have valuable information in them that can help you increase your profits in the future. That begins with a comparison of your project cost estimates with your real project costs.
Compare Project Cost Estimates With Real Project Costs
Are your estimates frequently coming in below your final numbers? Your first step is to identify where your projects are most commonly experiencing overruns. If you’re consistently underestimating the cost of materials, equipment, or labor, you need to find out why.
According to Statista, 60% of construction project overruns are due to rising material costs.
Do these things simply cost more than you expected? Or are they being used inefficiently? It’s possible that supplies are more expensive than you thought. But it’s also possible that reworks and inefficiencies are using more of these supplies than you anticipated.
When it comes to labor, Workyard can help you track your expenses by project and task. A quick look at Workyard may indicate that your masonry, electrical, or concrete labor is constantly going over budget.
Once you’ve compared your estimates and determined how they differ from your actual costs, you can then prepare an anticipated cost report.
Prepare an Anticipated Cost Report
Armed with your current cost reports, you can project your inflows and outflows for the future. But this, too, requires that your numbers be accurate.
Project cost reports can be analyzed for larger trends. If you see that your material costs are consistently exceeding estimates by 20%, you know that your current projects are likely to experience material overruns too.
Take a look at your labor costs. They may need to be tracked more closely. Workyard makes it possible to track your employee hours automatically through GPS—time that was previously lost to inaccuracies and inefficiencies can be recaptured.
Of course, sometimes it isn’t your estimates that are inaccurate.
Compare Your Subcontractor Performance
When analyzing your cost reports, take a deeper look at the jobs that you’ve outsourced. Are there any subcontractors coming in consistently over budget?
For things like electrical or plumbing, you may need to accept the overruns and increase your internal estimates. For work such as tile, masonry, or concrete, consider whether it makes sense to hire your own workers rather than subcontract out.
With Workyard’s labor tracking, you’ll have better control over when and where your employees work. That leads to more accurate labor estimates and less time lost to inefficiency and incorrect reporting.
Labor is a company’s biggest expense. And that’s also why it’s so important to accurately calculate your payroll.
Recalculate Your Payroll Costs and Payroll Burden
Labor costs can easily break the budget. Are you correctly estimating your hours and calculating your labor burden?
If your labor costs are constantly coming in over budget, it’s time to dig deeper. Employees may be incorrectly calculating their time. Even if their actual hours are correct, their time could be attributed to the wrong projects.
Workyard integrates with accounting platforms like Foundation, Quickbooks Desktop, and QuickBooks Online, so you can easily import and manage your employee hours. Workyard also integrates with payroll systems like Gusto and ADP Run. Employee hours are automatically tracked using GPS in Workyard then imported into your accounting or payroll software, reducing the likelihood of error.
Use Workyard To Improve Your Construction Project Costs
Workyard can help you increase the accuracy of your labor estimates, automatically track your labor costs, and identify potential areas of future improvement. Try out Workyard today to:
- Increase the accuracy of your project cost reports
- Retain complete control over your labor tracking and estimates
- Book your labor costs by project, task, and work code