A well-designed budget is a critical component of any business plan.
When it comes to budgeting, the deeper you dig for details, the better. Integrated software solutions can help make this task less burdensome, an article on Construction Executive’s website explains.
A key element of constructing the budget is an effective forecast and projection model. This means your forecast must include the jobs already in play. In other words, you should include the revenue you’ll generate throughout the project in your budgeting.
Remember, for projects or jobs that last several months, revenue isn’t generated merely at the end of a project, and costs aren’t consumed only at the beginning of the project. This means your job costing system not only has to include revenue and hours, but also needs to be able to track the changing costs and revenue levels.
Successful organizations can also use data from their accounting system and intelligence from their job costs files to project next year’s operations. The budget must correlate to realistic projections, especially when deciding to add fixed equipment capacity or other long-term costs.
When you set up your job costing system, make sure you take advantage of features that allow you to forecast revenue, cost and margin on a month-to-month basis at any point in time.
Run these reports for historical projects in addition to business already booked and future projects to see how you are tracking for next year. That allows you to create the well-designed budget described in the Construction Executive article.
Source: Construction Executive, August 2012