The best approach to forecasting for job costs requires managing variability in percent-complete projections and negotiating a schedule of billings.
But there are several definitions for “percent complete.” For some, it’s based on consuming materials. By measuring the consumption of costs, companies have an indication of percent complete.
Once you’ve consumed a certain amount of cost — say half the cost — you can assume the percentage complete matches. There are some great examples highlighting this in a recent article on Construction Executive’s website.
If you use job costing systems, you can view your project data in a variety of ways and percent complete varies. For example, it also can be determined by cost, labor or other features that give you more visibility in the project status.
In all the scenarios outlined in the Construction Executive article, the ability to monitor project completion and costs was an important factor in project forecasts. Companies should always be looking for tools or processes to streamline costs captured in the field.
Take a look at your job and project management software. You should demand daily reporting of job status progress, labor, materials and expenses. Give your employees mobile access and software tools to enter the data in the field.
Once you collect the data, the system should calculate percent complete and be able to automatically send email notifications when projects go outside the standard parameters you’ve set.
Remember, the ability to align your schedule of billing with more accurate percent complete calculations is a challenge. To do this, you need to have a flexible project and job costing system.
Source: Construction Executive, July 2012