How GCs Gain Control and Insight With Budget Tracking Tools

General contractors (GCs) operate on razor-thin margins. The unexpected can easily eat into their profits — or even mean taking a loss on a project. Fortunately, budget tracking tools are giving GCs greater control and insight, helping them protect their bottom line.

With these types of tools in play, contracting firms gain the ability to create a project budget based on historical insights, then manage it in real-time throughout construction. Carefully creating and tracking the budget helps the GC control risk, allocate resources intelligently and more.

In light of the wide range of fluctuations currently rocking global markets, gaining as much control over budgets as possible benefits GCs. That makes these tools particularly useful. 

The Basics of Budget Tracking Tools

The required robustness of the budget tracking tool totally depends on the GC firm. Smaller firms running only a handful of projects might be able to get everything they need from spreadsheets.

As the company scales, so does the complexity of its projects. At a certain point, most contracting firms find that they need more sophisticated solutions. Fortunately, a range of options exist here. The GC might choose a project management software that includes budget-focused features, or it might leverage its existing accounting platform. 

Either way, key features to look for in the budget tracking software include:

• Accounting (accounts payable and receivable)
• Contract management
• Change order management
• Financial forecasting
• Invoicing
• Job costing
• Payroll management
• Purchase order management
• Resource planning
• Reporting

Once the solution is in place, the next step is training the appropriate team members on it. 

Establishing standard operating procedures (SOPs) helps everyone use the same features in the same way. The resulting consistency helps the GC gain more control and insight from their budget tracking tool. 

What Budget Tracking Delivers for GCs

With the right tool or suite of tools in place, the contracting firm should be better able to do all of the following.

Create More Accurate Estimates

A strong budget tool makes it easy for the GC’s team to pull in historical data as they estimate the budget for a project. 

This gets easier when the team enriches the data in the budget tracking tool with metadata. They can, for example, tag projects as residential or heavy civil, medium or high finish. This way, estimators can pull up past projects of a similar type. Adjusting the historical data for inflation and incorporating updated subcontractor quotes will provide increasingly accurate estimates at each stage — from preliminary through detailed to final tender.   

Get Real-Time Visibility

Budget tracking tools aren’t just useful on the front end of a project. Arguably, they get more helpful as the project progresses. 

Good budget tracking tools give firms the ability to see where they stand with the budget in real-time. This helps them make informed decisions to progress the project and protect their bottom line.

Say, for example, that a project delay means one specialty contract won’t be needed on site for two weeks. If they get released to another job, though, they won’t return for four weeks. The GC’s team can calculate the most financially advantageous path forward: the four-week delay or paying the subcontractor to stay on standby. 

This real-time visibility also helps the GC manage change orders. Specifically, it makes it easier to track how those changes affect the overall budget and to make sure the GC collects any appropriate payment. 

Control Risk

Construction comes with uncertainty. What will the firm do if paid-for materials get stuck in the Suez Canal and don’t show, or if one of their specialty contractors goes under before they can complete the contracted work?

Budget tracking tools don’t eliminate those what-ifs. They do, however, support the GC in managing them. When the budget is accessible and up-to-date, the team can explore different scenarios to determine the best course of action and understand the cost implications of each option. This helps the GC manage risk while protecting its margin as much as possible. 

Allocate & Track Labor

Once the GC firm has its standard budget structure in place, it can quantify the amount of time it will take to complete a task when an average person is doing an average job. That helps them allocate resources based on a project’s requirements.

Then, as work gets underway, they can see what’s been completed, both from a financial point of view and a timesheet perspective. Reconciling those two figures helps the project stay on schedule and on budget. 

Manage Subcontractor Relationships

Thorough budget tracking can smooth relationships with specialty contractors, making sure payment gets released to them in line with completed work. A well-designed financial system allows subcontractors or specialty contractors to submit their claims directly into the main contractor’s platform and track their status in real time — eliminating uncertainty while requiring clear buy-in and understanding from all parties involved.

The clear visibility offered by a budget tracking tool also helps the GC manage and release retainage. 

Minimize Disputes

This type of tool gives GC firms built-in recordkeeping. This way, if a dispute arises, they have a clear ledger of what was paid when and to whom. This unified data source helps to clear up any misunderstandings, eliminating disagreements or at least lessening their severity. 

Getting the Most out of Budget Tracking Tools

To yield the biggest benefit from any budget tracking tools it implements, contracting firms should: 

1. Start with the “why.”

   First, the GC should ask its team members to identify any pain points when it comes to budget tracking. Also, inquire about ideas they have for improving workflows. Would the team benefit from having information in one place? From seeing costs in real-time? Keep asking “why” until the team is clear on the need. This helps the GC identify the right budget tracking tool for its use case. 

2. Set up the tool properly.

   While plenty of platforms offer plug-and-play functionality, taking the time to set up the tool usually yields better results. That might mean manipulating dashboards or reports to deliver the data the team needs. Or it could mean finding a way to get the tool to workers in the field to reduce lag between them and the office. Most GCs also benefit from setting up alerts that are triggered when certain thresholds are crossed (e.g., spend overages in any given category, large disparities between percent complete and cost incurred). 

3. Focus on data quality.

   As with any technology, the usefulness of the tool depends on the quality of the data it uses. Establishing SOPs and periodically auditing the data helps the GC’s team — from estimators to site managers — work from information that’s as accurate as possible. 
   

At the end of the day, a budget tracking tool is just that: a tool. It can be useful to the GC’s team, but it usually won’t do the work for them.

As the saying goes, measure twice, cut once. With the tool in place, team members should have the information they need more readily available. Checking it again, then acting on it can help the GC better plan for and manage its projects.

In this way, a good budget tracking tool minimizes risks and maximizes output from the GC’s staff and specialty contractors. 

Written by