Construction Finance: Cost Control Checklist
Keeping costs under control is essential for construction companies to ensure that their projects are profitable and delivered on budget. But as construction projects are particularly complex, with typically narrow project margins, this is a bigger challenge than it might initially appear.
IFS Cloud solutions, delivered by Muzulu, come equipped with a range of features that can help businesses in the construction sector keep their costs reined in. From forecasting to subcontractor management, IFS gives you real-time insights and far greater control over your projects.
Built to support the specific needs of businesses operating in the construction industry, IFS Cloud solutions empower firms to deliver more projects on time and within budget, even against a backdrop of wider economic uncertainty. Here are some of the main areas where construction costs need to be firmly controlled, and how.
- Forecasting, budget planning and tracking
- Resource and labour management
- Subcontractor and supplier management
- Real-time cost monitoring
- Risk management
Forecasting, budget planning and tracking
Before starting any project, construction companies must ensure that they conduct thorough planning and budgeting so they have a generally accurate idea of their costs. While construction projects are prone to contingencies, having a good general forecast is important.
This includes, for example, estimating costs for labour, materials, equipment, subcontractors and overheads. This is why it is important to monitor your budgets in real-time, comparing your actual costs against the forecasts and allowing you to make proactive adjustments as your project progresses.
Budgeting and monitoring across multiple projects is particularly important when taking on large-scale projects. This makes it easier to hedge currency so that you have the right amount of the right currency at the right time.
Resource and labour management
Given that profit margins in construction are often razor-thin (often as low as around 1-2%), it is crucial to make the most efficient use of your resources. This is why construction businesses should identify opportunities to optimise asset and resource allocation, including labour, materials, and machinery.
Therefore, you need detailed, hard data to help you better understand how your resources are being deployed on your projects. Analysing resource usage patterns can empower you to identify areas for potential improvement and minimise inefficiencies.
Subcontractor and supplier management
Solid working relationships with suppliers and subcontractors can help keep costs under control. Obviously, it’s always a priority to negotiate favourable contracts and obtain both competitive pricing and favourable terms, and having reliable partners can make a big difference to your ability to deliver projects on time and within budget.
IFS Cloud software solutions, delivered by Muzulu, come equipped with practical supplier management features to give you greater control over these working relationships. In particular, they can help you to monitor how your subcontractors are performing, as well as simplifying the management of contracts and enabling you to identify areas for potential cost savings.
Real-time cost monitoring
It is essential that constructors have systems to monitor costs accurately throughout the progress of a project. Expenses should be tracked against your allotted budget for the project, with cost variances and potential overruns identified and any discrepancies investigated promptly.
You can take timely corrective action where needed by monitoring your costs in real-time. This is why you need to be able to generate detailed cost reports enabling you to analyse how your project is proceeding while it’s still ongoing, intervening with quick, data-driven decisions when you need to.
In particular, you need to have a full breakdown of your projects according to their different aspects. This allows you to monitor your costs in fine detail, looking at different elements of a project to understand where money is being spent – and if any savings need to be made in certain areas.
Risk management
As anyone with experience in the construction sector will know, construction projects are fraught with potential risks. These include project delays, supply disruption and other unforeseen circumstances – all of which can jeopardise your ability to deliver a project within its budget and the set deadline.
IFS Cloud solutions, delivered by Muzulu, offer a range of risk management features to help you assess the probability of these risks and develop strategies to mitigate them. This allows you to understand the potential impact of these risks if they come to fruition, and allocate contingency funds accordingly.
Muzulu’s industry-leading IFS expertise and deep understanding of the construction sector mean we can deliver a comprehensive IFS Cloud solution designed for your business’s unique needs, including tailored project management tools. Contact us today to find out more.