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5 Expert Tips to Improve Your Project Budget Management

The principles of good construction project budget management — cost, quality, and schedule — never change. In a perfect world, the contractor, builder, or architect who balances all three finishes on time and on (or under) budget.

But, it’s not a perfect world, and schedules and budgets are often affected by economic, environmental, and social factors beyond your control. You can still compensate for that unpredictability through careful planning.

To help, we spoke with Jeff Hunt, a custom homebuilder and National Association of Home Builders expert on estimating, scheduling, and project management, who provided five tips to help you improve upon the tried-and-true “cost-quality-schedule” formula of project budget management. 

1. Plan for disaster.
You used to have to plan only for four seasons. Things are a bit more complicated now that we also have to plan for hurricane, wildfire, tornado, and flood seasons. Depending on where you do business, you should plan for weather-related seasons as inevitable. Pay close attention to long-range weather forecasts and develop a quick-response plan for how disasters common to your area may affect material pricing and availability. It’s not an exact science, but “if you have a hurricane or hail, shingle prices go up,” says Hunt. “If you have a flood, drywall prices go up.”

2. Protect yourself against price escalation.
Beyond natural disasters, tariffs and other supply-side costs also play a major role. In 2018, the price of lumber increased 78% over 2016, according to the NAHB. Hunt recommends protecting yourself by incorporating price escalation clauses into contracts. These clauses typically state that if the price of a building material rises over a certain amount during a project, the client will reimburse you for the cost difference. “They’re standard if you’re an astute builder [or installer],” he said.

3. Don’t slack on change orders.
Customers can be hard to predict and often change their minds. Change orders are an unavoidable part of the business, but “it's crazy how often I see builders do a bad job of change-order management,” Hunt said. The result? Delays in the schedule, and fights over price changes and payment. A simple solution is to document every change order (even if it’s a zero-cost change), have the owner sign the document (you need to sign it too), and require the owner pay cost differences up front. You might even consider halting any change-order work until the change-order contract is signed and payment is received. “Builders and contractors sometimes find that hard to stomach,” said Hunt, but it’s worth it to prevent misunderstandings, sneaky budget increases, and lawsuits.

4. Stay connected.
“In general, good project budget management involves good customer management,” Hunt said. Good customer management is all about communication and we live in the era of constant contact. It’s not just what your customer is used to, it’s what your customer expects from you, and informed customers are generally happier. Clearly lay out how and when you will communicate, and then stick to that plan. Plus, if you communicate via email, you'll also be documenting budget or schedule changes.

5. Let tech track the budget for you.

Apps can take the pressure off you to monitor financial details. The latest cloud-based project management software puts budgeting tools, invoicing schedules, time tracking, change-order management, job costing, purchase orders, and more all in one place and at your fingertips. They allow you to share selected budget info, such as change-order logs, with owners as well, which can be baked into your communication plan. “We’ve been in the digital age for a while,” Hunt said. “But it keeps getting better and better.”

Well-planned project budgets can not only make your work easier, but also keep your customers happy (and the referrals and good reviews flowing). Tell us about your best budgeting tips and techniques by sharing this post along with the hashtag #JamesHardie.

You can also learn more about James Hardie's radius marketing program to help you grow your business, or how to use social media as an effective business-building tool.

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