The only way to make sure that a business is on track and running at peak potential is to have an accurate budget. With a lot of competition and costs rising, it is very difficult to maintain a healthy profit margin. Without accurate budgeting it is nearly impossible. It is very likely that a lot of money is being left on the table.
If you are running a construction business then it can be very difficult to create an accurate budget. There are a lot of factors that affect the business that other industries don’t have to deal with. That doesn’t mean that it can’t be done, however. In this article, we will go over several ways that you can accurately create a budget that will be easier to stick with and make more of a profit.
1 – Do some forecasting
To create an accurate budget it pays to look ahead to see what can be expected. Unfortunately, looking ahead might have a bit of a blurry view and not allow for an accurate accounting of what to expect.
To properly forecast, it helps to look to the past to see what patterns can be picked up. Hopefully you’ve been using some software like a construction document management system to look back and see when projects were coming in so you can look ahead to anticipate the times of year they were occurring. You should also be able to see how long the projects lasted and what kind of gaps to expect between jobs.
Some of the things to look for are when government contracts are generally getting signed and if there are any other types of events which are likely to be repeated in the future.
All of the data you can get from your software should allow you to see the patterns and be able to extrapolate them to the future. Then it becomes clear how much revenue to expect and use that as a foundation for the budget.
2 – Have a financing plan
Every construction business tries to avoid any gaps in projects and have work 365 days of the year. The successful ones manage to do this but very many do not. This poses a problem for financing and having enough money to continue to operate when there is no work for a period.
An accurate budget will prevent things like needing to buy equipment right at the time that there is a gap in projects. The right budget will give you an idea of how to time your financing for new equipment so it is ready to go when the next project is set to begin.
3 – Review the budget often
A budget is a guideline and not set in stone. There are factors that will make it necessary to amend or revise the budget accordingly. Take the time to review the budget once a year to see how accurately it reflects the financial health of the company.