5 Construction Project Management Practices to… | Viewpoint

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Will your next project strike gold? Learn how to predict profitable construction profits.

Imagine, for a moment, you're a large car manufacturer. How much profit can you expect to make each year?

While the exact number of cars sold and final sales price may fluctuate, the standard calculation looks something like this:

Revenue – Cost = Profits

As an automaker, you can reliably predict your profitability because the cost baseline to produce each vehicle remains relatively constant. Sure, labor and material prices may change due to inflation or supply chain constraints, and maybe a few cars have heated seats compared to a few that don’t, but for the most part, it's easy to understand how much time and cost it takes to build a truck, sedan and (dare I say it) minivan.

Construction Project Management is Very Different

On the other hand, the construction industry is unique because every project is unique. There is no assembly line with standard parts for buildings and roads. Because of the complexity of each individual construction project, establishing a cost benchmark or baseline is much more difficult, and it’s hard to effectively recognize revenue—and construction profits—until well after the project is completed.

However, this dynamic in construction is changing. Through modern technologies and more strategic project management best practices, contractors are slowly moving to managing their projects like assembly lines, even if the end product is still vastly different. This can help create more solid financial baselines and, ultimately, influence your bottom line. Here are five best practices that can help:

1. Create Change Orders Right Away

Project managers are busy — we get that. More often than not, it becomes difficult to remember to generate a change order as soon as it happens. When a change order is forgotten about due to notes being misplaced or using other manual, disconnected processes, money is left on the table. Remember to document and enter changes as soon as requested. The best way to do this is by utilizing connected, cloud-based construction management software that can capture the request in real time from anywhere at any time — even while out in the field through a mobile device.

You can't predict roadblocks in a construction projects, but you can budget for them.

2. Budget for Roadblocks

From snow to scheduling conflicts, roadblocks are an inevitable part of any construction project. These issues can cost time and money and wreak havoc on your bottom line if left unchecked. While we can't predict the specific roadblocks that will come up, we can budget for them. When roadblocks occur, make sure to account for budget versus actual spend. This impacts work-in-progress (WIP) reporting, which impacts revenue recognition — increasing or decreasing your bottom line.

3. Track Every Change

Since we all know we don’t live in a perfect world, we know that changes will happen. One way to see the impact these changes will have on your profitability is by factoring them into your project costs as soon as they occur. Take the projected costs for the end of the job or phase. Add or subtract changes from the original estimate based on the change. This will allow you better to estimate the outcome of the job or phase and make changes ahead of time that can influence your profitability.

If this sounds like a lot of work, thankfully, there are job-costing software solutions out there that can automatically process change orders, manage labor costs, automate billing and connect with your construction project management solution, so you always know exactly what you're spending.

4. Share Knowledge Among PMs

An experienced construction project manager with more forecasting experience will almost always be able to produce more accurate forecasts and reliable estimates than a new PM. Seasoned project managers can share this knowledge with newer PMs by walking around the job site explaining how they come up with cost estimates and teaching the newer crew members what to look out for.

5. Make Life Easier By Using Connected Construction Software

Paper gets lost, and it's hard to communicate and input change orders on the spot if needed. While standalone software programs may be great at handling specific needs, if they’re not connected through shared data throughout the entire organization, your workflows will still suffer.

A great way to monitor actual spend and get change orders signed is by having a connected software suite that can capture these items in real time. This alleviates having to keep track of paper. Considering that a baseline is hard to create for our unique industry, modern construction project management software captures every project and project phase and connects the back office to the field, showing ahead of time how your bottom line will be influenced.

Watch How Easy Profit Projections Can Be:

The “Job Cost Forecasting for Pros: Increase Profitability and Improve Accuracy” webinar shows you how Trimble Viewpoint can predict your bottom line before it’s too late by displaying project variance in real time. Beyond simply capturing work, advanced data tools and workflows are used in order to communicate effectively with the back office and the field — reducing delays and improving profitability.

Ready for more?

Learn more about how to effectively manage profitability projections in our eBook "Is Your Project a Gold Mine or a Money Pit".

Want to know more about connecting your team with modern construction project management software? Contact us today!

We’ll show you how to build predictability into your construction business!

5 Construction Project Management Practices to Build Predictable Profits