How do I track project costs in my construction business?
Updated: Mar 11
Construction projects are made up of so many moving pieces. With developments happening month to month, week to week, and even day to day, keeping everything on schedule and within budget is no easy task. In fact, a study done in 2021 found that 75% of projects done by American and Canadian construction companies were going over budget by an average of 15%. With each change to the budget and delay that a project underwent, overall customer satisfaction went down.
So how can you best track costs, stay on top of complex projects, and keep your customers happy? Here are our top three tips:
Include project numbers on all invoices and documents
Even with the best outsourced accountant or bookkeeper, there are some steps to tracking costs that you have to do yourself. The most important is keeping all your invoices and documents organized by including a project number on each one.
Most suppliers of construction materials will let you include a project number on your order, and software like HubDoc lets you tag each document with a project number. Even if you have to go old fashioned and scribble a project number on with a pen, be sure you’re including this on each and every invoice and document that’s involved with a project so your tracking is 100% accurate.
Bill your projects on a regular basis
Progress billing is essential for both project and cash flow management. We recommend most of our clients send progress bills for their projects on at least a monthly basis, though some do it as regularly as every two weeks. This keeps both you and your clients up to date on progress and costs and means you have enough cash in the bank to see a project through to its completion.
Find tech that works for your business needs
In the study we mentioned above, IDC found one primary difference between construction companies that were consistently delivering projects on time and within budget and those that weren’t:
Project tracking technology.
Having the right tools and software set up to track your project costs is one of the best ways to avoid going over budget and keep your customers happy. There are a lot of tech options out there; which one will be best for you depends on the needs of your business. Our top three recommendations are:
A classic, excel is free to use and super flexible. Many of our clients use excel to create client invoices because they can easily tailor what’s included and remove irrelevant or unnecessary information. We also love how easy it is to directly export data from Hubdoc to Excel.
Excel works best if you’re handling one project at a time, with little to no overlap. Anything more complicated than this and we’d recommend an upgrade to a different tool, like the following two.
Xero Projects is great for small businesses handling multiple, simple projects at once. It has both time and cost tracking tools, lets you send customized quotes and invoices, and allows you to track the progress and profit of individual projects.
We recommend Xero Projects to owners that don’t have too many hard costs. In our experience, it’s not yet as seamlessly integrated with Hubdoc as the other two tools on this list
WorkflowMax is the most advanced option on this list that’s suitable for businesses of any size with advanced needs. If you have multiple, complex projects occurring at once and a high level of transactions, this is the tool for you. It has many great features - from time tracking and job costing to quoting and lead management.
The construction industry can be complex, but you’re not facing it on your own. To feel confident in your numbers, secure in your position, and excited about your future, check out our blog for more tips on managing your construction company’s finances.