Cost Control and How to Stop Yourself Running Over Budget
Making sure a project’s costs stay within the agreed budget is vital, but all too often it’s a lesson learnt the hard way. So whether it’s an expensive new build or a kitchen costing £10,000, how do you keep a close eye on the project throughout?
How to keep a handle on costs
TradePoint asked two experienced UK builders to share their tips on how to avoid falling into the red:
Here are David and Dean’s top tips:
Put pen to paper
Whenever there is the slightest change in the project’s scope that might push up the cost, Dean requests that a variation order is signed off to cover the extra work and cost. Although these incremental changes might not seem much over time, they can add up, leading to a nasty shock for the client at the end. Variation orders, although a bit of extra admin, help with transparency and ensure everyone is aware of what is going to be delivered and any potential impact on budget. “Our job’s made easier because we work with blue chip clients and surveyors, and they use good project managers who keep an eye on the project and what’s happening,” says Dean. But all clients are different so don’t rely on them or third parties to keep track of the project costs if you or your team have the opportunity to lead. Document any deviations from the project plan and flag any potential impact on costs as soon as they arrive. It will show the client you’re in control as well as being upfront, which will help keep the client happy.
Keep a daily diary
He’s no Bridget Jones, but David maintains a daily diary for every project. This allows him to document each job his team have done that day and the hours they have worked. This record helps David prove he’s sticking to the agreed labour and material costs as the work progresses. A simple way to keep track. Dean on the other hand, say that across every site his company works on, the site foreman will send a report on the day’s work at 4pm every day to the client. This also includes any details of potential cost overruns and photos of the work completed. So how often should you report back on progress and cost? The scale and pace of a project will influence how frequently you report back to clients – daily might be overegging it on some builds! But it’s better to have a collection of project reports you rarely need to refer to, rather than spending hours placating and negotiating with clients on unexpected costs later down the line. So, although regular reporting might feel like a bit of a chore, it is essential for keeping a close eye on budget and progress as a whole.
Draft precise and extensive estimates
“The way I operate is that I give people an estimate and I cover every aspect I can think of and also allow for hidden items,” Dave says. “I am really fair with them and we go through the costs as we do the job and, if things do crop up, they've got the worst case figures. “Then at the end of the job we sit down and we go through all the invoices – a lot of builders put in a cheap price and then hit the customer with extra, but that’s not my way.” Again, transparency and regular check ins with the client really help to keep everyone aware of costs.
Manage unforeseen costs as they emerge
If an unforeseen expense crops up on a project Dean is working on, he works with the client so see if another part of the project can be moved around to accommodate it. “For instance, we're working on a job in Nottingham at the moment where we are excavating the floor to put in new drains,” says Dean. “The drain was supposed to be at 1.75m but it turned out to be 2.2m down, so you've then got a trench that's got to be dug down an extra half a metre - so a lot more earth to come out than we were expecting.” Dean says he can’t just accommodate that in the existing budget because the job will now require a larger machine to dig down to that depth. “It wasn’t our fault or theirs, so we just worked together to ensure the budget could survive this unforeseen cost.” As in Dean’s example, it might not be possible to find additional budget if unexpected costs arise. And this is where a prioritisation of jobs will be essential as well, so you and the client are aware of any aspects of a job that can be evolved, squeezed or dropped altogether.
Record and flag any extras
David says preventing a project going over budget is all about managing clients when they want extra work to be done. As soon as extra work or specification is asked for, David gets a quote as fast as possible and then agree on any overspend with the client. “Until recently I didn't put anything in writing as builds progressed but I do now,” says David “I’d been caught out by doing extra work for customers during a job, which they then challenge at the end - and I had no proof they'd asked for it. “They just said 'it was part of the job' but in fact it was outside the original spec and budget – so I had to swallow the cost overrun." Now, David says, things are different. “We did a bathroom recently and we’d priced it for a corner bath and had allowed £500, but they decided to go for a freestanding one which was £1,500. I made sure the customer was aware straight away that the budget at the end would be out by £1,000, so it was then down to them to decide.”
Make sure you order special items early
“Sometimes we get jobs where an item needs to be specially made. The lead times for these are getting longer at the moment as the industry gets busier, so it’s getting increasingly important to order them earlier,” says Dean. “Because if you have to stop work while you wait for it to arrive, it’s going to cost money as well as time.” Common sense then! But are you aware of what those special or bespoke items are? Do you know who you can source them from and where they are based? All important considerations that need to be addressed as soon as they arise. So there you have it!
Thanks to Dean and David for their great advice on keeping a handle on project costs. If there are any tips you would like to share, we’d love to hear them. Just drop us a message on Facebook or witter.