I-COSTConstruction cost tracking answers one question: will this job still make its margin? To answer it you need four numbers for every area or package of work, kept up to date, and a simple way to forecast the rest.
The four numbers you need
| Term | What it means |
|---|---|
| Budget | The estimate at cost, approved when the price was agreed |
| Committed | What you have agreed to spend: orders placed, invoices received and labour worked |
| Incurred | What has actually been delivered, invoiced or worked so far |
| Forecast final cost | What the area will cost by the end of the job |
1. Set up the budget by area or package
Split the approved estimate into the areas, packages or cost codes you will buy and manage by. If you can, also tag each line with a cost type (labour, materials, plant, subcontract) so you can see where money is going.
2. Record commitments when you order
The most common mistake is waiting for invoices. Record each order's value against the budget the day it is sent. If invoices come in higher than the order, the higher figure is what you are committed to.
3. Track labour weekly
Add staff and site labour from timesheets every week, at real cost rates. Labour that only appears at month end is labour you can no longer control.
4. Record deliveries and invoices
Note goods received against each order and match invoices to them. Goods received but not yet invoiced are an accrual: money you owe that is not yet in the accounts.
5. Forecast the final cost and margin
A simple, safe method: forecast each area at its budget, or at its committed cost if that is already higher. Add up the areas for the forecast final cost, and subtract it from the agreed contract sum for the forecast margin.
Example: an area budgeted at £38,000 with £41,200 already ordered is forecast at £41,200, £3,200 over. Spotting that while there is still work to buy is the whole point of tracking.
6. Review every week
Look at the areas over budget or close to it, and the forecast margin against the margin you tendered. Decide what to do while you still can.
Free construction cost tracker (Excel)
Construction cost tracker template
Budget, ordered, invoiced, committed, remaining, forecast and margin, with the formulas built in.
Why spreadsheets fall behind
A spreadsheet only knows what someone typed into it, so it is always as out of date as the last person who updated it. In I-Cost, orders, invoices, deliveries and site hours update committed cost and the forecast margin as they happen, and every figure links to the records behind it. See construction cost tracking in I-Cost.
Questions
What is committed cost in construction?
The money you have agreed to spend: the value of orders placed (or the invoices, if higher), plus labour worked, whether or not it has been paid yet.
How do you forecast the final cost of a construction project?
A simple method is to forecast each area at its budget, or at its committed cost if that is already higher, and add the areas together. Subtract the total from the agreed contract sum for the forecast margin.