Construction projects require a well-structured plan, being responsible with investments, efforts, property, and the company's integrity. Some of the most relevant aspects when it comes to the building is the Construction Budgeting. It means controlling and managing all the construction costs when building. In this article, we mention all the aspects you must consider when planning a construction project budget.

Understanding your entrepreneurship's overall cost structure is crucial since building a specific project from the ground up is expensive. When performing construction, you need to handle cost overruns without significant surprises. Budget overruns may lead your company to bankruptcy.

A big error you can make as a project manager when building a construction budget is inaccurate estimates. In this sense, a thorough budget is essential.     

A construction budget lets you determine the estimated costs of all the project progresses to complete it from scratch and to prepare for modifications, structural problems, delayed completion dates, and other hidden costs.

Construction involves a delicate balance between investment and profits. Before starting to build, a construction project requires a complete understanding of its costs to ensure the benefits they previously have calculated. 

A constructor or a contractor elaborates a project budget to estimate the costs of every task involved in the construction. This way, they get the help of estimators to calculate the project's total price.  

Besides, basic budget considerations involve the number of days required to complete a specific task. It helps to calculate the labor cost, especially when the work is calculated by hours worked.

The more detailed construction budgets are, the better to control the investments and the final profits. This way, a conscience project’s budget should include the following items:

• Direct costs or hard costs. This category includes all the direct expenses you must make to carry out the project, i.e., the necessary equipment, the material costs, and labor. 
• Indirect costs or soft costs. These are the surrounding costs. It means the costs that make the project works, such as the design and planning costs, construction organization costs, temporary facilities, office supplies, legal fees, and the construction process operating costs. 
• Property. It is the price your company has to pay for acquiring the lot (in the case of a private project). Such costs involve land costs, permissions, real estate fees, and taxes. 
• Professional fees and services. Here you consider all the additional costs related to professional consulting or hiring external professionals, for example, hiring a cleanup crew to prepare the building site, which is a fixed cost.  
• Materials. Among all the project costs, materials costs are the only ones that can be negotiable. Besides, when you calculate material costs, you can be more precise since you can determine the price in detail because you know the quantity you’ll use. 
• Human resources or labor costs. In the construction industry, labor costs and hourly wages are considered part of the direct costs as these depend on the quantity of work the contractor carries out. 
• Tools and Equipment. Although a company commonly has a complete set of tools and equipment, some unexpected building costs may derive from new technologies or artifacts you need to buy for specific tasks.
• Project Management. Construction project budgets require a solid methodology to avoid overspending. To do this, a project management department with office space, Internet connection, utilities, etc., is a good solution.    
• Bonds and Insurance. Constructions require payment and performance bonds to secure general contractors. This insurance must cover all the potential costs of accidents and disagreements with partners and contractors. 
• Unforeseen Costs. While building, many unexpected costs may appear, for example, changes in the associated costs or dimensions. These costs directly affect the final price of the work.  
• Profits. An accurate project budget involves calculating the possible gains, which means the difference between how much you earn and the project's cost estimation.   
• Utilities and Taxes. Utilities are related to the site building's electricity, gas, water, and sewer costs. And do not forget the phone expenses. The pre-construction must consider the proper distribution of the resources for a low-cost project.

Creating a competent construction budget involves using construction management software like Microsoft Project and spreadsheet software like Excel. Both software are part of the Microsoft Office suite. So, if you're a construction manager and your company needs to build a good plan that integrates all the costs, deadlines, and involved contractors, you should consider them. 

Luckily for you, here on RoyalCDKeys, you can acquire a Microsoft Office 2021 Professional Plus Key Retail Global CD Key at €11,20. As a professional, you can calculate and plan the project's construction costs.

Next, let's look at the steps you need to complete when creating a construction budget for your projects and meeting client expectations.  

1. Research and Analysis

If you have experience building a successful construction project, you know that calculating the accurate budget is a painstaking task. You should review a similar past construction plan, budget, and historical data to avoid common mistakes. This way, you can estimate the contingency budget, the direct costs, the local and state taxes, unexpected expenses, and so on. 

It's recommended that you assemble your team,  as it takes more than one person to plan a construction budget correctly. Many people working on it will bring you closer to the project's true cost. 

You can also contact regular suppliers and contractors to estimate the labor and equipment costs. You can enter the pre-construction phase and calculate the estimated costs with all this information. 

2. Project Development

Project managers or architects can make better decisions with research and conclusions from the analysis. 

How much budget is there for the direct construction of the project?

With realistic expectations and a budget on their heads, architects can conscientiously design, integrate technologies and materials, and perform project execution more tightly. 

An aware project development tries to reduce unnecessary expenses during the project's progress. In other words, a realistic budget tries to maximize the resources, not forgetting the project's scope to promote the project's success.    

3. Documentation

With the project design in their hands, the project manager should speak to stakeholders. It's recommended that the manager highlights the possible issues in certain phases of the project plan. They can also pose the possible solutions and differences between the total budget and costs. For this reason, a contingency fund is mandatory.

4. Construction

When the stakeholders approve the budget, it's time to talk with the general contractor to perform pre-construction services. The general contractor develops the project by going through the SD projects, existing documentation, scopes, and construction details. They will begin with the site preparation and continue with structure and masonry.

Most construction budget templates are designed for Excel. The cells and calculation tools facilitate the math operations, which means a better understanding of the general costs of a given construction project. 

The suitable budget template should include individual cells for all tasks and particular materials. At the same time, columns should define the necessary time to complete the tasks and the number of workers. Finally, the specific cost of each task emerges from both the time and the price of materials and labor.

You can download a construction budgeting template that works for most projects from Smartsheet.

Although Excel is the best tool for defining costs and budget management, Microsoft Project is what you need to track costs and tasks. You can establish fixed costs and block cells in Excel to avoid future issues.

Microsoft Project is the application you need to plan the building process. With this program, you can divide the tasks into three basic categories: general costs, labor costs, and materials costs. 

Microsoft Project allows you to determine, through a Gantt Chart, which tasks the contractors need to finish to continue with the subsequent tasks. You can also specify the period for a successful project, and the maximum delay tasks can have. Keep in mind that delays can impact cash flow and working capital. 

A Gantt Chart is also helpful for filtering for the critical path and comparing planned costs against actual costs.     

In general, a project allows you to build a project's timeline to check every time you need construction plans and real-time data. This timeline also reflects the building structure, equipment operators, and subcontractors you need to complete the project.  

It also helps you to manage budget tracking and to invoice at the end of each period. As the head of the project team, you will use the project to determine the percentage of completion of tasks. When you have this clear, you can send the invoice to the project owner so they can pay you.   

A final benefit of using Microsoft Project and having this paper trail is that there's an easy explanation when extra costs arise.

Construction budgeting is primordial to estimate the total costs of the entire project. Knowing the specific expenses of any task and process, you'll be able to consider better the profits you can have with a given project. Otherwise, set realistic expectations for your company and stakeholders. With realistic limits regarding the profit, they can accept the cost increases in the case of presenting.