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Construction project forecasts are vital for managing cash flow, defining realistic objectives, and creating precise budgets. They direct critical decisions that help construction companies stay afloat and thrive. However, for CFOs or controllers, developing them is not always a simple task.
There’s enormous pressure on construction finance teams to improve their company's performance while cutting expenses. Yet, they're often hampered by processes and technologies that don't always integrate or make data conveniently accessible.
Many of these issues can be solved using the right technology and following best practices. Here are our tips to improve your construction project and financial forecasting.
1. Start—and continue—re-forecasting
Re-forecasting isn’t just acceptable, it’s the best choice for your business. As costs and timelines change, the initial forecast becomes less and less accurate. Having rolling forecasts and budgets rather than quarterly projections allows you to adjust based on current performance, changing costs, and access to materials.
Re-forecasting also adds more to your business development as a whole. It gives real-time business insight so that you can course correct long before fee erosion even occurs. You'll be able to align budgets better and enhance your accuracy, allowing the company to better understand how projects are going and where the company stands financially.
2. Make the process collaborative
Forecasting project costs isn't a one-person job, and it's not only for finance professionals. Make it a collaborative endeavor and ensure you are getting critical information from all stakeholders. Remember, over half of the rework in construction is caused by bad project data and poor communication.
Working cross-departmentally will help you gain insights you might not have known about before and solve challenges in a more timely manner. Thanks to collaborative forecasting, all departments are involved in the activities that drive company budgets. This not only holds your teams accountable for the data they provide, but it also encourages better performance. When departments have insight into how their performance affects business health, they’re poised to make better and more informed decisions.
3. Use technology to cost forecast
Construction is notorious for leaving technology on the table. That’s an opportunity cost, not just for your business as a whole but also for your forecasting.
Financial automation software can tap into your past project performance to give you smart trend analysis and predictive cost data. This gives your teams a significant advantage in the forecasting process. They’ll be able to convert vast amounts of information into easily understood, accurate business insights. These financial automations can reduce errors and re-forecast your reports instantly, giving your forecasts greater accuracy and flexibility.
4. Automate processes
Think about the time you'd save if you could say goodbye to tedious procedures, such as data collection. Financial automation tools allow teams to automate data collection and share it with multiple systems, ensuring that all departments are working from the same information.
This is a huge win for your forecasting process. One of the hardest parts of forecasting is ensuring you have the most up-to-date data available from all sources. Automation facilitates the data collection process so that no stone is left unturned. With it, you can cut down on the time it takes to generate a report and expand the scope of your forecast without the need for additional labor.
5. Implement workflows
Accurate data isn’t just about automation. It’s also about having the right process. It’s important to create workflows that assign clear responsibility to every member of your team. If information is missing, or a report is unsubmitted, there needs to be an audit trail. Whether it’s a materials delay, change orders, or any other obstacle, the sooner people know what's going on, the sooner they can pivot.
By implementing digital, automated workflows for your forecasting process, your business will have a clear outline for every forecast. It’ll allow you to reduce delays, hold team members accountable, and address internal holds efficiently. With these changes, project and financial forecasting will become more reliable and result in better work.
Build a better forecast with the right tools
Forecasting alone isn't enough to lead critical business decisions. Your forecast also needs to be precise, and timely to have utility. An accurate forecast from one year ago is less useful than one generated today. Putting in the resources and time to improve project forecasting will yield more precise budgets, improve cash flow, and increase revenue.
Luckily, there’s a clear path ahead to implementing all of these tips. Briq is a financial automation platform that can automate data entry, create intelligent workflows, and apply all the business development advice listed here. Set up a demo with one of our experts to learn how Briq can help you improve your construction project forecasting.
