Anyone working in the construction industry would be familiar with the issue of budget overruns. According to Reddy Kancharla, budget management is among the most difficult tasks when it comes to a construction project. Mr. Kancharla has been involved with the domain of construction for years. His professional responsibilities have included estimating and scheduling various project elements, investigating and designing foundations for various types of structures, examining structural failures and remedial designs, identifying and correcting construction discrepancies, and much more. In his years in the industry, he has come across several projects that involved budget related problems.
Construction projects have a reputation of going over the budget and taking twice the time to get completed as predicted. Reddy Kancharla mentions that there are a number of good reasons that lead to such situations. First of all, material availability and price both are extremely volatile and tend to affect the bottom line to a great extent. Secondly, a lot of unforeseen issues in construction projects crop in construction projects due to which one may have to rebuild. Moreover, clients also commonly make changes in between. Amongst all these issues and collaboration complexities, it becomes extremely difficult to keep the project budget on target.
According to Reddy Kancharla, even with all the difficulties involved, there are certain strategies and techniques that can help people to keep their construction project on budget. Here are a few of them:
- Set a realistic budget in the beginning: Checking out the expenses involved in past projects would be a good way to create a competitive budget for a current one. If a construction company is working with a client for the first time, then they should review their budgets from similar projects. However, if they have already worked with the client before, then following that particular project as a guideline for the budget evaluation would be the safest way to avoid potential hiccups.
- Avoid scope creep: This term refers to any kind of uncontrollable changes or growth in the scope of a project. Even though it is common to have certain aspects of a project to change once it is underway, it is important to have a proper process and strategy for such changes. A framework to communicate changes made to the original project plan should be developed, as it might have a crucial impact on the budget.
- Use project accounting practices: As opposed to the traditional accounting processes, project accounting focuses on measuring the financial performance of just particular projects. It involves collecting important data throughout the project progress, including time and expense information. With the help of project accounting, a company can acquire real-time data and financial insights they need to thrive and keep their project on track.
Following the strategies mentioned above can go a long way in aiding construction companies to increase their efficiency levels, and ensure smart budget management.