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The Ultimate Guide to Forecasting in Construction Software

Knowing your numbers is critical in the construction industry. Understanding how much a previous job truly cost is part of accurately estimating and landing new, profitable projects. But, just as vital is knowing how a current project is running and where it will end up, allowing for adjustments and planning. For this type of nimbleness, construction contractors need to understand forecasting.

What is forecasting? How does it help? And how can a firm perform forecasting properly? Keep reading to learn more about this important tactic (and feature) in this ultimate guide to forecasting in construction. 

What is Forecasting?

Forecasting is the process of analyzing and interpreting the current trajectory of a construction project. This process takes into account the budget, actual costs, upcoming or projected costs, current and expected change orders, and other values that will determine the final cost of the project at completion. 

Among others, the forecasting process yields two important data points: the estimate at completion (EAC) and the estimate to completion (ETC). 

Estimate at Completion (EAC)

The estimate at completion for any project details how much the project will cost the contractor or developer when the project wraps. This estimate includes all of the values involved in the project, including actual costs, projected costs, expected change orders, and other fees. 

This is a report that should be run and reviewed on a monthly basis to ensure there are no surprises or significant changes to waylay the project’s success.

Estimate to Completion (ETC)

The estimate to completion is a forecasting data point that explains how much money is expected to be left over from the project’s budget at completion. This value is essentially the difference between the budget and the EAC. 

While subtracting the EAC from the budget may appear to be a simple equation, that’s not the case. If the EAC isn’t as precise as possible and accounts for all of the commitments moving forward through the project (actual and proposed), the ETC may be useless. At this point, the contractor is opening themselves up to expensive overruns and shrunken profit margins, and they might not even know these expenses are coming. 

Why is Forecasting Important?

The ways that accurate forecasting is important are many, but let’s use an analogy. Consider you have a flight to make and you’ve budgeted enough time to get to the airport. And although you know the way, you set your GPS to track your progress. The GPS details what time you’ll arrive at your current pace and route, allowing you to determine how much time you’ll have left once you arrive. If a traffic jam or detour is in the future, the GPS adjusts the route and gives you the newest data, helping you to ensure you remain on time.

Forecasting is essentially the same as using a GPS with the exception that you get to choose the route when a roadblock occurs. Still, accurate forecasting can explain how much that detail may cost, and where the budget will land.

Other Benefits of Forecasting

Beyond being able to remain nimble and informed as described above, there are other significant benefits to accurate forecasting. 

Forecasting Creates Accountability

Firms should be running and reviewing forecasting reports on a monthly basis. Upon review and comparison to past months, major changes that have taken place in the budget or proposed changes moving forward will be apparent. Senior staff can then ask project managers why these changes occurred or why they may be necessary.

While this might seem like punishment, it’s anything but. Understanding how a project management team thinks allows the firm to implement training or protocols that may enrich their management team moving forward, helping keep future projects on budget. On the other hand, it also gives management the ability to recognize their staff for their foresight, allowing them to place employees in roles that best play to their strengths.

Forecasting Allows for Contingency Conservation

Every project has contingencies built into the budget for unforeseeable or unavoidable events. Generally speaking, those contingencies are around 10 percent of the total estimated cost. And while this is money meant for “emergencies,” managing the project allows the contractor to conserve their contingency budget.

Early and Frequent Communication

One of the most beneficial aspects of forecasting for contractors is the ability to clearly communicate early and often. With accurate forecasting reports, contractors are often able to see issues with the budget—or timeline, to some degree—well before the problem comes to fruition rather than that problem springing up at the last second when the contractors’ backs are against the wall.

With this understanding of the budget and its projected health, contractors are able to discuss issues with the customer. This may give the customer enough time to make a change and adjust the budget or scope accordingly, keeping the project on track and allowing for a timely delivery. 

Better Budgeting and Estimating

Very few successful construction firms handle one job at a time. They’re typically running multiple projects, all at different stages. Some are wrapping up, some are in process, and some may only be in the estimating or proposal stage. While the traditional use for forecasting is to keep the current project on track by staying ahead, it can also help with other projects in the pipeline.

The proper use of forecasting keeps contractors and developers up to date on the latest data on a monthly basis. If they’re reviewing how their current projects are doing, they’ll be able to plan and estimate other similar projects more accurately and efficiently. In use with job costing reports, being aware of trends in forecasting will ensure the contractor is able to provide the best estimate possible for their business and allow for better, more accurate budgeting for their customers. 

How Construction Management Software Can Help with Forecasting

Let’s be honest: the reason that most contractors that don’t forecast choose not to use this tool is that it’s hard. There is a lot of data entry, updating, reviewing, and corroboration that has to occur to forecast properly. And, should one data point be a bit out of line, the report’s credibility becomes suspect, meaning it’s not as helpful as a tool as one might think.

Just think of all the items that a forecasting report might require:

  • Actual costs of each line item
  • Data from the correct fiscal period
  • Which invoices apply to each cost item (and invoices that have multiple cost items)
  • Actual, pending, and outstanding commitment amounts
  • Unforeseen or unaccounted items

Luckily, construction management software can help ease this incredibly complex burden. 

Premier Construction Software automates the forecasting process. The system automatically populates most of the critical data that accurate forecasting requires, meaning users don’t need to transfer budget items, double-check accuracy, or even collect all of the data required. The system will automatically pluck items from individual reports and integrate them into the forecasting report.

Premier will automatically enter, track, or calculate values such as:

  • Original budget
  • Change orders (both actual and proposed)
  • Commitments (actual, proposed, projected, outstanding, and uncommitted actuals)
  • The budget utilized and project budgets

Along with those values, Premier allows users to update or input data that might not currently exist within the system. Items like anticipated costs for which the system does not account are easy to add, with customizable categories for simple organization. Also, any actions that need to occur such as budget transfers or internal change orders (workflows implemented for accountability when transferring budget items) are incredibly simple to add and track. 

Premier users also have the benefit of customizing third-party access. Users can allow customers, lenders, bonding partners, or subcontractors to access the system for up-to-date forecasting information. 

Forecasting Automation is a Powerful Tool That Every Firm Needs

The automation and customization make Premier Construction Software’s forecasting feature incredibly powerful. Users can make more informed decisions that keep projects on track and on budget by using the latest information available. This type of informed, nimble decision-making will lead to better profitability, growth, and happier customers—the goals of any construction firm. 

Author Biography:

Tom Scalisi has over 15 years of experience working in the trades. Since moving to full-time freelance writing, he has developed a passion for helping construction companies grow. He enjoys teaching contractors how technology can streamline their businesses and educating them about their rights during payment disputes. 

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Industry Insight Tips & Advice Ultimate Guide

The Pains of Data Entry and How To Solve Them

Few industries can rival the construction industry’s reliance on data. With so many moving parts in the form of contractors, subs, materials, inspectors, compliances, and accounting, having accurate data to work from is critical to keeping the job on track. However, the industry’s approach to data entry is antiquated at best.

But when someone does something long enough, they may struggle to realize inefficiencies or that there are better ways to do things. This couldn’t be more true for the construction industry, as many contractors have simply accepted the pains of data entry. But, there is a better way to get the job done with more speed, accuracy, and corroboration.

The Challenges of Data Entry

Data entry gets a bad reputation, and it’s usually for good reason (or several, for that matter). The following are some of the challenges that contractors face with data entry, and they certainly contribute to data entry’s bad name.

1. It Can Be Slow

Data entry is a painfully slow process. First, someone has to record the data—something that is often done manually in construction. Then, someone needs to sit down and enter the data into the system, piece by piece. Finally, that data is then used to form different reports and values, helping the contractor make informed decisions.

All of this takes valuable time from at least one of the contractor’s staff members, but likely three or four. This time spent can quickly equate to money lost, especially if those reports don’t contain the latest data or an error renders them useless.

2. It Can Be Inaccurate

Any time a human is responsible for data entry, that data is susceptible to errors or inaccuracies. Whether it’s that a decibel is in the wrong spot, the person entering the data can’t read the handwriting of the person who recorded it, or they’re inputting the data in the wrong place, mistakes will abound.

One small error extrapolated over several reports can be a serious issue. Not only can this cost the contractor all of the value they could’ve hoped for from the reporting process, but they might make critical decisions based on data they believed to be correct or up to date, only to find out it’s not.

3. Storing and Organization Can Be a Pain

Getting data into a system is one thing. Storing it and organizing it is an entirely different animal. With the amount of data that a typical project creates, file cabinets full of reports and data points just won’t cut it anymore. But, electronic reports saved individually to a local storage system aren’t much better.

Contractors that aren’t using a platform to sort and store their data are wasting time and potentially money. It can take longer to compile a report, make decisions, or avoid mistakes. Conversely, when that important information is readily at-hand, contractors can be more nimble and make better decisions.

4. It Can Be Hard to Access

Accurate, well-organized data and the reports that it comprises are great, but accessing them can be a nightmare. A report stored on a localized system back at the office won’t help with game-time decision-making, leading to contractors choosing between wasting time or flying blind, both of which can be very costly mistakes.

Also, poorly organized data can affect the way business is handled. Investors, executives, and partners rarely enjoy waiting for reports just to see how the latest project is stacking up. And, they want to know if things are on track with the very latest data. This situation can get even worse when the contractor, their clients, and the other parties are using different systems to access their reports.

Construction Management Software: Data Entry Solution

Luckily, construction data entry and many of the issues that go along with it are easily solved with Premier Construction Management Software.

1. Automated Workflows Reduce the Opportunity for Errors

One of the best ways to reduce data entry errors is to simply reduce data entry. Premier Construction Software provides automated workflows that allow users to input data and automatically distribute it to the folks that need to review, approve, or deny it. Since the staff isn’t re-entering the same data on several reports, there are fewer opportunities to introduce errors.

2. Gain Access from Anywhere

Premier’s all-in-one software solves data access issues, as well. By using cloud-based storage, Premier allows users to review data, reports, and even drawings from anywhere in the world. All they need is a web-enabled device. Contractors, clients, and decision-makers can quickly check the documents to make better decisions at the moment.

3. Standardized Systems

One of the most important aspects of all-in-one construction software is standardizing the systems which everyone uses. Rather than using four or five software platforms in-house to store and view documents, or potentially more across several clients and subcontractors, Premier provides access to several parties to the same platform. Again, this reduces the opportunity for error but also ensures everyone has access to the same data.

4. Automatic, Real-Time Updates

Data is only accurate if it’s up to date, and that’s one of the most significant hurdles that Premier’s all-in-one software handles best. Every time a change occurs within the system, whether it be a budget item, a schedule change, a compliance expiry, or a materials change, a whole-system update is triggered.

Any report affected by these changes will automatically reflect the new value. Anyone accessing those reports will see the most up-to-date data, allowing them to make the best decision possible with real-time information.

Simple Process

The biggest benefit of streamlining the data entry and management process with Premier Construction Software is how easy it is to implement. Premier’s team will help contractors implement their software, training their staff to use each of the features seamlessly. And, if any issues arise or staff has questions, each company will have one account manager to help them navigate the challenge.

Contractors using Premier software will be able to set up their own customized workflows, allowing them to use real-time data to create forecasting reports, job costing, and accurate billing. This translates to less time spent entering data, and fewer mistakes—something all construction companies should strive for.

Author Biography:

Tom Scalisi has over 15 years of experience working in the trades. Since moving to full-time freelance writing, he has developed a passion for helping construction companies grow. He enjoys teaching contractors how technology can streamline their businesses and educating them about their rights during payment disputes.