Construction BudgetingBy Jason J. Loven, CPA, CCIFP® | 

In the midst of permitting deadlines and site visits, budgeting is probably one of the last things on your mind. But operating without an annual budget is like embarking on an unfamiliar road trip and leaving your GPS at home. Without directions and a way to pinpoint your progress, you risk getting lost…or losing revenue.

Here are three reasons why budgeting deserves a top spot on your to-do list.

It acts as a basic business plan.

Given the nature of your business, planning can be difficult. But even if you can’t say with certainty where your next job will come from, you can set realistic revenue and profit targets based on numbers from previous years. At a minimum, you can say, “Here’s what we expect to spend on advertising, rent, and office supplies.” Outlining your expected income and expenses gives management an agreed-upon plan for the year ahead.  

It gives you a benchmark.

Comparing your actual results to your budget on a monthly basis gives you a way to gauge how things are really going. Only then can you identify where adjustments should be made. For instance, if you see you’re behind on revenue, you can find a way to make it up. Maybe you look for ways to cut overhead costs or take on an extra job next month. Without a budget, you might not even know you were off-track.    

It keeps management accountable.

Finally, a budget gives you a way to hold management accountable for overhead costs like travel and entertainment, office supplies, and vehicle expenses. If your marketing manager had planned to spend X amount for advertising yet spent twice as much, there should be a reason for the overage. Proactively comparing actual costs to the budget lets you say, “Why have we overspent?” before it gets worse.

Not sure where to start?

Budgeting can be a challenging, time-consuming process. And it can be difficult to know where to start. But you’re not alone—we can help. Having worked with contractors and construction-related businesses for more than 50 years, we know what you’re up against, and can help you establish a budget that accounts for fluctuating project timelines and payrolls. So if you just need help getting started, or if you’d prefer guidance through the entire process, don’t hesitate to give us a call.