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forecasting project costs - Premier Construction Software
July 18, 2023

Why Forecasting Project Costs is Important for your Construction Business

From day one on a construction project, the number one question everyone has is whether the project will meet the expected budget. You can wait to answer this question at the end of the project when you can’t do anything about it, or you can assess where the project stands as you progress through the work, allowing you to act proactively if an overage is found. In order to assess the project costs before completion, however, you must forecast or predict the potential costs to complete the work.

A forecast to complete the project is a well-educated guess of how much you have left to spend to finish the work. It’s based on the current costs, the percentage of the project that’s complete, and what’s remaining to be finished. The better you are at tracking your costs, the easier it will be to predict how much is left to spend.

Before we get into how to forecast final costs on a construction project, let’s look at why it’s important to know how much the remaining work will cost you.

The importance of forecasting final costs

One of the primary benefits of forecasting costs is that you get an early warning if a project is losing money. Since many contractors rely on their profits to fund future work, losses on today’s job can quickly lead to real problems when it comes time to start the next one. Without adequate profits to fund the work, contractors have to rely on alternative financings, like bank loans or credit cards, that ultimately cost them more in the long run, further reducing profits. It’s a never-ending cycle of higher costs.

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