Having an accurate budget for a construction project is a tricky business. During the early, estimating stage, a company wants to give an accurate representation of how much a project will cost, while adding some padding for the inevitable contingencies. Bid too high and you don’t get the job; bid too low and the project will surely go over budget very quickly, and you will gain a reputation of not being very good. Experienced contractors know how to come up with a good initial budget. Keeping an eye on that budget then becomes crucial during the life of the project.

Why do projects go over budget? There may be several reasons, but let’s focus on some of the most common.

A project manager may be inexperienced and not mindful of the budget numbers. Seeing the actual work being done is more tangible than looking at numbers on some spreadsheet.  (A good project manager always has the budget on hand and in mind.)

Unexpected things just happen. If a project manager does not keep an eye on all aspects of the financial health of a project, it becomes harder to know how to prevent the inevitable (equipment failure, weather-related delays, etc.) from affecting the bottom line. (A good project manager sees the big picture and can quickly put out small fires before they become large fires.)

A project manager may not communicate well with other project participants. Misunderstandings and lack of up-to-date information can mean mistakes and costly fixes. (A good project manager ensures that communication is clear and everyone involved is kept in-the-know.)

Project managers may have poor planning and detail-oriented skills. If a project manager has great people skills, but has trouble with the details involved in managing a project and can’t foresee upcoming problems until it is too late, funds may be depleted more quickly than anticipated. (A good project manager forecasts and anticipates.)

Humans make mistakes. The more that people have to do manually in recording and revising the budget, the more room for error there is. (A good project manager remembers to update the budget and to double and triple check all numbers.)

Fortunately, a good project management system can help with all these issues. The Spitfire Project Management System, for example, always displays up-to-date budget information (including actual change orders, vendor contracts, and pay request amounts) for all projects; sends project information to all who need to stay informed; automatically updates the budget and actual costs whenever events financially impact the project; and draws attention to upcoming budget problems in time for corrective action to be taken.