Construction projects often seem like a gamble — you’re betting that your estimates, project management skills, workforce and supply chains will come together to deliver the project on time and at (or below) budget. Betting wrong can prove disastrous to your bottom line.

Effective cost management hedges your bets. If you’re consistently running over budget, it might be time to outsource this vital process.

Role of Cost Management

At the most basic level, cost management comes down to keeping projects in line with their budgets. Done right, you need to think beyond direct costs, such as direct labor, materials and equipment. It’s also important to consider indirect costs, including permits and licenses, overhead, administrative and facility costs, and depreciation, as well as soft costs, such as design and architecture fees, inspections, assessments, and financing costs.

Effective cost management calls for more than periodic check-ins. It spans the life of a project — from planning and estimating to change orders and finishing touches. Continuous attention helps identify potential budget variances on a timely basis. This allows you to take appropriate measures to reduce overruns and avoid unwelcome surprises after completion. Nothing leaves a bad taste in the mouth like wrapping up a project, then subsequently learning that it broke even (or worse).

Case for Outsourcing

While cost management is essential to each project and the firm’s overall success, many contractors lack the requisite in-house expertise. Plus, with labor and other costs on the rise, firms may be reluctant to bring on qualified full-time professionals and invest in the hardware, software and training needed to properly do the work.

A simple, cost-effective solution may be to outsource your cost management. For starters, it’s scalable to your fluctuating or seasonal needs, unlike paying a full-time employee’s salary and benefits. Outsourcing also gives you access to the latest technologies at a fraction of the costs you’d incur if you purchase them yourself.

Outsourcing professionals who specialize in cost management for contractors provide a comprehensive approach that considers historical financial data, as well as real-time data on revenue, economic trends and imminent risks. They understand your competitors and their current pricing and practices. And, based on their specialized experience, they can identity cost-saving opportunities and suggest procurement best practices to help your control costs.

A comprehensive approach can preempt communication breakdowns between different silos within a firm that often prove costly. Moreover, outsourcing cost management and other financial responsibilities lets you focus on core competencies, like design, project management, customer relations and strategic planning. This leads to greater efficiency, enhanced profits and happier customers.

You Can Afford to Delay

The payoffs for effective cost management are even greater than they might seem. Getting projects done on time and within (or under) budget plays an integral role in building your construction firm’s reputation in the industry and among current and prospective customers. Contact our CFO outsourcing professionals to get started.