Some construction companies, especially smaller ones haven’t a clue whether they’re making or losing money on individual projects. They think it’s too tiresome to produce cost reports for each project. Some contractors just look at their bank accounts at the end of the month and if there’s cash in the bank they’re happy.
What is a project cost report?
Cost reports usually compare the costs spent on the project with the income earned. Usually these cost reports allow contractors to break the cost and income down into separate cost codes. Contractors can then compare costs versus income for labour, equipment and various materials. Some reports can be quite detailed and break the report down even further to different types of labour and equipment. There are dangers of breaking cost reports down into too many different categories as it can become difficult to monitor, which inevitably leads to errors.
Cost reports are usually done on a monthly basis. However they can be done more frequently, even done daily for a particular task. Contractors often don’t do cost reports as they believe they take time and one needs computer access. Yet, I have done simple exercises in the field on a daily basis. So for instance, on a bulk earthworks job if you know what each item of equipment costs it’s easy to work out the hourly cost of the equipment team (say excavator and trucks). If you know how many cubic metres of earth the team is moving in an hour it’s simple to calculate the cost per cubic metre.
Why cost reports are useful
Project cost reports can yield much useful information. They often save contractors money, or help contractors make more money.
I’ve always done monthly project cost reports and found them useful for a number of reasons. They:
An accurate cost report is a useful tool on construction projects providing information on where the project is making and losing money. Unfortunately many cost reports are poorly done or the information is ignored which can lead to problems. I’ll deal with cost reporting errors in my next post.
Do you prepare project cost reports?
Have you found them useful?
Read: 'Avoid these 10 cost report errors'
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The opinions expressed in the attached articles are those of the writer. It should be noted that projects are varied and different laws and restrictions apply which depend on the location of the contractor and the project. It's important that the reader uses the supplied information taking cognisance of their particular circumstances. The writer assumes no responsibility or liability for any loss of any kind arising from the reader using the information or advice contained herein.
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