Project cost reports are useful and can supply contractors with valuable information. Last week I published a post ’10 Reasons why you should prepare project cost reports’. Readers seemed to agree that project cost reports were essential.
Unfortunately some cost reports can be complex and time consuming to prepare. I’ve known some companies with cost reports that took several days to prepare. You couldn’t find the Project Manager for two days as he was locked away in his office trying to complete his report before month end. This meant that things went unattended on the project while the cost report took priority. Then when the report was completed nobody bothered to read it because it was too lengthy and difficult to interpret.
Furthermore contractors sometimes make errors in their cost reports which then provide the wrong information. Occasionally management ignores the cost report and doesn’t take action to figure out why the project is incurring losses or they misinterpret what the cost report is showing. In extreme cases I’ve known managers instruct that losses shouldn't be shown.
Some Project Managers leave the preparation and interpretation of the cost report entirely to their Quantity Surveyor or Contract Administrators and pay scant attention to the end report. They view it as just another document produced for their senior managers.
Don't make these 10 mistakes with your cost reports
I’ve found the following problems with costs reports:
Regular construction project cost reports are invaluable and can provide much useful information. However cost reports with the incorrect information can give the project team a false sense of security. It’s essential that cost reports are kept relatively simple and also that companies have accounting systems which quickly and easily provide accurate data to support the cost report.
It’s important to investigate anomalies in cost reports. Don’t just take the report at face value. I’ve discussed investigating your losses, but sometimes it’s equally important to investigate where you are making money. You don’t want to find later that where you thought you were profitable you actually aren’t, and there were in fact errors with your report.
Like any useful system the information produced from a cost report must be easy to interpret. This information must be used correctly to uncover losses and either recover the money or at least prevent further loss.
What errors have you uncovered in your cost reports?
Do you believe everything on your cost reports?
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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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