Our Top 10 Tips to Managing your Budget Effectively

My top 10 tips to managing your project budget effectively

by Sarah Beeny

Having a firm plan before you embark on a new building project is key to its success. This includes a budget, one of the things that some people struggle to get right.

Project builds and home renovations can be complicated and often involve different layers and potentially contractors. It’s not always a straight forward process, even with meticulous planning, but there are ways that you can make it easier for yourself and remain in control throughout. Defining your plan from the outset – knowing where you’re going and being sure about it – will help you to achieve the results you want and really will save you money in the process.

Here are my top 10 tips for helping you to manage your budget effectively.

  1. From the outset, be realistic about how much your project is going to cost. Calculating on the pessimistic side will help to avoid any nasty shocks. Itemising everything realistically and meticulously at this stage means that you can work out a sound allocation of costs. If you are not realistic now, then you could be in big trouble later on.
  2. Be prepared for change – planning for contingency is key. Building projects are complicated and it’s inevitable that something might not go exactly as planned, but always allowing for (and even expecting to dip into) your contingency pot from the outset will ensure that you’re prepared. Work out exactly what these contingencies might be and earmark funds for this so that you can cope – budgeting about 10% of your total costs is a healthy rule of thumb. Expecting the work to take longer than planned is also a good idea – this means that you’re prepared for any possible delays and you also have a bit of flex time if something needs to be reworked.
  3. Draw up a detailed schedule of works with timings to sit alongside your budget. Getting super organised at the start will help you to maintain momentum throughout the project and avoid delays which can end up costing serious cash in the long run. Decide what needs to be done and find out exactly how much materials and labour will cost – be strict with yourself and make changes only if necessary. Knowing what needs to be done when and keeping it updated and on track means less likelihood of getting behind, which can have an impact on other areas of the project. Remember, every extra day you add to the schedule puts a strain on your budget, as do delays in deliveries of materials or extra expenses incurred through having to hire equipment or doing work that you had not foreseen.
  4. Decisiveness pays off. It’s simple – decide what you want to do and how much it will cost in time and money. Make up your mind and stick to it. If you are indecisive it could end up being expensive. Decisiveness will allow you to project manage with efficiency and precision, helping you get clearer quotes and timelines from contractors at the outset and hopefully make the entire process smoother in the long run.
  5. Always get three quotes before deciding who to hire for the job. Be specific and get an itemised quote. You’ll then be able to see where and how to reduce costs if necessary. You’ll also be able to think carefully about how much work you can outsource, and how much you can do yourself.
  6. Be cautious about opting for the cheapest quote. A builder who gives a low quotation may well realise halfway through that it was an unrealistic figure – this is where problems will start to set in and it may even end up with them leaving the job unfinished. A healthier profit margin for the contractor means that they are more likely to be on your job than another. A higher cost may also indicate a higher standard of work – long term, a smoothly run site will mean you end up spending less.
  7. Ensure that you are given a quotation and not just an estimate before work begins. An estimate is an approximate guide to what you can expect to pay. Once you have been given a quotation for the work, this is the amount that a contractor is expecting to be paid for the job. Some estimates will include ‘provisional sums’ which are normally used for work the builder has to sub-contract and has not obtained firm estimates for. Always make sure you are consulted before a provisional sum is converted into a firm price, and before you sign any contracts.
  8. When you do decide who to hire, insist on a written quotation and make sure you sign a contract. Always negotiate fees up front and stick to a written agreement. Occasionally, unforeseen circumstances can arise and you may need to change the work that needs to be done or how it should be carried out – in this case, be fair and agree on extra payment. Clear, detailed briefs and keeping communication open, including dealing with potential difficulties as and when they happen, will avoid money spent unnecessarily.
  9. Review your calculations regularly as the work develops. A budget is a working document and something that needs to be monitored throughout the entire process, not just in the planning stage. Keep a detailed track of all costs and make time in your schedule to review so you can ensure that you stay on track.
  10. Hiring a project manager is always an option. Remember, if you don’t feel up to managing the project and budget yourself, employ an experienced, efficient manager to do the job for you – this will ultimately save you money in the long run.

Staying on top of your budget will ultimately help you to feel in control not only of your finances, but your entire project.

Original article hosted at Building Inspiration.

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