Tips to Stay on Budget for Construction Companies

how construction companies can stay on budget

Construction companies have a uniquely difficult time staying on budget due to the nature of their work. 

Temporary production means that construction companies employ frequently changing labor crews and contractors, so payroll can fluctuate greatly depending on the number of projects going on at any given time. 

Expenses are also difficult to predict because of the fluctuating prices of construction materials. Whether it’s supply chain delays or international tariffs, prices are subject to fluctuate wildly between projects (or even during the span of a single project).

It’s also difficult for construction companies to keep the “big picture” in mind because each project is so self-contained. When a crew is heads down on a particular house or building or site, it is easy to forget where that project fits into the company’s larger plans and finances.

Fortunately, we’ve compiled a list of simple things construction companies can do to stay on budget. Check it out below.

Draft a Detailed Project Plan

Everyone in construction knows the phrase “measure twice, cut once” — and this applies to more than just sawing planks of wood. A detailed project plan is key to establishing how many laborers and subcontractors you’ll need, what materials you’ll use, whether you’ll need to rent tools or vehicles. 

It can include:

  • Blueprints and drawings
  • Permits and code requirements
  • Site reports
  • Safety measures
  • Delivery methods and schedules
  • Temporary utilities (electricity, heat, bathrooms, etc.)

Once you’ve thought out all of these aspects, you’ll be able to set an accurate timeline and a budget.

Map Out All of Your Expenses

To ensure that you have the best shot at sticking to your budget, map out your expenses in as much detail as possible. It may help to break them down into categories. 

Fixed Expenses

Fixed expenses are recurring expenses that don’t change over time. These can include salaries, office rent or mortgage payments, subscriptions, lease or loan payments on vehicles or equipment, etc. These are the easiest costs to predict since they are typically stable and do not change from month to month.

Variable Expenses

Variable costs are expenses that fluctuate based on multiple factors. These costs can include materials, subcontractors, overtime pay, transportation, equipment rentals, etc. They can be tricky to predict because of price changes due to supply chain delays, subcontractor rates, amount of overtime worked, fuel costs, and the unpredictability of jobs in general.

Overhead Expenses

Finally, overhead expenses are the costs associated with keeping the business running, regardless of its success or failure. These can include costs for accounting, advertising, office utilities, and anything else that is needed to run the business that isn’t directly related to a specific project or product.

Work Contingencies Into Your Budget

Even the best-planned budgets need to build in a buffer for contingencies. Something will always come up mid-project whether it’s unexpected demolition, additional required materials, or calling in a subcontractor at the last minute. You should expect these issues to crop up, include some wiggle room in the budget, and account for this in quotes given to clients. Typically, construction companies build a 5-10% contingency rate into the budget.

You don’t want to have to ask for extra funds from your clients mid-project — especially if there’s a chance they don’t have extra cash. The project will grind to a standstill, you’ll be left covering unexpected costs, and the client will be unhappy.

Consolidate Your Expense Tracking

Predicting your expenses is all well and good, but you also need to track them in order to compare them to the original budget and make sure you’re staying on track. In order to do this, you must consolidate all expense tracking so that all employees are on the same page.

If various employees are responsible for picking up materials, refueling vehicles, or making other company-related payments, it’s difficult to trace a paper trail. Expenses might be tracked by individual employees using spreadsheets or phone notes, and there might be multiple credit cards making the purchases — an accounting team’s nightmare.

If your expense tracking isn’t consolidated into one place and a firm process, you won’t get a complete picture of how much is being spent — and that makes it easy to go over budget.

Use a Spend Management Platform 

Using a spend management platform like Mesh Payments is an easy solution to tracking expenses and keeping your team on budget. 

Unlimited virtual and Plug & Pay™ cards can be issued to employees and controlled by the finance team. You can set limits on amounts and even lock cards to particular vendors, making expense tracking and categorization simple. You can also easily see exactly how much is being spent per project and as a business overall.

You’ll no longer have to get employees to fill out expense reports and wait for reimbursements for purchases made out of pocket. Mesh provides the cards for the transactions, receipts can be uploaded digitally, and then all that information in the platform for simple reconciliation


To learn more about how Mesh can help construction companies stay on budget, schedule a demo.

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