In 2013, Forbes said Excel might be the 'most dangerous software on the planet', and you don't need to spend long in construction to empathise. Construction contractors are often working against such thin margins and the smallest error can stick a huge dent in the bottom line. So it's surprising to learn that most construction firms still rely on spreadsheets for Cost Value Reconciliations.
Contractors can find more reliable software built to handle the construction industry's rigours, which helps you sidestep spreadsheet pain. Instead of scrambling to source siloed information, you can store your info in one central place that gives you complete visibility across your business, among other benefits.
Let's see how digital Cost Value Reconciliations can transform an almost impossible task into an accurate, efficient, and effective profit measuring tool.
What is Cost Value Reconciliation?
Cost Value Reconciliation is (CVR) is a construction-specific tool that is used to measure costs against budgets on construction projects.
You can track the contract's profitability as the project progresses by measuring costs against its value, from the beginning through to the end.
Cost Value Reconciliation is a crucial project management tool that ensures construction projects finish on budget, but its often neglected. Mainly because its tough to produce timely Cost Value Reconciliations that can help contractors act before the information is outdated.
Much like a company balance sheet, you compare the actual costs against the total value of works completed - profit included - to product a bottom line figure.
1) Break down siloes and connect your data
Creating effective Cost Value Reconciliations is tough when you've got paperwork and emails flying at you from all directions: timesheets, orders, requisitions, variations, adjustments, etc. Once you've gathered everything, you then waste time typing it into a spreadsheet, but not before somebody hand delivers more late paperwork.
Let's look at invoices, an essential function of your role. How can you expect to extract value from projects when basic, yet crucial, documents land on your desk too late to be useful?
If you store your information in a central electronic database, you'd break down these siloes and get a complete overview of your project. Your whole business becomes transparent, which gives you access to the details you need when you need them, instead of waiting on someone to send a report.
2) Get real-time insights and proactive reporting
You're fighting against razor-thin margins and tight deadlines, but there's an industry-wide over-reliance on outdated and messy data. After you've spent two weeks compiling the details, they're already behind the actual accrued costs. Then you get stuck with lost and mislaid paperwork like change orders, delivery records and labour timesheets - it makes your job difficult.
Storing your information in one central database lets your team update figures the moment it changes, like goods received and new material orders. When the latest data lives inside the system, you gain real-time insights from accurate and timely Cost Value Reconciliations. You can spot areas that are leaking money, manage ongoing costs and understand the project's profitability.
3) Reduce the risks of human error
Each time you enter then rekey data into a spreadsheet, you're increasing the chances for errors. Plenty can go wrong; cut and paste blunders, 'fat finger' syndrome, lousy math. Almost 90% of all spreadsheets have errors, and even the most carefully developed, tried and tested documents have mistakes in 1% of their cells. That's an expensive and avoidable problem.
Digitising and bringing your information into one place is the best way to reduce tedious data-entry and costly mistakes. Suppose you cut out rekeying and capture all the cost and sales information first time. In that case, you can concentrate on more productive ventures like improving commercial performance without worrying about errors coming back to bite you.
4) Eliminate mundane processes and win back your time
Construction's reliance on paper-based systems and DIY workarounds is a big problem. You'd struggle to find any contractor or subcontractor that didn't still depend on some pen and paper processes. It doesn't make sense to dig through boxes of paperwork, or adding to the pile, when you can automate these tasks.
Most people aren't interested in wasting time on repetitive data entry and sifting through mountains of paperwork. Digitising your Cost Value Reconciliations and other processes then storing data in a central location can reduce these tasks and liberate your time so you can focus on more enjoyable work.
5) Establish and improve your processes
You can't make data-backed decisions when your processes are tangled, unpredictable and reliant on too many sources. It's almost impossible, and time-consuming, to measure costs against the project's value and build accurate forecasts. It's not easy to trust your decision when you don't feel comfortable with the process.
If you create a process map that visualises your processes, you could change, remove, and improve your workflows. Control over your processes will boost communication between departments while keeping compliant and purging redundant processes that slow you down.
Get your Cost Value Reconciliation right first time
The best way to convert your Cost Value Reconciliations into a profit-making tool is to digitise and automate your processes. Gather and store every crucial document inside a central database that stops you scrambling around at the last minute to produce subpar reports.
This visibility keeps your finger on the pulse of your project at every point in the contract's lifecycle. You can make the most effective decisions based on real-time data that you can trust.