How to Track Project Budgets
Keep your projects profitable by tracking costs against your budget in real-time.
Why Track Budgets?
Without tracking:
- You don't know if you're making money until it's over
- Cost overruns sneak up on you
- No data to improve future estimates
- Cash flow surprises
With tracking:
- Catch problems early
- Make informed decisions
- Improve estimating accuracy
- Protect your profit margins
Setting Up Your Budget
Start with Your Estimate
Your budget should match your winning bid:
| Category | Budget |
|---|---|
| Labor | $45,000 |
| Materials | $62,000 |
| Subcontractors | $38,000 |
| Equipment | $8,000 |
| Overhead | $12,000 |
| Total Cost | $165,000 |
| Profit | $16,500 |
| Contract Price | $181,500 |
Break Down by Phase
For better tracking, split by project phase:
| Phase | Labor | Materials | Subs |
|---|---|---|---|
| Demo | $5,000 | $500 | $0 |
| Framing | $15,000 | $22,000 | $0 |
| MEP Rough | $0 | $0 | $28,000 |
| Drywall | $8,000 | $12,000 | $0 |
| Finishes | $12,000 | $18,000 | $10,000 |
| Punch | $5,000 | $9,500 | $0 |
Set Up Cost Codes
Use consistent cost codes across projects:
01-000 General Conditions
02-000 Site Work
03-000 Concrete
06-000 Wood & Plastics
09-000 Finishes
...This lets you compare across jobs.
Tracking Costs
What to Track
Labor
- Hours worked by employee
- Task/phase worked on
- Regular vs. overtime
Materials
- Invoices from suppliers
- Delivery receipts
- Returns and credits
Subcontractors
- Contracts/POs issued
- Invoices received
- Change orders
Equipment
- Rental invoices
- Usage logs for owned equipment
- Fuel and maintenance
Tracking Methods
Daily (Recommended)
- Log labor hours end of each day
- Enter invoices as received
- Review any unusual costs
Weekly
- Summary labor review
- Invoice batch entry
- Budget vs. actual report
Daily tracking catches problems fastest. A $500/day overrun becomes $2,500 by Friday if you only check weekly.
Budget vs. Actual Analysis
The Basic Report
| Category | Budget | Actual | Variance | % Used |
|---|---|---|---|---|
| Labor | $45,000 | $32,000 | +$13,000 | 71% |
| Materials | $62,000 | $58,500 | +$3,500 | 94% |
| Subs | $38,000 | $41,200 | -$3,200 | 108% |
| Equipment | $8,000 | $6,800 | +$1,200 | 85% |
| Total | $153,000 | $138,500 | +$14,500 | 90% |
Understanding Variance
Positive variance = Under budget (good) Negative variance = Over budget (investigate)
Percent Complete Tracking
Compare costs to progress:
| Item | Budget | % Complete | Should Cost | Actual | Status |
|---|---|---|---|---|---|
| Framing | $37,000 | 100% | $37,000 | $35,500 | Under |
| Drywall | $20,000 | 60% | $12,000 | $14,200 | Over |
| Finishes | $40,000 | 25% | $10,000 | $8,800 | Under |
Drywall is 60% done but 71% spent - investigate now!
Warning Signs
Red Flags to Watch
- Labor hours exceeding estimate - Every week
- Material costs running high - Waste? Theft? Price increases?
- Change orders not priced - Doing extra work for free
- Subs exceeding contracts - Scope creep
- Equipment rentals extending - Schedule delay
Early Warning Calculations
Cost Performance Index (CPI)
CPI = Budgeted Cost of Work Performed / Actual Cost- CPI > 1.0 = Under budget
- CPI < 1.0 = Over budget
- CPI = 0.9 means 10% over budget
Estimate at Completion
EAC = Budget / CPIIf budget is $100,000 and CPI is 0.9: EAC = $100,000 / 0.9 = $111,111 (11% over)
Taking Action
When Over Budget
- Identify the cause - What specifically is over?
- Determine if recoverable - Can we fix it?
- Adjust approach - Different method, more crew, etc.
- Document for future - Learn for next estimate
- Communicate - Tell stakeholders if significant
Common Fixes
| Problem | Possible Solutions |
|---|---|
| Labor over | Add crew, overtime, adjust sequence |
| Materials over | Find alternates, reduce waste, negotiate |
| Schedule behind | Accelerate, adjust sequence |
| Scope creep | Document, submit change orders |
Change Order Management
Always Capture Extra Work
When scope changes:
- Document the change
- Price the impact (time and cost)
- Submit change order
- Get approval before proceeding
- Track separately in budget
Impact on Budget
Add approved change orders to your budget:
| Description | Original | Changes | Current |
|---|---|---|---|
| Labor | $45,000 | +$5,000 | $50,000 |
| Materials | $62,000 | +$3,200 | $65,200 |
| Contract | $181,500 | +$12,000 | $193,500 |
Now track against current budget, not original.
End of Project Analysis
Final Job Cost Report
| Category | Budget | Actual | Variance |
|---|---|---|---|
| Labor | $50,000 | $48,200 | +$1,800 |
| Materials | $65,200 | $64,100 | +$1,100 |
| Subs | $38,000 | $41,200 | -$3,200 |
| Equipment | $8,000 | $7,500 | +$500 |
| Overhead | $12,000 | $11,800 | +$200 |
| Total Cost | $173,200 | $172,800 | +$400 |
| Revenue | $193,500 | $193,500 | $0 |
| Profit | $20,300 | $20,700 | +$400 |
| Margin | 10.5% | 10.7% |
What to Review
- Which estimates were off?
- What surprised us?
- What would we do differently?
- How does this compare to similar jobs?
Use this data to improve future estimates!
Best Practices
- Track daily - Small consistent effort beats monthly scramble
- Code everything - Consistent cost codes enable comparison
- Review weekly - Team meeting to discuss status
- Act on variances - Don't just report, respond
- Document changes - Every extra is a potential change order
- Learn from data - Update estimates based on actuals
Next Steps
- Project Dashboard - Monitor all jobs
- Cash Flow - Track money in and out
- Budget Tools - Set up tracking in BuildVision