The Virtual CFO

Budgeting for Construction Projects – Resumed

I know I haven’t posted in a while. There are three reasons for this.

First, I have been extremely busy working with clients the last two months. This I am very grateful for.

Secondly, I resumed classes in Tennessee Tech’s MBA program the last week of August. What I really like about taking MBA classes is that every class I’ve taken has helped me serve clients better. I have an extensive "hands-on" operations and financial management background. What I’ve learned in the MBA program has complemented this.

And third, I’ve spent most of my "free time" over the last month working on the presentation I gave at last Monday’s Tennessee Society of CPAs Construction Conference. The conference went well and I was very pleased with the material I covered. I also appreciated the complements I received from several of the participants of the session.

Over the next few weeks, I will be blogging about the topics I covered at the conference. I hope you enjoy it and it is of use to you and your company.

Why Budget Projects? Assumption in this Series

Before I move on, I would like state that I am making one assumption in this series: that a majority of the construction company’s work is individual projects that are competitively bid.

There are construction companies whose business model is built around competitively bid work that would be considered routine. An example of this would be a one- or multi-year contract with a municipal water and sewer department for line installation and repair. Companies that are built around this type of work can successfully use the normal budgeting process because their sales can be forecasted with some measure of confidence.

Construction companies with a business model built around individual projects that are competitively bid must budget on a project basis because their revenue is entirely centered on projects.