Most project owners know that forecasting is essential to project success, but many fail to focus on the accuracy required to achieve its optimal functions. Forecasting offers insight about the future, and its basis in the past reveals what is effective and ineffective for any project. From this, decision makers can gain insight into all details of the project at hand. Whether you use software as your guide or handle the process manually, accuracy is non-negotiable.
Plan Better by Starting Strong
If you want the ultimate in forecasting accuracy, you need to understand what’s driving it. Start with pinpointing the performance trends that are key to the project’s success, without throwing in the kitchen sink. A project may have 10 or 10,000 activities, but everything under the project is not at the same risk. Once the most important risk areas are identified, select the method that best matches your business. Are you using averages to date to best predict the future? Should the last crew production be the next crew’s objective?
Knowing what the engine behind your forecast is, along with the goals you’re hoping to accomplish, will help you begin with accuracy that will carry through to your finished product. It’s a simple concept, but if you put in an effort to make your initial starting point and numbers precise, your end result will reflect this meticulousness. Proper, accurate forecasting allows you to account for projected resource fluctuations, labor shortages and time frames on your project. Without maximum attention to detail in these areas, projects can experience a spike in costs and rampant coordination slip-ups.
Stay on Time
If you use software, you can quickly calculate forecasts from planned quantities, labor hours and equipment hours against actual earned quantities or percentages complete. You can also forecast projects and activities by real-time production performance on a daily, weekly or monthly basis. These steps and the attention to detail they command will amount to enhanced accuracy and more cost-effective projects. Everyone has heard that time is money, and this is especially true in the construction industry. An extra hour of mass labor or expensive machinery use that was not accounted for can equate to a nosedive in productivity and a damaging outlay of cash. Accurate forecasting makes your project progress smoothly, and every iota of time necessary for each part of the process is allocated ahead of time. Your budget will thank you, and so will your CFO.
Optimize Cash Flow
Accurate forecasting contributes to tightened, exact budgets, which translate into optimized cash flow and an upswing in revenue. Forecasting also allows you to analyze and manage expected costs to secure project funding and use it to evaluate the impact of spending levels over time. Resource and budget allocations can then be adjusted, contributing to more precise future forecasts and a firm grasp on the financial status of the job.
By using historical data to make projections, you will have more accurate numbers and the ability to see what your costs are in each area of the project. Financial figures that were once unclear will have clear-cut points of origin, and the fiscal side of the project will be vastly improved. Granularly accurate forecasts allow for visibility into projected costs, actual costs, current cash, estimated cash, cash flow, financing costs, as-built costs and planned total costs, all of which are invaluable for project success both on and off the jobsite. Time and planning are crucial to the success of any construction project, but what rules here is the element that matters most in any business—revenue.
Forecasting in and of itself is not enough to garner powerful results. Highly accurate forecasting, however, is the next level up and is an essential piece of the project puzzle. There are numerous ways to handle this and many points from which you can begin, but the key is to throw your energy into accuracy. By starting with painstakingly detailed and accurate figures, you’re already leagues ahead of most construction business owners. Use the hindsight from historical data to feed the precision of foresight. By doing so, you will take control of your project and amplify visibility, ending in better planning, timely progression of the project and more money lining your pockets.