A financial projection is a statement that estimates future revenues and expenses. A good economic forecast should be able to detail different projects based on construction options and alternatives. In simple terms, you’re expected to create a budget, and then predict how this budget will compare based on your revenue and expenses.
There are two ways you can do this: use modern technology or stick to the traditional use of Excel spreadsheets. Excel spreadsheets are okay, but they don’t possess the sophistication required to create accurate construction projections.
The disadvantages of Excel in creating financial projections
Here are some additional disadvantages of using Excel to create financial projections.
Lack of collaboration
When creating a financial projection for a megaproject, you’ll need modern technology to make collaboration and sharing information between different stakeholders easier. The only way you’re able to do this with Excel is by emailing a copy to your colleagues. This is inefficient and creates room for errors.
With no efficient collaboration, it becomes difficult for different team members to validate projections and identify errors before they affect the entire project.
Prone to errors
Did you know that JPMorgan Chase lost more than $6 billion partly due to Excel spreadsheet errors? Yes, errors in Excel spreadsheets can cost you your entire project, and may even leave you bankrupt. Modern technology makes it easy for contractors and project managers to identify errors in the early phase of a construction project.
No security checks
People can manipulate figures based on what they deem best when accessing the spreadsheet. This means that one party can alter data, even if they know it’s inaccurate. As a result, the entire sheet becomes erroneous.
Time-consuming to use
Assume you’re a contractor working on a linear project, such as road construction. For this, you need to identify the best approach to use to save time with the least minimal disruption for motorists. With an Excel spreadsheet, you’ll have to create simulations to determine the best strategy to use manually—and the bigger the project, the more challenging this will become.
Easy for the data to be deleted
Another disadvantage of using Excel spreadsheets is that there’s a big possibility that the data can be accidentally deleted or corrupted. This mostly happens when an inexperienced person uses their spreadsheet, or when they store the file in a virus-infected computer.
Using modern technology, companies can improve their brand equity when making their financial presentations. Project owners will feel more inclined to work with them compared to contractors using outdated accounting methods.
How to use construction technology to create better financial projections
Now that you know the disadvantages of using Excel, it’s time to discuss how construction technology can help you make better financial projections.
One construction optioneering technology you can use to create better financial projections is https://www.alicetechnologies.com/solutions/for-owners. This platform is designed to simulate the entire construction process from the preconstruction phase to the handover phase.
Optioneering platforms often use mathematical algorithms to answer several questions about labor, milestones, rates, equipment, and materials. Using this data, the platform simulates how much will be required to complete a milestone.
You can estimate how much money is required for the project in minutes. Compared to using an Excel spreadsheet, this technology can reduce your labor costs and project time significantly.
BIM technology helps architects and engineers create innovative futuristic buildings. The main goal of BIM is to ensure that the workflow process is collaborative, ensuring that a construction project remains cost-effective, safe, efficient, and profitable. Project owners can use BIM technology to work with others and create cost estimates based on models.
BIM can be used for better financial projections because it factors in construction law professionals who are aware of the project’s cost of materials, shipping, labor, and taxes. This technology allows contractors to choose more cost-effective materials and identify the best time to buy them. Additionally, you’ll be able to streamline the construction workflow to reduce billable hours, saving costs.
Technology for tracking material and equipment used
Another technology you can use for better financial projections is tracking for equipment use. These technologies help project managers track material costs to ensure the project is within budget. Software applications with GPS capabilities ensure that equipment (such as heavy machinery) is serviced on time, reducing costs.
These technologies can also track equipment usage to avoid subcontractors misusing the equipment for personal gain.
Data collection app for better decision making
Data collection apps make financial projections more accurate because they give real-time information about what’s happening on the ground. For example, using these data collection apps, you’ll be able to know the quantity of material being used and its price.
Once you have this data, cost estimators can compare it with their initial plans to know if they’re within budget. A good system should be able to share this data in real-time and be able to gather and organize the data in a simple and intuitive manner.
Another way to get better financial projections is to improve communication among critical decision-makers in the project. You’ll need a communication platform that makes it easy to peer review designs with other engineers and architects.
An independent cost estimator should also have access to the drawings so that they critique estimates and identify errors. Your communication technology should make it easy for contractors to hold subcontractors accountable. That way, you’ll increase efficiency and complete projects on time.
Another way technology can be used for better financial projections is through drones and artificial reality. Drones are cheaper to use when compared to flying an airplane to create 3D structural models and topographical maps. These models can be used to develop accurate cost estimates.