Cost Reports

Post written by David Stewart.

During the execution of a project, procedures for project control and record keeping become indispensable. These tools both record all financial transactions as well as give managers an indication of progress and any problems encountered on the way. By recording all financial transactions, organizing them and comparing them to the estimate (or budget), the prudent contractor can identify any areas that may be costing more than was anticipated in the bid. The compilation of this data is called a cost report.

A construction cost report requires the manager to code or allocate ALL transactions to a computerized application that will summarize costs by cost item and determine the percentage of funds expended for each cost item.  When compared to the percentage of physical completion for that work item, the manager can determine whether or not that work item is being performed at or under budget.  If work is not progressing to budget, corrective action can be taken to avoid a cost over-run.

Project control procedures are primarily intended to identify deviations from the estimate rather than to suggest possible areas for cost savings. However, a secondary but important function of a cost report is to develop historical cost information to use for bidding subsequent projects (a general contractor bidding for a construction project must prepare definitive cost estimates to compete for award of the contract. 

At the completion of the project, the cost report will identify the total cost of the work and, by comparison with revenue generated by the project, provide a measure of the profitability of the project, as well.

Photo credit: Jon Díez Supat / Foter / CC BY-NC

Posted: Tue, 20 Nov 2012
Read more articles about: