Actual vs forecast project margins is a key component when budgeting in every business, as it tells you how accurate your estimate was, and how efficient your team were in delivering the project.
While understanding your actual and forecast project margins are both critical for any business, accurately predicting and capturing them can be a challenge.
Regardless of the size of your business or the scope of the project, tracking these margins in real-time lets you prevent money from being lost by making adjustments to your quoting and working methodology.
Forecast Project Margins
The forecasted project margin is the baseline for tracking how finances are progressing once a project has been started. This margin should be based on a complete breakdown of exactly what you’re expecting to spend on a project in terms of time, materials, and third-party contractors. There are two key reasons to have a good handle on your forecast project margins before you start a job.
Firstly, it will tell you whether or not you should take the work. If you’re running at less than your target margin before you even start, you can guarantee that you won’t be ahead by the time the job is done, so knowing your forecast project margins ahead of the sale, let’s you say no to unprofitable work, and justify a higher price to the client.
The second key reason is that if you’ve got a full estimate of your project costs and margins, it lets you go and negotiate with your suppliers or subbies on work to ensure that if you win the job, you’re still making money.
Actual Project Margins
Your actual project margins are what really happened. It’s incredibly rare for a project to go perfectly as we planned it, no matter how experienced, or awesome we are out of our jobs. As a result, the Actual and Forecast margins can vary wildly. The actual margins are the ones that you keep track of not just at the END of the project, but DURING it as well, so you can jump on any problems quickly, and solve out-of-scope changes, or cost-overruns in time to correct them.
WorkGuru helps you to build out quotes and projects with project margins in mind. Build out detailed quotes with as many tasks and products as needed so you can get as specific as needed to get an accurate forecast. You can even build templates for common projects and quotes to save time and money.