Cost Value Reconciliation is a unique tool for the real estate construction industry. It measures explicitly pricing against budget on a building project. It provides businesses the ongoing report of the project’s sustainability by measuring cost against value at several points in the lifecycle of a contract right through to the end. Often, cost value reconciliation is an underused project management element.
Nevertheless, it is a fundamental tool that ensures that the construction project ends within the estimated budget. Quite similar to a balance sheet, the real expense of a project is compared against the overall value of the tasks completed, particularly with regards to the profit to get the bottom line figure.
Importance of Cost Value Reconciliation (CVR) in Construction
Cost value reconciliation is a process that helps you to get the reports on the profitability of an ongoing contract during its entire lifecycle. Without the process in place, extraneous losses on the projects can often go overlooked. However, it can further damage the bottom line of your construction business.
You may also experience your construction projects going over budget until you can even imagine anything about it. It can hurt the sustainability of your specific contract and your overall construction business by and large. At times, it can also spoil your name in the industry.
Your customers will expect a project which is delivered on time and within the estimated budget. Nevertheless, without following the cash reconciliation process, meeting those requirements will be extremely tough.
Who performs cost value reconciliations?
Cost value reconciliations are generally performed by the builders who report the sustainability of the project-in-process to the project management team.
When should you carry out the cost value reconciliation process?
Cost reconciliations are calculated along with the monthly provisional estimates throughout the contract and upon the ultimate completion. The project management team can also employ the ultimate figure while negotiating the closing balance upon the project completion.
For whom is the cost reconciliations process useful?
The process is useful for all big or small building construction businesses. Whether you run a well-renowned construction company or you are just a subcontractor, cost reconciliation reports are essential and helpful to your work.
Importance of creating more precise forecasts using cost value reconciliation
Examining historical cost reconciliation reports help construction companies to predict the sustainability of future work. It is an utterly beneficial process regarding determining issues and rectifying them promptly. Since cost value reconciliations track the earned value against the allocated budget, they are crucial for spotting real-time issues. Nevertheless, the process helps you prevent making the same mistakes on the upcoming projects.
Why is it crucial to conduct monthly cost value reconciliation during construction?
One of the jobs a surveyor performs when you employ him/her for building construction is to conduct cost reconciliation at distinct phases of the building project. The process can help you in specific crucial ways. The cost value reconciliation can help you-
To assess the accuracy of time projections
You will most likely evaluate contractor bidding documents determining the fixed cost and duration of each aspect of your building construction project. You will sign a contractor probably based on the estimated quotes you find convenient.
The cost reconciliation enables you to ascertain if the quotes are accurate or not by comparing the anticipated duration against the period required to complete each phase of your building project, like planning the building foundation.
The periodical cost value reconciliation helps you to adjust the timeline of the schedule of other subsequent activities. For example, you can squeeze the schedule for selling your existing house if your new house is not ready at the time you expected to move in.
Get warnings about price traps
The surveyor can notify you to secure some extra money in real-time. In any case, the monthly cost reconciliations consistently notify that the budgetary projections you have created are not sufficient. This warning can secure surplus funding in the early stage so that the building construction project doesn’t get delayed due to insufficient funding.
On another note, monthly cost value reconciliations can help you upgrade to the more precious and high-quality materials for the construction project if you find that you have overpriced the overall expense of the stuff you have elected. However, the additional resources estimated for those materials will be useful to shop superior stuff without overreaching your estimated financial plan.
Obtain more informed templates
Periodic cost value reconciliations can provide you with an informed and systematic analysis of each feature of your building construction project. Isn’t it better than just getting a simple project report after the construction work gets over, which only outlines the issues linked to the project?
The cost reconciliation reports generated each month can be of great help when you plan out other projects since the reports will provide you with a strong base on which you can evaluate the time and financial requirements of each side of your future construction works.
Consequently, monthly cost value reconciliations are the most crucial tools that can enable you to get precise feedback about all the facets of a building construction work since you will have enough time to make necessary changes and adjustments. Nevertheless, it is essential to work together with the quantity surveyor to ensure the person can help you obtain the best value out of the cost reconciliation reports.