How to Achieve Effective Cost Management in Construction

Reading Time: 5 minutes


As a construction business, a wide range of factors are outside of your control. Everything from shortages of skilled labor to fluctuating prices of materials will impact your bottom line. That makes it critically important to recognize the factors that you do have control over, so you can keep an eye on them and manage them effectively. That’s why diligent cost management is so essential for long-term success. You may not be able to control conditions in the larger market, but you can manage your response to them.

Having full visibility into and control of your budget, cost tracking, subcontractor relationships, forecasting, and other key elements of cost management can give you a source of power, and a rudder to help you steer your ship through inclement weather.

The good news is that the right software tools put sophisticated and powerful cost management strategies within your grasp.

Why Cost Management Matters in Construction

In one estimate, just 20% of construction companies know what their actual margins are; profitability can be elusive without greater visibility. In a thin-margin environment, construction firms must avoid additional costs and delays. You must keep your team moving forward, and subcontractors engaged.

What’s making cost management more difficult?

Project delays can lead to higher costs, especially when materials prices are so unpredictable. Change orders frequently spike costs above budgets. And the inability to see costs and project work in real time means that the numbers may have changed by the time a manager sees it.

The goal of effective cost management is to consistently improve an organization’s approach to spending through better data and planning. That includes careful monitoring and controlling of project budgets, encompassing everything from materials and labor to insurance and permits.

And thanks to the modern, cloud-based ERP Microsoft Dynamics 365 Business Central, effective cost management is easier than ever. Here’s an overview of what the right software setup can deliver:

  • Better visibility into the costs of labor and materials
  • Better decision-making based on more accurate and up-to-date info
  • Better alignment between the field and the office, because everyone has access to the same centralized data
  • Better projection of upcoming needs and potential problems
  • Better cost forecasting
  • Better job quote accuracy
  • Better supply chain management to keep projects on course and in budget
  • Better collaboration and coordination via subcontractor management, which helps keep projects moving forward with fewer unexpected complications
  • Better ability to course correct and adapt to changing circumstances
  • Better control of timelines thanks to sophisticated scheduling features
  • Better ability to meet deadlines

The Cost Management Toolbox: Business Central, Power BI, and ProjectPro

With those benefits in mind, let’s look at a few of the solutions that can help you achieve them.

Microsoft Dynamics 365 Business Central

Although there are a number of cloud-based ERPs to choose from, Microsoft Dynamics 365 Business Central is a great fit for most construction firms. The platform architecture is optimized for mid-sized companies, helping them benefit from streamlined processes while supporting essential activities and processes—including finance, project management, sales and service management, supply chain management, other operations, and analytics —using one set of connected data. It brings you scalability, security, ease of access, and evergreen updates.

And perhaps most important for cost management, it delivers analytics and intelligence capabilities that help you keep a closer eye on your business. It allows you to make use of data for valuable capabilities like predicting and forecasting cash flow and revenue, or modeling the implications of business decisions regarding clients and project workloads.

Power BI and Power Platform

You can take Business Central’s capabilities even further by integrating it with Microsoft’s Power BI in the cloud. Power BI, which is part of Microsoft’s Power Platform, allows you to create robust data visualizations that make it easier to interpret and act on your most valuable data insights. Sikich consultants will help you work with the Power Platform to create consistent automatic workflows, facilitate quote approvals, help executives keep tabs on project performance, and more.

HEADSTART for Construction

Another way to add to the versatility and functionality of Business Central is by taking advantage of Sikich’s HEADSTART for Construction solution, which was developed specifically for Business Central. With HEADSTART for Construction, you get access to a selection of modules that can boost your cost management capabilities, providing you with greater visibility and control over costs.

All HEADSTART for Construction deployments include the Job Costing module, and you can pick and choose among these other capabilities:

  • Job Purchasing/Payables
  • Job Progress Billings with Retention Management
  • Time & Materials Projects
  • Project Management
  • Subcontract Management with Insurance Certificate Tracking
  • Payroll Management & Integration with Prevailing Wage and Certified Payroll
  • Job Quoting
  • Job Materials Planning
  • Job Scheduler
  • Service Scheduler

Some of the tasks and activities that HEADSTART for Construction can help you with include accurate estimating and job quoting based on job segments or tasks, better management of contracts and change orders, and the ability to efficiently set up subcontracts for budgeted items on a job.

Want to learn more about how Sikich can help your construction business reap the benefits of better cost management? Contact us.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


Join 14,000+ business executives and decision makers

Upcoming Events

Upcoming Events

Latest Insights

About The Author