Estimates Provide a Foundation for Spending Plans

Don’t let estimates and spending plans get confused. While they work together, they have different roles to play in managing construction projects. 

The Difference Between Estimates and Spending Plans

Two financial planning tools for construction contractors are closely related yet serve different purposes. One is a preliminary cost foundation for the other. Estimates provide a foundation for spending plans, while spending plans set the financial boundaries for the projects. 

Estimates – initial assessments of project costs used to determine financial feasibility, bidding, and contract negotiation. 

Spending plans – detailed and clarified plans used for project management and control. 

The Purpose of Estimates

Estimates are used for preliminary cost planning, informing contractual agreements, and providing an overview of anticipated costs. Estimate adjustments should be based on project details, market conditions, material price fluctuations, and labor availability. The scope of an estimate is limited to providing an introductory assessment of project costs.

Estimates serve only as a guideline or starting point.

The Purpose of Spending Plans

Spending Plans define the actual financial constraints and guide cost management throughout the project. It is a comprehensive financial plan that includes all anticipated expenses. It sets hard spending limits and is typically only revised to reflect changes in scope, approved change orders, and actual costs.

Spending plans serve as a project management tool. 

Estimates and Spending Plans Should be Used in Conjunction

While the estimate is a prediction, the spending plan acts as a financial framework to control spending.

Estimates help provide a way to determine the project’s overall financial feasibility, and they are a starting point for building a detailed spending plan that reflects the anticipated costs of labor, materials, equipment, and other expenses. 

By comparing actual costs to the estimated costs, you can track progress, adjust budgets as needed, and manage financial risks effectively.

Estimates get you in the game, and spending plans allow you to perform well.

Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:

• Clients and customers

• Employees and subcontractors

• Vendors and service providers

• Governmental entities 

Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:

• Remain informed

• Avoid hassles

• Reduce risks

• Be future-ready

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