Five methods to manage a property project budget
Property developers, financial intermediaries and private individuals planning a self-build — anyone working on a project can benefit from practical methods which help to manage a budget.
In our series on budgeting, we share methods that help you plan, manage and review your budgets. In this second part, we move onto tips for managing a budget while the property project is underway. Finally we suggest some unaffiliated reading for those who wish to further explore the topic.
Read: part one of this series for tried and tested methods to help you plan a property project budget.
So, whether you are undertaking your first development, or you have lost count, may the following provide financial confidence throughout the duration of your project.
The five methods
Monitor your accounts with due care. One of the most complicated aspects of budgeting may well be ensuring that all money is flowing properly and to the right accounts. Of course, payments, transfers and billings come in and go out at different times and can therefore cause some confusion – particularly when the project involves a great number of contractors.
As the absolute minimum, set up a spreadsheet to monitor your in and outgoings, check that the bills match the activity of an account, and chase up any discrepancies to resolve them as soon as possible.
Reforecast. Reforecast. And yes, reforecast. After the project starts it is easy for a budget to get out of hand and become a problem. The sooner such a problem is found the easier it is to fix – for example an unexpected gap in funding may even lead to missing financial deadlines, missing these deadlines might break a deal with a resource owner, and a lack of resources can lead to the downfall of the project.
The lesson is clear. Reforecast the budget as often as is reasonable and discover if you need to find any additional funding, such as a bridging loan, fast.
Keep everyone on the project involved and let them know how the budget is performing. Letting people know what is happening is not merely good communication but it is also a fine way to improve morale and empower a team – this can even lead to more efficient work and therefore a better budget – so it is a win-win situation.
Prepare for the unexpected. Ex US Secretary of Defence Donald Rumsfeld, a man who had to deal with much which was unexpected between January 2001 and December 2006, once said it is not the unknowns that matter but the "unknown unknowns". Whatever we think of that statement, the important message is that things can happen regardless of how much we plan.
Whether you are funding a project yourself, or relying on funding from a third party, make sure you are aware of the funding methods that are available to you should a problem arise, such as a property development bridging loans.
What happens next?
Once you are aware of the fluctuations, you have prepared the extra resources needed, and you have informed the team about the budget, then you are ready for the challenges ahead. You are well along the path to a well managed budget.
Next and after the project is completed you will need to be confident reviewing the budget, which we will cover in the final part of this series.
Affirmative is a bridging finance lender based in Manchester providing property developers, property investors, and individuals around the country with fast short-term finance. Speak with us about bridging loans on 08000 44 84 84 or send an email to email@example.com.
To better manage your budget, Affirmative recommends gaining the insight of professionals. Each of the following books is well received by critics:
Nigel Wyatt, The Financial Times Essential Guide to Budgeting and Forecasting: How to Deliver Accurate Numbers, 2012.
Malcolm Secrett, Brilliant Budgets and Forecasts: Your Practical Guide to Preparing and Presenting Financial Information, 2010.
Joe Knight, Roger Thomas, Brad Angus and John Case, Project Management for Profit: A Failsafe Guide to Keeping Projects On Track and On Budget, 2012.