Budget against actual on a development: the columns that show an overrun early

A development can have paid out 40% of its construction budget, with every invoice inside its line, and already be $50,000 over. A budget against actual report only shows that if it carries what has been committed and what is still to be priced, not just what has been paid.

Paid to date is the least useful number on the page. It tells you what happened, and nothing about what is coming.

The columns a budget against actual report needs

• Original budget for each cost code, as approved at feasibility.
• Approved variations, added to the original to give the current budget.
• Committed: amounts locked in by contract, order or accepted quote.
• Paid to date.
• Still to commit: your best estimate of the costs not yet under contract.
• Forecast final cost: committed plus still to commit.
• Variance: current budget less forecast final cost.

Mastt's guide to project cost reports lists the same building blocks, and adds pending changes that have not been approved. Keep those in a column of their own, where they are visible without being counted.

Set up cost codes that match how you buy

Use one cost code for each contract or package you will actually sign: site works, structure, services, finishes, fees. A code that mixes two contracts can never be committed cleanly, because half of it is signed and half is not.

Where you can, use the same codes as the builder's progress claims and the quantity surveyor's report, so the three documents can be read side by side. Count a quote as committed only once it has been accepted in writing.

A worked example

Four cost codes, part way through a build:

• Site works: budget $235,000 ($220,000 plus a $15,000 variation), committed $230,000, paid $230,000, nothing left to commit. Forecast $230,000, $5,000 under.
• Structure: budget $900,000, committed $880,000, paid $520,000, $45,000 still to commit. Forecast $925,000, $25,000 over.
• Services: budget $350,000, committed $210,000, paid $40,000, $170,000 still to commit. Forecast $380,000, $30,000 over.
• Finishes: budget $480,000, nothing committed or paid, $480,000 still to commit as a provisional allowance. Forecast $480,000, on budget for now.

Across the four codes the current budget is $1,965,000 and $790,000 has been paid, about 40%. Every line of paid to date is inside its budget. The forecast final cost is $2,015,000, which is $50,000 over.

Where the overrun was hiding

• Structure is nearly all committed, yet $45,000 of work is still not in any contract.
• Services is only 60% committed, and the estimate for the rest already takes it $30,000 over.
• Finishes looks on budget only because none of it has been priced.

Finishes is the line to worry about next. Switchboard Finance's guide to quantity surveyor reports notes that lenders read a large block of provisional sums as risk, and that turning them into fixed quotes tightens the cost to complete.

Track contingency against the forecast

Say the project carries $100,000 of contingency, and the $15,000 site works variation came out of it, leaving $85,000. Against paid to date, that looks comfortable. Against the forecast, the $50,000 overrun leaves $35,000, with the whole finishes package still unpriced.

The same Switchboard guide notes that contingency used up early, before the major trades have started, reads to a lender as cost pressure.

The monthly routine

1. Update committed from every contract, order and accepted quote signed that month.
2. Re-estimate still to commit for each code, starting with the provisional allowances.
3. Record variations as pending until approved, then move them into the current budget.
4. Compare forecast final cost with the quantity surveyor's cost to complete before the next drawdown.
5. Explain every code whose variance moved by more than a set amount since last month.

Mastt recommends a fixed schedule: monthly for most projects, and weekly or at milestones during high risk phases.