Construction projects have several moving components. You have to manage materials, workers, invoices, and progress. Making a mistake can lead to overspending and forgetting to request payments. A schedule of values can keep you organized as you work on new projects. We’ll discuss how a schedule of values can help with your next project.
What Is a Schedule of Values?
A schedule of values lists every billable item related to a construction project. This schedule of values keeps your expenses in order and can preserve your budget. A schedule of value also distinguishes billable items based on their milestone. Building the foundation requires a different set of billable expenses, such as adding concrete walls and interior details. A general contractor or subcontractor will list the items and allocate budgets for each one.
How Is a Schedule of Values Used?
A schedule of values identifies billable expenses, their budgets, and how much money you have allocated to each item. Contractors use this system to stay within budget and keep costs low. A schedule of values also helps contractors estimate costs for each stage of the project. After creating and reviewing the schedule of values, some contractors may deem the project unprofitable and make some suggestions to the architect or project owner.
Why Is a Schedule of Values Important?
Construction projects get expensive. They require many workers, materials, and additional resources. Some contractors focus on the construction’s progress and don’t consider their budgets. Spending too much on construction can make it unprofitable and hurt your chances of landing additional work. Contractors also use a schedule of values to track a project’s current stage. They can present insights to the architect or project owner to demonstrate progress and discuss weaknesses. This information helps contractors and architects make better decisions. An architect may provide you with additional workers if the project falls behind critical deadlines.
A data-driven approach can lead to more effective decision-making. A schedule of values provides essential data points in a central location. Contractors can look at the data and make decisions that affect the budget and direction of the construction. Without using a schedule of values, contractors can incorrectly assess progress and expenses, leading to poor decisions.
A contractor will also present this schedule to the architect or project owner when requesting payments. The payer will look at your schedule of values before making the payment or disputing the invoice. The construction industry operates on tight margins. If a contractor doesn’t receive additional cash flow for the project, it can quickly get stalled. A schedule of values provides contractors with a resource to showcase their work and receive additional funding. Furthermore, it informs your clients about payment deadlines. It’s easier for the architect or project owner to pay on time if you give them a few months to gather funds instead of a few days.
Who Should Use a Schedule of Values?
Any contractor should use a schedule of values to ensure the project stays on track. Contractors can submit the schedule of values to clients for review. Clients will trust you more if you provide a detailed timeline that addresses each stage of the construction. Architects appreciate contractors who go the extra mile and may hire the contractor for additional projects.
A schedule of values also creates expectations in the workplace. Workers at the construction site will understand their roles and responsibilities for the project. You can set goals for each worker that aligns with the schedule of values. Contractors can review progress and their schedule of values to either commend workers or provide feedback on how to improve.
When Should You Use a Schedule of Values?
A schedule of values keeps everyone on the same page and is crucial for completing a project on time and within the budget. You should create a schedule of values before spending any money on materials and workers. Without a plan, you risk spending money on the wrong resources and losing a client’s trust. In addition, a schedule of values creates a strong first impression and provides guidelines for your workers.
How To Accomplish a Schedule of Values as a Contractor?
A schedule of values puts you on the right track, but those numbers are only estimates. You can still veer off course and mismanage resources. Some contractors stay within the budget and accomplish milestones within their deadlines. We’ll discuss how to accomplish a schedule of values so you finish projects on time and within the client’s budget.
Tailor Your Line Items to Your Project
Some clients will request more specific breakdowns for each billable item. As a result, you may have to establish budgets for each line item and provide a detailed explanation for each expense. Other clients may request less information about an overall budget instead of a budget for each line item.
Follow A Template
Clients will have specific requests, but each schedule of values provides the same basic information. You can create a schedule of values template that you use for each client. Some clients may request additional details, while your template will work just fine for other clients. Creating a template saves you time and helps you stay organized. Your template should include the following:
- Categories for each line item
- How much each line item costs
- Billing schedule
- Previous payments
- Your current progress
- Remaining costs necessary for completion
- Retainage costs
Assess Your Costs
You will have to put each cost into your schedule of values. Reviewing costs and progress can help you monitor the construction and make real-time decisions. Assessing costs early and often will help you stay within the budget and complete the project.
Avoid Front-loading Your Costs
Some contractors make the mistake of front-loading their costs. These contractors buy most of the materials upfront instead of waiting until they reach deep into their supplies. Front-loading your costs comes with several risks. A client may back out of the deal and leave you with the materials. You can structure a contract to avoid this fate, but front-loading costs make you vulnerable to this scenario. If your client suffers financial hardship, they may not have sufficient funds to pay for your services.
Front-loading your costs can also lead to complications if a client requests changes or the initial materials get misused. You may have to approach the client and ask for a budget extension. The client may begrudgingly approve your request, but it can impact your ability to get future opportunities. Front-loading can also lead to payment discrepancies, and some clients may accuse you of making false claims.
How To Avoid Delay in Project Payments
Contractors need quick payments to stay profitable and afford materials. If a client delays payments, the entire project will slow down and limit a contractor’s ability to pursue additional work. Receiving project payments on time helps you move forward and complete projects sooner. It’s no wonder contractors want payments as soon as possible.
However, some clients may take extra time to review your services or become unavailable for a few days. During these scenarios, cash flow can get tight, and your workers may look for better jobs. Losing workers can further stall construction, but paying on time will keep them on board.
