If you’ve ever been in a situation where your project is steadily going over budget, your reported finances are often inaccurate, or you end up missing crucial financial insights because of unorganized project financial tracking, we don’t need to tell you the benefits of keeping accurate, organized financial data for all of your projects.

In this guide, we’ll tell you everything you need to know about financial reporting for construction projects, including the importance of reports for construction businesses, some important things to include in financial reports, the best way to manage financial reports, the challenges that come with not using financial reports, and some best practices for creating reports.

The Importance of Financial Reporting for Construction Businesses

Financial reporting for construction businesses is important for all sorts of reasons, including staying on top of finances for ongoing projects, viewing how you’ve progressed or regressed financially compared to past project data, and learning and adjusting for future projects.

Staying on Top of Ongoing Project Finances

Without accurate financial reporting to keep you in the know about how money is being managed, you could end up going off the cliff. 

Reports allow you and your team to see a scannable, yet detailed breakdown of where money is being spent, made, and lost so that you can keep your finger on the pulse of project finances.

Comparing Current Data to Historical Data

Well-organized financial reports allow you to compare current project finances to previous projects, so that you know whether money management has improved or declined over the years.

As a construction professional, you understand the value of knowing how your company’s financial performance is doing right now, but what’s even more valuable is comparing your current finances to past finances in terms of financial allocation for resources, such as materials and labor; how change orders and client selections affect the overall budget; and ultimately profitability.

Learning and Adjusting for Future Projects

Financial reporting done right can potentially predict how projects in the future will do financially, which is a really valuable tool for construction companies to possess.

You can see the benefits of financial reporting immediately with financial tools that automatically keep track of project finances, and If you are diligent about creating and organizing financial reports for even just a few weeks, you can identify patterns and spending habits from which you can learn, apply to, and adjust for future projects.

The Dangers of Not Utilizing Financial Reporting

Neglecting to create accurate financial reports can cause a host of financial issues for your business including:

• Consistently going over budget in projects because you weren’t on top of your finances throughout the project
• Consistently overbidding or underbidding projects because you’re clueless about how money is being managed
• Financial errors and inaccurate insights because of the error-prone process of manually tracking financial data
• Wasting valuable time because you have to rely on manual data entry
• Delaying the discovery of crucial financial insights until the end of the fiscal year instead of having those insights on-hand all the time
• Completely missing crucial financial insights such as how the financial health of your company has progressed or regressed over the years
• Increasing your workload at the end of the tax year because you waited until the last minute to look over finances
• Having to keep up with hundreds of spreadsheets that may or may not be up-to-date
  
  

What Should Be Included in a Construction Financial Report?

Generally, a construction financial report should include cash flow data, profitability measurements, and a breakdown of expenses. However, what should be included in a financial report largely depends on the type of report you want to create. For instance, a change order report will have some different or additional data fields than a client selection report. 

To learn how you can make the most of financial reporting for your construction business with a multitude of report options, learn about ConstructionOnline™ estimating tools.

Tips for Managing Reports in Construction Projects

The best way to manage reports in construction projects is to use a specialized financial reporting software that lets you always access up-to-date data, create a wide variety of accurate reports, and gives you important filtering options, all of which remove the laborious, time-consuming task of manually entering such data into multiple, separate spreadsheets.

Have a Way to Always Access Current, Accurate Financial Data

Financial data is no good if it’s outdated and full of errors; when you’re using spreadsheets to create reports, it’s guaranteed that data will be outdated until you manually change everything yourself, and very likely that the data will be riddled with errors because of the nature of human error.

Using specialized software that automatically updates all of your financial data is crucial so that you always have accurate and relevant project data. It’s also important that the software allows you to view the up-to-date data in comparison to historical data, so that you have a comprehensive understanding of how projects are performing financially.

Create Different Types of Financial Reports

Construction projects have a wide variety of financial reports because of the complex nature and multiple aspects of construction finances, so it’s important that you have reliable software that allows you to create different types of reports.

The types of construction financial reports include more general reports like the following: 

• Profitability reports 
• Cash flow reports 
• Estimates vs. actual reports
• Estimate proposal reports
• And more …

There are also more specific reports including:

• Change order reports 
• Selection reports 
• Work-in-progress reports 
• Work order reports 
• And more…

All of these are crucial to having a comprehensive understanding of financial data – both project- and company-wide.

Filter Reports for More Relevant Financial Data

Because of the multifaceted nature of construction projects, it’s incredibly helpful to use software that can automatically filter reports based on relevant data. 

For instance, say you need a summary of a particular project’s change orders that are organized by the statuses approved, rejected, and pending. Let’s also say you need to know the added amount of time the change order will add to the project timeline. With a specialized financial reporting software, you have the option to create this level of detail in a report for you and your team. 

Important Types of Financial Reports for Construction Projects

We’ve covered that there are many types of financial reports you can create for construction projects using reporting software, but here are a few types of reports that we’ve identified as the most important and commonly-used after decades of experience in the construction  industry:

• Classification reports: shows a breakdown of an estimate’s classification types, like material, labor, equipment, and more.
• Actuals vs. estimates reports: tracks project profitability by showing variance between total estimated costs and actuals.
• Change order reports: create change order summary and overview reports that show additional cost and time requirements, change order by status, type and reason, and more.
• Selection reports: create selection overview reports that show allowances, pending and approved selections, dates ordered and delivered, and more.
• Cash flow reports: show projected cash flow based on estimate financial values
• Project-wide vs. company-wide reports: generate reports for specific projects and company-wide reports including all projects for more detailed data.
• Weekly, monthly, and quarterly reports: generate snapshot reports for different time periods
  
  

Best Practices for Creating Construction Financial Reports

Believe it or not, it's possible to do financial reporting in a harmful way. To avoid those ways, here are some best practices we've found over the years that will make financial reporting work for you and not against you:

Keep Reports Scannable, and Allow People to Drill Into Data if They Want

Ensuring your financial reports are easily scannable with the option to drill into the data makes reports more readable and understandable.

Believe it or not, there’s actually such a thing as too much detail when it comes to financial reporting; if you create a report that is so complex that only you can understand it, there will likely be more confusion and errors down the road. 

For the best results, keep the upfront information as simple as possible, and allow for the option to see more detail if needed.

Keep Track of Company-Level vs. Project-Level Reports

Tracking both company-level and project level financial data gives you a more holistic view of your finances.

If you only track company-level data without project-level data, you won’t be able to drill into exactly what succeeded and failed from project to project, and if you only track project-level data without company-level data, you won’t get the big picture financial information that’s important for profitability.

For a more complete understanding of how your business is performing financially, make sure you have a way of creating separate company-level and project-level financial reports.

Don’t Rely Solely on Spreadsheets

Relying on multiple spreadsheets that require manual data entry every time something changes is likely to cause headaches, and a lot of wasted time and energy. If you’ve ever had to rely on spreadsheets alone for financial reporting, you know we’re not exaggerating when we say you could end up juggling hundreds of spreadsheets just to get accurate financial data.

With financial tools like ConstructionOnline™, you can create accurate financial reports in seconds, complete with the ability to access up-to-date data, create different types of financial reports, and filter those reports to only include the most relevant data - all with a few clicks. With this kind of variety, financial reporting is worth its weight in gold!

If you want to know how your projects are performing financially, download our free project scorecard template where you can check the financial health of multiple projects, in addition to other crucial KPIs for your construction projects.