Professional budgeting tool.

Georgy Zemitan, Project Manager, ITeam

Construction and development companies are showing increasing interest in modern management technologies, in particular, in budget management. This is understandable - the time of “easy money” is ending in the industry, competition is intensifying, in which companies with effective management will win. In this article, we will share the experience of implementing budget management in companies in the construction industry, illustrating the story with examples on the BPlan automated budgeting system.

Because budgeting is a relatively new technology for construction companies, it tends to be underused. Basically, the tasks of managing the financial flows of the company are being solved, and the management of the profitability of activities and the value of the company is not yet relevant. Accordingly, all budgets are prepared in terms of cash flows (receipts and payments of cash), and of the three main budgets (BDR, BDDS and Balance), only BDDS is used.

With that said, a typical development company budget model consists of the following budgets:

Sales budget
Construction cost budget
Management budget
Business expenses budget
Development budget
Bank settlement budget
Investor settlement budget
Cash Flow Budget (CFB)

It makes sense to start automation of budgeting with the creation of a directory of construction objects. This analytical section will be used in both the sales budget and the construction budget. If the company operates in several regions, it is convenient to group the objects by geography. The figure shows an example of a directory of objects (analytical direction) in the BPlan system. The created hierarchy serves not only as a means of convenient visual presentation of data in budgets, but also allows you to automatically consolidate data from specific objects into total figures for cities and for all objects in general.

A characteristic feature of the construction business is the distribution of built apartments between the developer company, external investors and the local administration. Therefore, before developing the budget system itself, as a rule, a reference table of the parameters of construction projects is compiled, giving a picture of the planned and actual distributions of the leased areas. In it, for each object, its total area is entered, as well as the percentage of the area transferred to the local administration and a third-party investor. As a result of the calculation for each object, the area remaining at the disposal of the company is determined.

The sales budget is one of the most complex budgets in a construction company. The matter is that it, as a rule, contains the largest number of analytical sections (directions in BPlan terminology). In this example, all articles of this budget are considered in the context of 4 areas of analytics: cities and construction sites, types of apartments, budget periods and versions (planned, actual, absolute deviation, relative deviation).

The direction "Type of apartments" is present in companies engaged in housing construction. It provides sales analytics by apartment type (number of rooms, footage).

In addition, the sales budget in most cases contains a non-trivial structure of items, since both the price and revenue are divided into contractual and insurance.

The sales budget structure looks like in BPlan as shown in the figure on the right. Budget items are presented in the upper part of the window. At the bottom are the analytical sections used. Of course, some articles must be calculated. For example, revenue is calculated as the price per square meter multiplied by the volume of sales.

The same budget in the planning or data analysis mode in the table is shown in the figure below. The capabilities of the BPlan table made it possible to display a complex multidimensional budget structure in the form that is most convenient for work at the moment. Namely, the data for the analysis "Plan-Fact" for the article "Revenue" for January is shown in the context of objects and types of apartments. Other items and budget periods are not displayed in this table view.

Setting a different display form for the same budget table allows you to answer other questions. For example, the form of the table in the following figure makes it possible to analyze the actual dynamics of the number of apartments sold in Moscow.

After the sales budget, as a rule, a budget for construction costs is developed, one of the possible options for which is shown in the following figure. All cost items (works performed) are grouped into four main chapters: "Preparation of the construction site", "Main construction objects", "Energy facilities" and "Unforeseen costs". The directory of cost items should be designed in such a way that it can be used without changes for all objects. The figure shows an example of a budget for construction work costs in the plan-fact analysis mode for "Object 1" following the results of February. Positive values of deviations, corresponding to the excess of actual costs over planned ones, are highlighted in red.

Further, a “Managerial Expenses Budget” is developed, which reflects the items of expenses associated with the management of the company (office expenses, salaries of management personnel, etc.), a “Commercial Expenses Budget”, which contains all costs associated with real estate activities and a “Development Budget ”, showing the distribution of financial resources by budget periods allocated by the company's leaders for its development. In general, the structure of these budgets does not bear any industry specifics.

Specific for a construction company is the active use of external financing in the form of bank loans and funds from external investors, which is always reflected in the budget model. The budget for settlements with banks should give a picture of receipts and payments of loans, as well as interest payments both for each creditor bank and in total for all banks.

The budget for settlements with investors contains planned and actual receipts of external investments with analytics for specific investors.

A development company may have several legal entities in its structure. For example, often the functions of investment, construction and sales are separated into separate legal entities. persons. In this case, when budgeting cash flows, it is necessary to manage the solvency of several current accounts. To do this, BPlan creates a directory of settlement and cash accounts, which is used in budgets as necessary.

At the head of the budget system of a construction company is the Cash Flow Budget. It gives a complete picture of opening and closing balances, as well as receipts and payments of cash for the company as a whole. The value of the article "DS at the beginning of the period" in the first budget period is entered into the table (in the example - 5000 USD in January). All items of income and payments are calculated automatically based on previously compiled operating budgets. The item "DC at the end of the period" is calculated as the initial balance of funds, increased by the amount of receipts and reduced by the amount of payments. The value of the article "AC at the beginning of the period" in the second and subsequent periods is equal to the final balance of the previous period.

In conclusion, we emphasize once again the main tasks that cash flow budgeting, which is most often used in real estate companies, solves:

Management of solvency and liquidity of the company.
Analysis of the sales budget in the context of objects, versions, customers, distribution channels, types of apartments and others.
Obtaining a clear picture of the structure of costs for construction work.
Management of mutual settlements with creditors and investors

Thus, being able to plan and analyze the company's cash flows, its leaders can manage much more efficiently.

At the same time, the directions for further development of budgeting are also clear. It is necessary, in addition to cash flows, to start budgeting in the language of income and expenses, to correctly determine the company's profit and directions for its use. For companies aimed at increasing their market value, it is necessary to draw up a planned balance sheet and control the actual dynamics of changes in assets and liabilities. In addition, in order for budgeting to truly become a management technology, it is necessary to involve the heads of all centers of financial responsibility in the development of budgets, develop a system of their motivation, depending on the indicators actually achieved, and introduce a management accounting system that would correspond to the financial and budget structure.

Of course, effective budgeting is impossible without appropriate automation. At the same time, at the initial stage of introducing budget management in a company, it is reasonable to use an inexpensive and easy-to-learn and configure program that is available for self-implementation.