Imagine this: your construction project is cruising along smoothly, and the budget seems airtight. But then, out of nowhere, you get the news — costs are spiralling, and your margins are shrinking fast. What happened?
As it turns out, common financial mistakes — like relying too heavily on spreadsheets, or not properly tracking variations — are quietly eating into your margins. These mistakes aren’t just frustrating; they’re costly.
In this article, we’ll break down five costly financial mistakes and show you exactly how to avoid them. Let’s get started:
Many construction companies make the mistake of using the general ledger (GL) to track detailed project costs. But the GL is built for overall financial reporting, not for providing granular insights on how much you’re spending and where.
Why this is a problem:
The general ledger might offer a broad overview, but it quickly falls short when it comes to project-level detail.
Adding more GL codes to track specific project costs might seem like a solution, but it only complicates your chart of accounts without giving you the granularity you need. This leads to inaccurate cost tracking and makes it difficult to compare actuals to your budget or pinpoint where things went off track.
👉 Solution:
Instead of overloading your GL, use cost codes to track detailed project expenses.
Cost codes allow you to break down your project into categories — like labour, materials, and subcontractors — so you can compare actual costs against your budget at a granular level. This approach provides far better insights into where you’re spending and how well your project is performing financially.
Failing to accurately capture and track costs tied to project variations is a common and costly mistake. Whether it’s a last-minute change in scope or additional work, if you’re not separating these costs, you’re likely losing money.
Why this is a problem:
When you don’t isolate the costs associated with variations, it becomes nearly impossible to see how these changes impact your project’s profitability.
If variation costs get lumped into your main budget, you won’t know if the additional work is eating into your margins or if you’re even recovering those costs. This can lead to scope creep, where unexpected work goes unbilled, damaging your bottom line.
👉 Solution:
Use a system that allows you to set up variation codes and allocate costs specifically to those variations. This creates a clear separation between your original project scope and any additional work.
By ring-fencing variation costs, you’ll be able to track whether you’re recovering expenses and how each variation affects your overall project performance. This clarity ensures you’re not leaking margins on untracked or underbilled work.
Relying on manual data entry for cost management might seem manageable, but it’s actually one of the biggest risks to your project’s financial accuracy and efficiency.
Why this is a problem:
Manual processes are prone to human error, whether it’s a mistyped figure, duplicate entries or missing important details. These mistakes can lead to inaccurate financial reporting, missed costs and wasted time fixing errors.
Manual entry also slows down your overall workflow, making it harder to stay on top of real-time financial updates, which means you’re always a step behind on key decisions.
👉 Solution:
Invest in automation. Tools like invoice automation and real-time cost- software eliminate the need for manual data entry by capturing costs directly from your suppliers, timesheets, and purchase orders.
Automation reduces the chances of errors and gives you up-to-date financial insights, so you can focus on managing the project rather than correcting mistakes. Not only does this save time, but it also ensures that your financial data is always accurate and ready for real-time decision-making.
In construction, loyalty to preferred suppliers is common, but it could be costing you. If you’re not regularly testing the market for competitive pricing on materials, subcontractors, or services, you may be overspending without realising it.
Why this is a problem:
When you stick to the same suppliers without comparing prices, you could be overpaying simply out of habit. This can have a direct impact on your project’s profit margins. Even small overcharges on materials or services can add up quickly across a project, leading to higher-than-necessary costs.
👉 Solution:
Make a habit of testing the market by comparing quotes from at least three different suppliers for each trade or service. This ensures you’re getting competitive rates, even from your preferred vendors.
You can also use invoice automation tools to double-check that the prices you’re charged match the original POs and agreed supplier price files, reducing the risk of overpayment.
An often overlooked financial mistake is failing to track the utilisation of equipment and resources.
When you don’t monitor how well your machinery, tools, or workforce are being used, it can lead to overspending on underused equipment, unnecessary rentals, or inefficient allocation of labour.
Why this is a problem:
Without proper tracking, equipment may sit idle, while rental costs or maintenance fees continue to pile up.
Similarly, inefficient resource allocation can lead to wasted labour hours or delays. This lack of visibility into how your assets are being used can drain your budget without you even realising it.
👉Solution:
Implement a system like Lentune Yard to monitor and manage your equipment and assets in real-time.
Lentune Yard tracks where your equipment is, how often it’s being used, and whether it’s time to return, repair, or reallocate it. This ensures that every piece of machinery and every resource is being used efficiently, minimising downtime and reducing unnecessary costs.
It’s clear that construction financial management isn’t just about tracking numbers — it’s about using the right tools to make informed decisions at every stage of your project.
By addressing common financial mistakes like inefficient equipment usage or manual data entry, you’re not just saving money — you’re optimising how your entire project operates.
Ready to make smarter financial decisions and protect your margins? Explore how Lentune’s cost management solutions can help: