In big capital projects, forecasting is supposed to help teams stay one step ahead. You plan for costs, track progress, and try to predict where the money’s going. But sometimes, even the most detailed forecasts still lead to big financial surprises.
Why does that happen? It’s usually not because someone made a huge mistake. It’s because a few small errors or blind spots slip in and get ignored—until they snowball.
Forecasting errors don’t always come from a single, obvious mistake. Instead, they often result from things that weren’t noticed or overlooked at the start of the project. These small issues build up over time, slowly growing until they turn into bigger problems that the team didn’t foresee. Understanding the subtle yet significant factors that lead to forecasting issues is crucial for keeping projects on budget and on schedule.
Overconfidence in the Plan
One of the biggest problems is trusting the original plan too much. At the start of a project, everything looks perfect. You’ve got your schedule set, your costs predicted, and all the team members in place. It’s easy to believe that everything will go exactly as planned. But capital projects rarely unfold like clockwork. Projects often change in ways that aren’t anticipated. Delays are inevitable. Weather might disrupt schedules. Materials cost more than expected. Teams shift as resources get reallocated or issues arise. The problem is that when forecasts are based entirely on the initial plan and don’t adjust for these changes, they quickly become irrelevant.
A forecast should never be set in stone. It’s just a starting point, a tool to help guide the team. As the project progresses and things shift, the forecast must be flexible enough to account for these realities. The key to accurate forecasting is the ability to adjust and adapt as the project evolves. By monitoring and updating regularly, the team can ensure that their forecast stays aligned with the project’s actual trajectory.
Not Tracking the Right Data
A forecast is only as good as the data behind it. If you’re relying on outdated numbers or estimates that haven’t been updated, the financial picture will be skewed. The numbers that went into the forecast at the beginning of a project are often the best guesses available, but as the project moves forward, those numbers need to be refreshed and updated frequently. Sometimes, missing invoices or overlooked costs can lead to inaccurate reports that show things are on track, when in reality, there are hidden financial discrepancies.
Inaccurate data creates a false sense of security, and if teams continue to operate on outdated or incomplete information, they’ll eventually face a large budget gap they didn’t see coming. Real-time data is essential for accurate forecasting. It’s not enough to rely on historical figures or estimates from months ago. Regularly updating data ensures that the financial picture stays as accurate as possible and that there are no surprises down the road.
Ignoring Small Cost Creeps
Most financial surprises don’t come from one giant, unexpected misstep. Instead, they result from small, seemingly insignificant changes that, over time, accumulate into bigger problems. A few extra days of labor here, some unexpected shipping fees there. When these minor expenses aren’t caught early, they get incorporated into future forecasts and spread out over time, unnoticed by those responsible for monitoring the budget. By the time the issue is realized, the discrepancy between the forecast and the actual financial situation has grown too wide to fix easily.
The key to preventing these small costs from snowballing is paying attention to the little things as they happen. These incremental changes might seem minor in isolation, but over the course of a long project, they can significantly impact the overall budget. It’s crucial to track these changes closely and ensure they’re incorporated into updated forecasts as they arise. By catching these small shifts early, you can avoid bigger headaches and keep the project within budget.
Forecasting in a Vacuum
A common mistake in forecasting is working in isolation. Sometimes, project managers, finance teams, and contractors each create their own forecasts based on their own understanding of the project. But if these teams aren’t aligned, it’s easy for the forecast to become an inaccurate reflection of reality. One department might assume everything is ahead of schedule, while another is struggling to meet deadlines. One team might expect that costs will stay low, while another knows they’re already over budget.
This lack of alignment can lead to inaccurate forecasts, leaving executives with a misleading picture of the project’s financial health. Forecasts must include input from all key stakeholders. Each part of the project team has valuable information that can affect the forecast, and the more people who contribute, the more accurate and reliable the forecast will be. By ensuring all teams are on the same page, you can prevent gaps in the forecast and catch discrepancies before they become serious problems.
Forgetting to Update the Forecast Regularly
It sounds obvious, but it’s one of the most common mistakes: failing to update the forecast as the project progresses. A forecast created at the beginning of the project might be spot-on at the time, but as the months go by, things change. New risks emerge. Costs shift. Progress is made—or setbacks happen. If the forecast isn’t updated regularly, the project’s financial picture becomes outdated, leading to misaligned expectations.
The forecast needs to be treated as a living tool that evolves with the project. Waiting for quarterly reviews or major milestones to update the forecast is not enough. Ideally, the forecast should be revisited at regular intervals—whether weekly or monthly—so that it reflects the current state of the project. This keeps the team informed and prepared to address any issues as they arise, rather than being caught off guard by unexpected developments.
Lack of Historical Perspective
Another often-overlooked mistake is failing to consider the lessons learned from past projects. Every completed project holds valuable data that can help improve future forecasting. For example, how long did a similar renovation project take to finish? Did you underestimate concrete costs in a previous build? What unforeseen issues slowed the progress of past projects? These insights are vital for creating a more accurate forecast.
Without looking back at historical data, it’s easy to repeat mistakes or fail to anticipate certain risks. By reviewing data from past projects, teams can refine their estimates and avoid the same pitfalls. Learning from experience makes forecasting sharper and helps teams better predict potential challenges before they arise.
Making Forecasts Smarter: The Right Approach
While no forecast can be 100% accurate, there are ways to make them more reliable and reduce the chance of financial surprises. The best forecasts are those that pull from real-time data, are updated regularly, involve input from all parts of the project team, and leverage the lessons learned from past projects.
A strong forecasting system should also be flexible enough to adjust as the project moves forward, catching small changes before they snowball into bigger issues. By ensuring that the forecast is regularly updated and based on accurate, up-to-date data, teams can create a more realistic financial picture, stay ahead of any potential issues, and maintain control over the project’s budget.
The bottom line is that forecasting is an ongoing process, not a one-time event. By continuously refining and updating your forecasts, you can avoid the surprises that so often derail capital projects. It’s about building a system that helps your team stay informed and prepared for whatever comes next.
Estimating, Capital Projects, review, Validate, Capital Funds, Compliance
