International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056
Volume: 12 Issue: 05 | May 2025 www.irjet.net p-ISSN: 2395-0072
A comprehensive study on key performance indicators for finance management in construction projects: a case study approach
Ezhil R. Sharon1 , Fathima Taskeen2 , Indra Priya3
Post-Graduate Student, Faculty of Architecture, Dr. M.G.R. Educational and Research Institute. Chennai, India
Asst H.O.D, Faculty of Architecture, Dr. M.G.R. Educational and Research Institute. Chennai, India
Add H.O.D, Faculty of Architecture, Dr. M.G.R. Educational and Research Institute. Chennai, India
Abstract - This research examines the role that financial Key Performance Indicators (KPIs) can play in the management of construction projects in order to promote budget compliance, liquidity, and risk management. The case study examined the Chennai One World project in order to identify specific financial KPIs that impacted the project's excessive cost overruns, liquidityandtimedelays.Thefinancial KPIs examined are the Cost Performance Index (CPI), Return on Investment (ROI), and Cash FlowRatio (CFR). The Institute of Corporate Directors Principle (80/20 Principle) is the foundation of the research financial KPIs, which emphasized the top 20% of KPIs that had 80% of the impact in a building project. The developed framework assisted in proactive governance of financial decision making and continuous monitoring through benchmarking and experts reviews in real-time. The research results highlighted the importance of supplier control, liquidity, and strategic budgeting to achieving supplier management goals. The research results emphasized that all threeelementsaresignificanttoachieving project and financial success. The framework was a practical and scalable approach in increasing financial transparency, reducing cost overruns and financial risk in construction projects.
Key Words: FinancialManagement,ConstructionProjects, Key Performance Indicators (KPIs), Cost Control, Budget Adherence, Risk Management, Project Success, Strategic Decision-Making
1.INTRODUCTION
Financial management is critical to control costs, manage liquidity, and deliver work on time in the construction industry. However, the industry has not applied financial KPIsconsistentlyasacollectivewhole.Thestudyclosesthis researchgapbyproposinga formalKPImodeltoenhance financialpredictabilityandtransparency.
2. LITERATURE STUDY
This considers the role of KPIs in the construction management area, stressing things like timeliness, quality, safety,andefficiency.Keypointsarethattheapplicationof KPIs may, particularly in financial statistics, cause project failureandfinancialmismanagement.Theamountofproject failure is huge, as 80% of project failure is attributable to
poor financial practices and there should be standard financialKPIs.
2.1 Identified Research Gap and Need for Further Study
We've use time, safety, and quality KPIs, but there isn't a standard in financial KPIs, and no way to accurately representoverallfinancialhealth.Manygapsbetweenreal timedata,coordinationwithdifferentstakeholders,tracking risks, etc. makes immediate research into financial KPIs imperative.
This thesis addresses financial performance evaluation vs planningwithanemphasisonfinancialKPIsandprovidesa frameworkthatcanbeadaptedandvalidatedusingpractical casestudies.
2.2 Financial Management in Construction
Aconstructionproject'soutcomeisgreatlyaffectedbyhow financesaremanagedandallocated,estimated,budgetsare developed, and financial risk is managed. Effective budgeting,funding,andfinancialplanninghelpswithsteady cash flow, reduces risk, and minimizes delays created by fundsbeinglimited.
In construction, financial planning, budgeting, and project funding:
• Financial Planning: Allocating money and making forecasts.
• Budgeting: Manages project costs and maximizes availablefinancialresources.
• Project funding: Secures ongoing access to financial resources to support the continued progress of the project.
FinancialRisksAssociatedwithConstructionProjects:The impact of financial risks on construction projects can be catastrophic, resulting in both severe delays and cost overruns. Financial risks include funding deficiencies, problemsattheconstructionsite,aswellasuncertaintyin constructioncosts.BymonitoringworksprojectswithKPIs, financialriskscanbeidentifiedsoonerratherthanlater,and actionscanbetakentoaddressthembeforetheyresultina drainonfinances.
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056
Volume: 12 Issue: 05 | May 2025 www.irjet.net p-ISSN: 2395-0072
2.3 Market Benchmarking and Industry Standards
Benchmarking aligns project performance with industry standardsofprofitability,cashflow,andcostmanagement. KPIsfacilitatefinancialdecision-making,benchmarking,and bestpractices.
KPIsmeasureefficiency,risk,andfinancialhealth.Lagging KPIsmeasurepastresultswhileleadingKPIsindicatefuture problems.Goodreportingenablestheaccuratetrackingof performancewhichcontributespositivelytoprojectsuccess, riskmanagementanddecision-making.
3. METHODOLOGY
The research utilizes a qualitative case study-oriented methodology, relying on the primary data source of interviews and secondary data sources to decipher key financialKPIsinconstruction.UtilizingtheParetoPrinciple (the 80/20 rule), it focuses on the top 20% KPIs that influence80%oftheoutcomes(theprojectoutcomes).The KPIs include budget control, cost efficiency, rework and change control, cash flow and liquidity, debt and funding pressure, and procurement and supplier management. A structured KPI framework was selected, developed, and validated for real-world application through industry benchmarkingandexpertverification
4. CASE STUDY
Artha Properties' Chennai One World project, an upscale villacommunityinChennai'sITCorridor,wassupposedto cost₹150Crbutendedupcosting₹195Crduetoa30%cost overrun. It had significant operational and financial problems such as delays, liquidity issues and incomplete phases that necessitated a comprehensive analysis of its financialKPIs.
4.2 Key Financial Findings
Theprojectincurreda₹45Cr(EVM),30%costoverrun,and aCPIof0.77.Projectfinanceswerestrainedbecauseof25% change orders and rework (₹16.57 Cr, 8.5%). With 42% relianceonloans,38%rigidityonsuppliers,and22%delays frombuyers,theliquidityratiois0.50(D/Eratio:1.6,27% increaseininterest).
Witherinefficiencieswererevealedby:
supplierdefaults(18%)
procurementdelays(18%)
vendorscoreof(63/100)
4.3
External and Market Challenges
NationalDayparadeandfireworksevent,basedonalotof expenses on COVID and demolition projects, and a dip in revenuecountRealEstatemarket,resultinginalostof19% inrevenuebutsawa14%increaseincostsduetoinflation.
Table -1: PerformanceSummaryofFinancialKPIs
Area
Budget Management
KeyMetrics&Findings
30%costoverrun,CPI:0.77,₹45Cr EVMoverspend,inflation& volatility-drivenvariations
CostEfficiency HighVAC,delaysinlogistics, materialwaste,andcostlyrework
Rework&Change Control 8.5%costonrework,25%change orders,stakeholderdelays
CashFlow& Liquidity 42%loandependency,D/Eratio: 1.6,27%interestcostrise
Debt&Funding Stress Poorhedging,delayedfunding,low liquidity,30%+idealloancap exceeded
Procurement& SupplierMgmt. 18%procurementdelay,63/100 vendorscore,importedmaterial costoverrun
5. ANALYSIS
Table -2: TheParetoPrinciple(80/20rule)byCriticality percentages
6. RESULT AND DISCUSSION
HighCriticalityKPIs(21%)–Musthaveheightenedattention regardingfinancialandoperationalcontrols:
Budget Management - Budget Variance, CPI, EVM, EconomicVolatility,Hedging.
CostEfficiency-VarianceatCompletion(VAC).
Rework &ChangeControl -ForceMajeureDelays, CoordinationEfficiency.
Cash Flow & Liquidity - Cash Flow Sufficiency, WorkingCapitalTurnover.
Debt&FundingStress-WorkingCapitalTurnover.
MediumCriticalityKPIs(60%)-Requireongoingmonitoring toensurefinancialviability:
IncludesProcurementEfficiency,ValueEngineering, Variation Orders, Supplier Performance, Advance Recovery,BuyerPaymentDelays.
Impactsmultiplecategories:budgeting,cost,rework, cashflow,andfunding.
International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056
Volume: 12 Issue: 05 | May 2025 www.irjet.net p-ISSN: 2395-0072
LowCriticalityKPIs(19%)–Requireperiodicmonitoringto avertdowngradingefficiencies:
SustainabilityCost,Storage/MachineryCost,Debtto-Equity,andMarketLiquidityStress.
Monitorlongtermfinancialresilience/hiddencost leakages.
Remember that 21% of KPIs will have 80% of the project outcomes-bettertargetingthis21%ofKPIsreturnsabetter leveloffinancialcontrolandlevelofprojectsuccess.
6.2 Framework
By applying proactive budgeting, liquidity optimisation, procurement management, funding balance, compliance assurance, and KPI-based monitoring, this integrated framework provides better financial control. The suite of tools together minimises the potential of delays, cost overruns, and financial shocks by being aligned to project milestones.
Table -3: FrameworkSummaryTable
FocusArea IntegratedActions&Tools Purpose
Financial Planning & CostControl
Cash Flow & Liquidity Management
Employ risk-adjusted budgeting and cost index forecasting; use Aconex/BuildSmart dashboards to track CPI and SPI;useBIMtoreducerework; use CCB to enforce stringent changecontrol;anduserolling projectionstoforecastcostson amonthlybasis.
Use ERP dashboards to monitor daily cash flow; use CRM reminders and penalties to structure buyer payments; recover advances based on milestones; bargain with suppliers for flexible credit; anduseprivateequityorREITs asbackupfundingsources.
Prevent overruns, control changes, minimize rework
Regulatory & Risk Compliance
Procurement & Supply ChainMgmt.
Debt & Funding Management
Ensure liquidity, reduce payment delays, minimize loanreliance
Use strategic sourcing to secure long-term rate contracts;useSAPMM/Oracle SCM to plan MRP; evaluate vendor performance on a quarterly basis; use GPS/ERP for logistics; and give local sourcing priority to lower risks. Timely material delivery, reduce price fluctuations
UseinvestororREITmodelsto keeploanamountsunder30%; hedge interest rate risks; match loan disbursements to projectprogress;andkeepa5–
Reduce financial stress, ensurestagewisefunding
Monitoring & Reporting
10%emergencyreservefund.
Userisktoolstomaintainarisk register, establish fast-track approvalteams,conductearly due diligence for compliance, and predefine arbitration termstopreventlawsuits.
Utilise Power BI/Tableau to create real-time dashboards; distribute weekly financial reports;conductquarterlyKPI reviews;andtrackPV,EV,and ACusingEVMtools.
7. CONCLUSIONS
Avoid legal delays, manage regulatory risks
Enable informed decisions, track project health
The study concluded that financial KPIs of a structured nature are an essential component of any construction projectimprovingriskmitigationandmanagement,financial control, and transparency of the financial records of the project.Inparticular,throughacaseanalysisoftheChennai One World project, the authors identified poor financial planning, overall project rework (₹16.57 Cr, 8.5%), and inefficiencies with supplier management (vendor score: 63/100)askeycontributorsto30%costover-runs,aCPIof 0.77,andanEVMover-spendof₹45Cr.
Itisalsonoteworthythattheauthorsstated,inreferenceto the Pareto Principle, that 21% of KPIs affect 80% of outcomes in terms of the project's success overall. The uptakeofstrategicprocurementpoliciesandprocurement strategies coupled with effective management of debt/funding,liquidity,andbudgetingarekeycomponents in successful construction project delivery. The proposed KPIframeworkenhancestransparencyandaccountability, improves cash flow tracking, unlocks efficient vendor management (improves delays - 18%), and essentially enablesbettercontrolsoverkeyfinancialindicators,i.e.D/E ratios(target≤1.0,actualvalue1.6).
This report will provide a template that is scalable and customizabletoallowprojectmanagerstomakechangesina proactive,asopposedtoreactive,mannerleadingtotimely projectdelivery, budgetcomplianceandfinancial viability overthelongerterm.
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