Tracking Construction Expenses and Job Costs
Tracking your expenses and job costs are critical to staying within a budget. If you’re not staying within budget, then you’re not making money, and if you’re not making money, you’re probably not going to be in business for very long!
Create a Budget
As a general contractor it’s your job to create an accurate estimate for every project you build. In order to be profitable and achieve your desired margin you need to know exactly how much it’s going to cost you. A budget details all of the project's expenses and costs from start to finish (Landau).
They include things like:
- Labor cost
- Equipment and tools
Your budget helps you keep track of how much you are spending so you can ensure the job will be profitable. Although a construction budget estimates all of your costs, it’s important to leave some profit cushion in the event things go wrong!
There are simply too many variables and inputs to try to manually track everything. Experts don’t even recommend Excel for this task. The most common accounting software to track costs and expenses are Quickbook and Xero. There’s also a lot of specialty software that’s trade specific that contractors might also find helpful. Using software allows you to track real time costs, manage cash flow, stay on budget and optimize your business.
Stack is a cloud based construction software solution that helps contractors bid smarter, faster and win more jobs. It’s designed for contractors, sub contractors and material suppliers.
It uses technology to help with:
- Takeoffs and estimating
- Field productivity
- Project Management
These tools increase efficiency, help submit more bids and increase revenue!
JobNimbus was built for contractors just like you to take your business to the next level by easily organizing, tracking, and automating your work. By streamlining workflows within JobNimbus, you’ll save time, money, and sanity and be able to see the big picture of your business at a glance.
Their goal is to supercharge your workflow by:
- Organizing leads
- Optimizing sales
- Managing projects
- Streamlined billing
They also offer a 14 day free trial with no credit card required!
Acculynx is an all in one roofing software company that has serviced over $50 billion in contracts throughout the US and Canada. They help you close deals faster by offering:
- Industry leading Customer Relationship Management
- Advanced Integrations
- Order satellite images of roofs with Eagleview
- Autopopulate estimates with Eagleview measurements
- Integrates with your material supplier to use real time pricing ensuring your estimate’s costs are accurate
- Photo Storage
- Estimate Building
These are just a few examples of trade specific software. It doesn’t matter what trade you’re in, there is a lot of great software built to help with automation of workflows, estimating and customer relationship management, specifically for your business!
Keep Receipts and Invoices
Keeping track of all your receipts and invoices is critical for any business. In today's world it's as easy as snapping a picture and uploading it directly to your accounting software.
A common issue is losing track of receipts on purchases, or struggling to assign purchases to the correct job. If you send a member of your team to Home Depot with your credit card to pick up 20 sheets of plywood and they forget to give you a receipt it can create friction between you and your bookkeeper. Or, what if you used that plywood for multiple projects? The bookkeeper has to call you to determine what the purchase of $600.00 on 1/11/2023 at Home Depot was? If you can’t recall, then that cost isn’t being applied to the correct job and might appear to be more profitable than it actually is. That’s just one receipt - imagine if it was 20 receipts and a couple thousand dollars of purchases, or even more!
Also, the IRS requires that you have all of your receipts on hand for up to 3 years after purchase. In the event that you get audited, it’s important to have your receipts handy!
Track Labor Costs
Labor can easily be one of your most expensive costs. Keeping a close eye on each employee's hours and labor cost can help monitor how much you are spending and also keep your workers accountable (Riddell). Another advantage of tracking labor costs is you can use your own historical data to accurately bid jobs. You can look at labor costs and say building an outdoor kitchen this size usually takes 200 labor hours. Use that data to build more accurate estimates. If you do the job and find that it took more or even less time, dive into nitty gritty and determine why your estimate was off. You can use these insights to better optimize labor and create better estimates!
Materials are another significant cost that can add up quickly.
Billing and pricing mistakes happen all the time and the only person likely to catch them is you!
Make sure when you return material to supply houses they are crediting it back properly.
Make sure you have fair pricing
When a sales rep cold calls you, be polite and ask them to send their best price list. You might have a great relationship with your current material provider, but make sure you have a great price as well by knowing what their competitors charge.
Review Expenses Regularly
Make a habit to constantly review your expenses. You should know everything coming in and everything going out from your accounts. If expenses start to become a problem or get out of hand you can immediately get a grip or make necessary changes to stay within your budget.
Make Sure Everyone is on the Same Page
Make sure your entire team is on the same page. When you make new policies or procedures, make sure everyone knows why they are in place. If you send someone from your crew to Lowe’s to pick up some last minute materials and they don’t send a picture of the receipt - let them know how important EVERY receipt is and why it is that you have your procedures in place.
Keeping Track of Expenses Helps Make Sure You’re Profitable
Use the tips discussed in this article to help track your expenses and job costs. Don’t let anything slip through the cracks. Everything you do affects your bottom line and as a business owner it’s your job to keep track of all of your expenses. Be sure to:
- Create a budget
- Use software
- Keep receipts and invoices
- Track labor costs
- Monitor materials
- Review expenses
- Make sure everyone on your team is on the same page
If you have any questions about construction bookkeeping, accounting, best practices or want to join our construction bookkeeping community, check out our resources and original content at ConstructionBookkeeping.com