When it comes to the building business, it’s indeed a dog-eat-dog world out there. As such, when you win bids, you naturally win big.
But, given that your competitors also use construction estimating software to score great returns, you might feel pressure to lower your standards. So, even if you win a bid and start the project, you still feel like you’ve lost, and even worse, you might also be doing a capsizing project.
To avoid this depressing scenario, here are some notes on accurate construction cost accounting.
The Process Outline
The only thing you have to remember about construction costing is that your capital should be accommodating in all levels. As a rule, you don’t want to over- or under-spend as this can ultimately result in more costly damages. While cost-cutting is indeed possible, you should abstain from doing so unless you’re dead sure nothing unexpected will come up. Assuming, especially when it comes to on-going projects, isn’t only impractical but also hazardous.
Gross and Net Difference
When it comes to business, it’s smart to calculate in terms of net gain rather than gross because this will give you honest feedback. Again, same as the process outline, you should not, at any point assume anything. Your net profit will move when the gross fluctuate, so any sudden surplus will affect your overall returns. Before you make the bid, keep in mind these principles.
Essential Standard Cost
Your construction cost report must include every intangible and tangible products and services. This typically includes the following:
- Equipment and materials. These are every piece of raw material you will use and work with (e.g. steel frames, cement, power tools, etc.).
- Labor and handlers. These are the personnel who will lay all the groundwork from start to finish.
- Overhead (surplus). These are the unavoidable cost that every construction business has; take it like an emergency fund.
As you can see, computing the cost of construction projects is complex, but simple enough if you break it down. But, the key thing you have to remember is that there is money involved in every action.