So often, companies want to have the ability to produce budget to actual job cost reports WITHOUT involving an accounting department. Very RARELY that can be done because project management operations would require a complete manual tracking process. That action would completely burden project manager’s time management. The optimal way would be to have the project management department tightly integrated with the accounting department. There are so many benefits for any company to integrate both the construction management and construction accounting departments.
The construction estimating department creates the estimated anticipated cost and then applies a markup to determine the selling price, bid, or quote. Estimating also recaps the very detailed estimate into a manageable series of job cost codes (approx 50- 250 master job cost codes on average) that may be used if the job is awarded to your company. Then, project managers, purchasing managers, or production managers, buyout (or schedule self-perform labor) the job and eventually receive invoices to pay (approval) per the respective purchase order/subcontract, as well as per the job cost code. (self-performed field labor reporting aka: time cards, are also tracked per the respective job cost code) Then the construction accounting department PAYS the approved invoices and / or approved payroll which creates the ACTUAL job cost data. That complete process is an effort to compare the estimated job cost versus the ACTUAL job cost. As said earlier, the only EFFECTIVE way to produce Budget to Actual Job Cost Reports is to pay invoices by using a construction estimating software program or construction estimating process, AS WELL AS a construction job cost accounting software program.
For example: if you are an electrical contractor, the job cost code for 2×4 lighting fixtures can be code 12345; so all ESTIMATED COST of the materials, labor & equipment can go into that code as the job cost budget estimate. Likewise, the same would be for the ACTUAL cost of the materials, labor & equipment can go into that code as the job ACTUAL cost when the construction accounting department pays job invoices. So here is the flow how both BUDGET and ACTUAL data could be gathered. Budget code would include the 2×4 fixture, the conduit, the wire, the terminations etc., all going to budget code 12345. Now, as material is being delivered (2×4 fixtures, wire, conduit, etc) it is coded as ACTUAL job cost code 12345. As ACTUAL labor time (timecard) is being recorded not only to the job number but also to the job cost code activity, or task 2×4 fixtures 12345. The labor and equipment time would/could also be for setting the 2×4 fixture, running wire, running conduit, etc in one Job Cost Code. OR, if you are a concrete contractor the job cost code for a slab on grade can be 12345, or if you are a masonry contractor the job cost code for CMU exterior walls is 12345, so hopefully you get the picture here.
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