There are a many benefits of doing projects based upon a time and material or cost plus billing basis compared to lump sum contracts. The major benefit is that you’re guaranteed to make money as long your client is willing to pay for all your costs incurred on a project.
The most important procedures to have in place is a contract that accurately explains your method of accounting for those costs and what your clients are expected to view when they receive a bill/invoice from your company.
With this said, it is important to have a system in place to accurately capture those costs and to provide invoices that are easy for your clients to understand.
There are some subtle differences between time and material jobs and cost plus projects. With time & material jobs labor is billed out by the hour while material and subcontractor costs include markup.
In cost plus projects labor is handled the same ways except in most cases material and subcontractor costs are shown with no markup. The markups are calculated in the fees for managing the projects and are presented at the bottom after the costs of construction. In most cases with cost plus projects the budgets are also provided prior to construction.
Whatever method you choose for your projects, it is important to understand, that it is all about client’s trust. If you double bill your client you’ll lose trust or if your bill is wrong or isn’t accountable you’ll lose trust. Once you lose trust you’ll probably struggle collecting each time you send your client an invoice.
One of the best ways to account for your costs is to have an automated job cost accounting system that does the following:
- Includes a job cost module that captures all your cost transactions
- Allows you to enter in your predetermined project’s billable rates along with markup percentages for those costs or fees for managing the project
- For cost plus projects the system needs allow for entering budgets by category of work for the original contract or all subsequent change orders
- A system that captures the costs from the original source, which includes: Time cards from employees for labor costs and invoices, checks and/or credit card transactions for material and subcontractor costs
Once those transactions are entered and processed and accounted for a good job cost accounting system will:
- Pull information from the job cost system and create professional looking invoices easily and quickly in seconds
- Once the bills are created tag those transactions as billed so your clients never gets double billed
With a single-entry job cost accounting system all your other tedious tasks of bookkeeping functions of running a successful construction business should be completed, which includes:
- Creating vendor checks, 1099’s and lien waivers
- Tracking subcontractors workers comp & general liability insurance
- Calculating payroll and create payroll checks
- Generating W2’s, 949 & 941’s and State and Federal Unemployment Reports
- Age payables and receivables
- Financial reports including: profit & loss, balance sheets and work-in-process reports
These are just a few of the many features we’ve incorporated into our software to expedite the billing, bookkeeping and financial reporting of handling Time & Materials and Cost Plus projects.
Contractors Software Group has been developing construction software since 1995. We’ve developed one of the only single-entry solutions that expedites the processes and procedures from the initial contact all the way through to job cost accounting.
For more information, please go to our web site at https://contractorssoftwaregroup.com/construction-software-solutions/job-cost-accounting-software/