Optimising Job Costing with Construction Management Software

A practical and user-friendly document management software that helps track and manage construction project expenses efficiently can reduce costs and increase profits. The right asset-building system or software will allow a company to manage its projects more efficiently, share important information with key staff members, monitor budgets, and receive critical information such as calculating job order costs.

Calculating Job Order Costs

Calculating job costing aims to provide the management with both micro and macro-level cost information that needs to cover every expenditure. Expenditures involving the project include payroll through site excavation, foundation pouring, and other relevant activities until the project is complete. 

The first stage of job costing is determining the job and assessing the relevant factors that can affect the project’s outcomes. It is crucial since it allows the management to estimate the tasks the workers will be doing for the project. 

The next step is estimating the cost of doing the job. Expenses for a project are usually divided into one of the following categories:

Material costs

The material costs are the prices paid for components or materials needed throughout the project. Material costs are categorised as direct or indirect costs based on traceability to the product. 

If the raw material used for a project is a necessity and is directly used, they are considered direct expenses. Examples include wood, concrete, steel, and electric wire. Meanwhile, fasteners, fittings, safety equipment, and lubricants are indirect materials usually bought in large quantities and may be used for different aspects of a project.

Labour Costs

Another category of expenses is labour costs. Most construction companies’ main expense is labour, which is why keeping track of spending for crew members and subcontractors is crucial. Workers’ compensation, overtime pay, and any other related expenditures are included in labour costs.

Overhead Expenses

Overhead expenses are not linked to delivering a construction service but are allocated to the projects to help develop a more realistic cost report. Overhead expenses include utilities, cost of subcontractors, machinery depreciation, insurance, and property taxes. 

Overhead expenses are usually included in the final cost sheet that is then charged after the project is completed. In some companies, the estimated overhead expenses are challenging to measure accurately, and they set a certain percentage for it.
For more details about optimising construction management software for job costing, here is an infographic from Bizprac.

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