Estimating Project Costs
There are many specialized products available to help you develop estimates for your projects, sometimes referred to as job costing. Whatever method you choose for building your estimate, Sage 50 Accounting can help ensure all your anticipated job costs are accurately stored and tracked against actual costs.
The ability to determine job costs is essential when bidding on a new project - you want to ensure you don't under estimate a project's costs (or over estimate a bid price). Listed below are some key components you should consider when developing an estimate.
Which invoicing method are you going to use?
Depending on the scope of the project and your type of industry, you may choose different invoicing options for different jobs. For example, you may want to charge a fixed price for a project that requires a specific number of hours (such as the installation of exterior light fixtures), or, if you think the project scope may change, perhaps due to some unknowns (like a basement renovation which may uncover foundation issues), it might be preferable to invoice for the actual cost of time and materials as it arises, plus a management fee (a cost+ arrangement). If you expect the project to take a long time (several months or even years), progress billing may be the best option.
How do you want to track internal and external costs?
When preparing a project estimate, be sure to account for both incidental and potential costs. Incidental costs which could be missed: building permit fees, licences, electrical permits, dumping fees, courier charges, etc. These costs add up, and can become significant. In addition, your project estimate should factor in the possibility of on-site events, such as a burst water main, the need for additional city or utility services, or additional equipment rentals. To streamline the estimating process, add these items to inventory and create a checklist in Sage 50 Accounting to remind you to add these costs to your estimate, and possible project costs that may need to be factored in or conditionally costed in the project estimate.
What is your budget?
It is important to set up a budget to ensure you will have the funds on hand (cash flow) to pay for expenses incurred during a project.
With the correct pricing for your services and identified price lists for materials set up in Sage 50 Accounting, you are ready to generate an estimate (sales quote) for your potential customer. It is important to capture as much of the project detail as possible on your original estimate so that you can easily convert it to a contract (sales order) later.