| Cost code | Budget | Actual | Committed | Est. at completion | Variance |
|---|---|---|---|---|---|
| 03 Concrete | $280,000 | $238,000 | $30,000 | $291,000 | ($11,000) |
| 05 Metals | $356,000 | $214,000 | $120,000 | $349,000 | $7,000 |
| 09 Finishes | $430,000 | $92,000 | $310,000 | $430,000 | $0 |
| 26 Electrical | $254,000 | $108,000 | $140,000 | $262,000 | ($8,000) |
| Totals | $1,320,000 | $652,000 | $600,000 | $1,332,000 | ($12,000) |
Job cost is a dimension, not an account
A contractor does not need to know that materials cost 400,000 dollars last quarter. A contractor needs to know which jobs it went to and whether those jobs had it in the budget. General accounting software answers the first question. Job costing answers the second.
In EZBilling every cost carries a project and a cost code. Cost codes follow CSI MasterFormat divisions, and each cost has a type: labor, material, subcontract, equipment or other. The chart of accounts stays short, and the detail lives where a project manager looks for it.
Costs land on the job when they are entered
When a vendor bill is entered it is allocated to a job and cost code and posted to the general ledger in the same step. Subcontractor billings, purchase orders and change orders are tied to the project too, so committed cost is visible next to actual cost.
Budget, actual and forecast
A budget tells you what you planned. It does not tell you where the job will finish. EZBilling lets the project manager maintain a cost forecast by cost code: cost to date plus an estimate to complete gives the estimate at completion, and the forecast is saved each period so you can see how it moved.
- Budget versus actual versus committed, by cost code.
- Estimate to complete and estimate at completion, maintained by the project manager.
- A profit fade report that shows projected margin eroding from one period to the next, while there is still time to act.
- A job profitability view across every active project.
Work in progress and over/under billing
The WIP schedule is the report a surety, a bank and a CPA ask for first. For each job it compares what you have earned with what you have billed.
Percent complete is cost to date divided by estimated total cost. Earned revenue is percent complete times the contract amount. If billings are higher than earned revenue, the job is overbilled, which is a liability. If billings are lower, the job is underbilled, which is an asset and often a sign of slow billing or a cost overrun.
EZBilling produces the WIP schedule from live job cost and billing data, with PDF and Excel export.
Percentage-of-completion in the ledger
For contractors who report on the percentage-of-completion method, EZBilling posts the period-end adjustment that brings recognized revenue in line with earned revenue, using costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings. A projected loss on a contract is recognized in full in the period it becomes evident, as the accounting standards require.
Frequently asked questions
What is job costing in construction?
Job costing is tracking every cost and every dollar of revenue by project, and within the project by cost code, so you can see the profit on each job and on each part of each job, not only for the company as a whole.
What is a WIP schedule?
A work-in-progress schedule lists every open contract with its contract amount, estimated cost, cost to date, percent complete, earned revenue, billings to date and the resulting over or under billing. Sureties, lenders and CPAs use it to judge how a contractor's jobs are really performing.
How do you calculate over or under billing?
Divide cost to date by estimated total cost to get percent complete. Multiply percent complete by the contract amount to get earned revenue. Subtract earned revenue from billings to date. A positive result is overbilling; a negative result is underbilling.
What is the difference between a budget and an estimate at completion?
The budget is the cost you planned when the job started. The estimate at completion is what you now expect the job to cost: cost to date plus the estimated cost to finish. Percent complete should be measured against the estimate at completion, not the original budget.
Which cost codes does EZBilling use?
Cost codes follow CSI MasterFormat divisions, with a cost type on each cost: labor, material, subcontract, equipment or other.
See it on your own jobs
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