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“Wow. My foremen and bookkeeper are going to throw a fit.”

“That’s why you have to make proper tracking a non-negotiable. By the way, you should also track your equipment by the job. Unless all jobs need the exact same equipment, you need to spread the cost of the equipment only over the jobs that use it.”

“Why can’t I just roll my equipment costs into overhead?”

“You will end up over-estimating the cost of jobs that don’t need the equipment and under-estimating the cost of the jobs that do need it. You might lose good jobs and win bad ones.”

“Ouch. Okay, so how can I track the use of inventory?”

“Honestly, we still fight that one. If I were in your shoes, I would assume the quantity estimated is what went in.”

“How is my accounting system going to reflect that?”

“Great question. Unless you are using sophisticated or customized accounting software, your accounting system will probably never produce a report that shows the true job costs. We have special reports written into our package.

“When I was your size, we relied on Excel spreadsheets. We loaded the labor hours, equipment hours, and inventoried material quantities into a spreadsheet and calculated the costs based on our fully burdened labor rates, our average material costs, and our hourly equipment rates. We added in all other direct costs such as delivered materials and subcontractors. We compared the cost produced by our spreadsheet against the cost we estimated for the project.”