How to use cost codes in a construction business
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Explanation of Cost Codes and how to use cost codes in a construction business. Also includes how to create a Cost Codes Report in Quickbooks.
How to use cost codes in a construction business
- 2. ABOUT COST CODES Total in from Sales (from checkbook) 2,378,870 Total out for Construction (from checkbook) -1,903,096 Total out for Overhead (from checkbook) -356,786 Profit 118,988 Why bother going through the accounting process? If this is all you get from your accounting…
- 3. If you are not going to use the financial information in your accounting system to help you make informed management decisions… Why bother going through the accounting process? ABOUT COST CODES
- 4. Use your CHART OF ACCOUNTS to make decisions about running your BUSINESS… Use COST CODES to make better decisions about the JOB. ABOUT COST CODES
- 5. Cost Codes categorize the individual material and labor expenditures during construction of the project. This aggregated information should be compared to your estimate/budget periodically to check for variances. ABOUT COST CODES
- 6. If variances between the estimated and actual expenditures are found, you should adjust the estimating database… …question the subcontractor- material supplier about the cause of the variance. …OR ABOUT COST CODES
- 7. Import Cost Codes into Quickbooks
- 8. HOW TO IMPORT COST CODES IMPORTANT: Before beginning the process below, you must set up your Chart of Accounts. You may use any Chart of Accounts you wish, as long as it uses Work In Process (WIP) line items. The following instructions assume that you have imported the NAHB Chart of Accounts prior to adding the Cost Codes. CONSIDER THIS: While we provide the entire set of 300-plus cost codes in this file, you should think about what you are trying to accomplish before using the entire set. I recommend that you begin with a set of cost codes that corresponds to your estimate, as I have done in LEVEL ONE. This allows you to track the most important costs while not overwhelming your bookkeeper with busy work. USING LEVEL FOUR, you can transfer the entire set of cost codes and de-activate the items you won't be using. When, and if, you have a need for additional cost codes, you can simple activate any in the set that you require.
- 9. 1. Select “Lists” 2. Select “Item List” HOW TO IMPORT COST CODES
- 10. HOW TO IMPORT COST CODES 1. Select Excel 2. Select Paste from Excel
- 11. HOW TO IMPORT COST CODES 1. Select Customize Columns.
- 12. HOW TO IMPORT COST CODES 1. Set up Chosen Columns as shown here. 3. Double-click to move Column Name back to Available Columns. 2. Double-click to move Column Name to Chosen Columns. 4. Highlight Column Name and move up or down to get proper order. 5. Click OK when set- up is complete.
- 13. HOW TO IMPORT COST CODES 1. From Excel file Bonus-Cost Code Export, decide Cost Code level you are going to use. LEVEL ONE is recommended. 3. Highlight entire light-colored area of level selected. Right-click, Copy. 2. IMPORTANT: Cost codes on import are keyed to NAHB Chart of Accounts. If you are using a different Chart of Accounts, be sure to change the INCOME ACCOUNT column entries to your WIP accounts.
- 14. HOW TO IMPORT COST CODES 1. Back in Quickbooks, click in empty cell at bottom left. Paste. 2. Save changes.
- 15. HOW TO IMPORT COST CODES 1. If Copy-Paste has been done correctly, you will get a message indicating that Item Records have been saved. Click OK.
- 16. Use Cost Codes in Quickbooks
- 17. HOW TO USE COST CODES IN QUICKBOOKS 1. When entering a bill from a supplier or subcontractor, use the Items tab. 2. Enter the cost code in the “ITEM” section.
- 18. 1. Click on down arrow. 2. Select Cost Code and double-click to enter. HOW TO USE COST CODES IN QUICKBOOKS 3. Alternatively, just start typing the ITEM name. Select Cost Code and double-click to enter.
- 20. HOW TO CREATE A COST CODES REPORT 1. Select Reports 2. Select Purchases 3. Select "Purchases by Item Summary".
- 21. HOW TO CREATE A COST CODES REPORT 1. Select "Customize Report".
- 22. HOW TO CREATE A COST CODES REPORT 1. Select "Filters". 2. Scroll to and select “Date". 3. Select “All”.
- 23. HOW TO CREATE A COST CODES REPORT 1. Remain in "Filters". 2. Scroll to and select "Item". 3. Click on down arrow and scroll to “All sales items". Click on “All sales Items".
- 24. HOW TO CREATE A COST CODES REPORT 1. Still in "Filters". 2. Scroll to and select “Name". 4. Click on name of job you wish to review. 3. You can run the report for all jobs, or….
- 25. HOW TO CREATE A COST CODES REPORT 1. Still in "Filters". 2. Click “OK”.
- 26. HOW TO CREATE A COST CODES REPORT 1. Select "Header/Footer". 2. Change Report Title to "Cost Codes Report". 3. Click OK.
- 27. HOW TO CREATE A COST CODES REPORT 2. Check to confirm new report title is correct. 3. Select "Memorize". 1. Select “Show Filters".
- 28. HOW TO CREATE A COST CODES REPORT 1. Rename to "Cost Codes Report". 2. Click “OK".
- 29. HOW TO CREATE A COST CODES REPORT 1. Check "Save in Memorized Report Group". 2. Select a group that makes sense to you from dropdown list. 3. Select OK.
- 30. HOW TO CREATE A COST CODES REPORT 1. Select "Reports". 2. Select "Memorized Reports". 3. Select "Company". 4. Confirm "Cost Codes Report" is available for use.
- 32. COST CODE REPORTS – Project Final You can run a Cost Codes Report for the complete project at the end of the job. 1. Select “Reports” > “Memorized Reports” > “Company” > ”Cost Code Report”. 2. Select “Customize Report” in the upper left of the screen. 3. Select “Filters”. 4. Select “Name”. 5. Select Job Name. 6. Select “Refresh” and Report is shown.
- 33. COST CODE REPORTS – By job, by month You can run a Cost Codes Report for a project for a specific month. 1. Select “Reports” > “Memorized Reports” > “Company” > ”Cost Code Report”. 3. Select “Customize Report” in the upper left of the screen. 4. Select “Filters”. 5. Select “Name”. 6. Select Job Name. 7. Select “Refresh” and report is shown. 2. Set date to desired period.
- 34. COST CODE REPORTS 1. You can run down into the details of the expenditures by line item. You can drill down into the details of the expenditures by line item. Just click on the line you wish to review.
- 35. CREATE AN ESTIMATE IN QUICKBOOKS You do not have to use the “Estimate” function in Quickbooks. The “Cost Codes Report” previously introduced may be sufficient for your Job Costing needs. Personally, I use EstimatorPRO, with its flexible line items and powerful database, to create the Estimate and then track the estimate line items by printing the Cost Code Report for each project monthly and entering that information into EstimatorPRO. In any event, the “Estimate” option is available in Quickbooks. Here is how to use it with Cost Codes.
- 36. CREATE AN ESTIMATE IN QUICKBOOKS To create an Estimate, click on “Estimates & Change Order”.
- 37. CREATE AN ESTIMATE IN QUICKBOOKS 1. Select the customer for whom the Estimate is being prepared. (Customer information should have been entered previously). 2. Enter estimate items and costs from estimating program. (I use EstimatorPro). 3. Save Estimate when entries are completed.
- 38. QUICKBOOKS ESTIMATE WITH COST CODES 1. From “Reports”, select “Jobs, Time and Mileage”. 2. Select “Job Estimates vs. Actuals Detail”. 3. Select the Job you wish to review. 4. When the report appears, go to “Customize Report”, set the date, adjust subcolumns selections, and click “OK”.
- 39. QUICKBOOKS ESTIMATE WITH COST CODES Gross Profit = $243,000 Actual Revenue -$184,200 Actual Cost $ 58,800
- 40. QUICKBOOKS ESTIMATE WITH COST CODES You can also run a report for any period simply by changing the “from-To” inputs.