10 construction line items you’re not including in your job costing – but should

You’ve landed a big project, your estimates look solid and you’re ready to break ground – until unexpected costs start eating away at your profit margin. A last-minute equipment rental, an overlooked permit fee, a warranty claim you didn’t account for. Suddenly, your profits shrink, and you’re left wondering where it all went wrong. Sound familiar?

Accurate job costing is the backbone of financial management and profitability in construction projects. Yet, many builders unknowingly overlook key line items in their estimates, which leads to unanticipated costs that erode profit margins. These omissions can make the difference between a thriving business and one struggling to stay afloat.

If you’re not including these overlooked job costing line items, you’re leaving money on the table.

Why does precise job costing matter?

Construction businesses operate on tight profit margins. According to a study by Deloitte in 2023, the average net profit margin in the industry hovers around 5.5%. With such slim margins, even small oversights in job costing can significantly impact your bottom line. Including all relevant line items means your estimates will reflect the true cost of a project, giving you a clearer picture of profitability and protecting you from financial surprises.

Here’s a list of line items you should include in your job costing to ensure accuracy.

Insurance and warranty costs

It’s common for builders to account for general liability insurance but forget about project-specific insurance needs, such as builder’s risk insurance. This can also lead to warranty costs being missed – for both materials and labor. Setting aside a portion of your budget for warranty claims can save you from unexpected expenses and enhance your reputation with clients.

Equipment rentals

It’s easy to budget for large equipment purchases, but what about rentals? From cranes to specialized tools, rental costs can add up quickly. Make sure to include not only the rental fees but also delivery, setup and potential overtime charges for late returns.

Storage fees

Materials and equipment often need secure storage in between and during projects. Whether you’re renting a storage unit or maintaining an on-site storage facility, these costs can add up. Failing to budget for a storage solution can result in rushed decisions that compromise the safety and accessibility of your tools. Accounting for the smaller cost to safely store your expensive assets now will keep you from having to make costly purchases to replace them.

Safety measures

Safety compliance is not just about meeting OSHA standards, it’s also a proactive way to avoid costly accidents. Budget for safety gear, training and certifications. A study by the National Safety Council found that every dollar invested in safety programs can save $4 to $6 in indirect costs, such as downtime and medical expenses.

Employee training and certifications

Skilled labor is the backbone of any construction company and is essential to the success of your home builds or projects. Investing in employee training and certifications not only enhances the quality of work but shows your team that you’re invested in them. These costs, including course fees, materials and time off for training, should be a regular part of your job costing to ensure long-term productivity and compliance with industry standards.

Technology investments

Construction management software like Buildertrend streamlines project tracking, communication and financials. However, the cost of such tools – including licensing fees, training and upgrades – is often overlooked. These tools pay for themselves by enhancing efficiency and reducing errors, but they should still be a line item in your budget.

Punch list management

The final phase of a project often involves managing a punch list. Labor and materials for completing these final tasks can be time-consuming and costly. Include a contingency fund for punch list items to avoid last-minute budget overruns.

Subcontractor overtime and rush charges

Unforeseen delays or tight deadlines can lead to subcontractors working overtime or charging rush fees to complete tasks on time. These costs can significantly impact your budget or bottom line if not accounted for in advance. Including a buffer for these potential expenses ensures you’re prepared for any schedule changes.

Legal costs

From reviewing contracts to navigating permits, legal expenses can sneak up on you. Set aside a budget for routine legal reviews and potential disputes. It’s a small price to pay for avoiding larger, unexpected legal battles down the road.

Printing and documentation

In the age of digital transformation, printing might seem outdated, but it’s still necessary for blueprints, contracts and compliance documents. These costs can add up over multiple projects and should be accounted for in your job costing. You can use tools like Buildertrend Takeoff to significantly reduce printing needs by digitizing blueprints and streamlining documentation workflows, saving both time and money.

The benefits of comprehensive job costing and using software to manage it

When you account for these often-overlooked expenses, you’re not just covering your bases – you’re setting your business up for success with:

• Improved cash flow management: Including all potential costs gives you a realistic view of cash flow needs, helping you avoid cash crunches.
• Accurate project planning: When you know the true cost of a project upfront, you can plan more effectively, ensuring you stay on time and within budget.
• Enhanced profitability: Properly accounting for these items protects your profit margins and allows for more competitive pricing.

One of the best ways to manage all these essential line items and account for them in your projects is to use Buildertrend’s financial management software. Our new, Job Costing Budget provides actionable insights for managing the financial health of your projects throughout their lifecycle. You can optimize cost analysis with superior visibility into underlying detail and adjust your profit forecast in real time using on-demand data. This new feature also allows you to provide improved financial clarity for clients – especially on open book jobs.

By offering a user-friendly platform that tracks expenses in real-time, integrates seamlessly with your financial workflows and provides detailed reports, Buildertrend makes it easier than ever to account for every cost. With features like customizable templates and automated updates, you can ensure no line item is overlooked, leading to more accurate estimates and smoother project execution.

Take control of your job costing

Hidden costs checklist: Are you forgetting these?

• Insurance and warranty costs
• Equipment rentals
• Storage fees
• Safety measures
• Employee training and certifications
• Technology investments
• Punch list management
• Subcontractor overtime and rush charges
• Legal costs
• Printing and documentation

By incorporating these often-missed line items into your job costing, you’ll create more accurate estimates and ensure smoother project execution. Remember, the goal is not just to win projects but to complete them profitably. Take the time to revisit your job costing templates and add these essential categories.

Don’t let hidden costs drain your profits. Buildertrend can help you track every expense and create accurate job costing estimates. Schedule a demo or explore our resources – because every detail matters when it comes to your bottom line.