Estimating and Job Costing

Typically, the hardest part of implementing technology in a business is deciding which technology to implement. Knowing that accurate estimating lies at the heart of profitability, choosing an estimating program can seem over-whelming. Industry consultants stress the importance of knowing and mapping out your company’s systems and processes before making any decisions. Consider these questions:

• How do you gather pricing data for your estimates?
• Do you design using CAD?
• How do you turn estimates into proposals? Into contracts?
• How do you track actual labor and material costs versus estimates?
• Can you run work-in-progress reports?
• How do you handle change orders?
• What kind of accounting program do you use?
• Do you communicate with clients, suppliers and subcontractors by fax, e-mail or PDA?
• How many employees does the estimating process involve?

Case Study:
Podesta Construction

Three years ago, Podesta Construction’s estimating system consisted of handwritten proposals, HomeTech software, and stacks of papers with pricing information from subs and suppliers.

“There was no job costing so to speak,” recalls vice president Matt Podesta, who co-owns the full-service San Francisco remodeling firm with his father, Jerry, the president. “We didn’t know how many man-hours we had into a job. We didn’t know what the materials were by cost code, so when bills came in, we had nothing to track against.”

Armed with a degree in business economics and accounting and three years’ experience as a financial consultant, Podesta worked with his father to understand which elements a remodeling estimate had to include and then began assessing available software programs. Seeking an integrated program with detailed estimating and job costing, a scheduling option, and the ability to customize labor rates, import cost data and manage contracts and change orders, Podesta chose Intuit Master Builder.

Podesta Construction had its own cost-code structure, so he did not purchase Master Builder’s estimating database. Instead, he loaded in the costs of materials, subs, equipment and other items with Podesta’s codes, applying dollar values whenever possible.

Why upgrade your estimating software from a Microsoft Excel spreadsheet if you’ll just have to import that data into another system? Matt Podesta cites two primary reasons: proposals and job costing.

Most estimating software programs make it easy to turn an estimate into a proposal and eventually a contract using a template, customizable or your own. “Once I print an estimate and a proposal, that’s now the basis for a contract, and I can print changes orders against that contract,” Podesta says. “Those are all the deliverables that go to the clients.”

Then there’s the ability to compare actual and estimated costs without having to export and reformat data from Excel or to print two reports and go through them manually. Podesta says work-in-progress reports help him make adjustments before project’s end and make a better profit.

As the firm has grown — from $1 million to more than $2 million during the past few years — making sure that profits keep up with sales is more important than ever.

Submit questions or ideas for this department to Kimberly Sweet at [email protected] or 630/288-8170.