How to Make Construction Estimating Make Dollars and Sense

Construction Estimating is Hard

Construction estimating is complex. It requires a blend of detailed mathematical calculations, in-depth knowledge of construction practices, thorough site analysis, and the ability to predict potential risks and contingencies accurately. In addition, the estimating takes place while working under tight deadlines and pressure to submit competitive bids, and it is easy to see the burden grow.

In the past, manually calculating material quantities, labor hours, and associated costs by hand often used physical blueprints, hand-drawn sketches, and detailed itemized lists. Formerly, estimators would physically measure elements on-site and manually calculate quantities. It came with a heavy reliance on experience and “gut feelings” to determine accurate pricing.

These “old fashioned” methods:

• Were time-consuming

• Had a high potential for errors

• Often led to inconsistent estimates

Today, there are better methods and solutions. The backbone of these solutions begins with job costing.

Construction Estimating Begins with Job Costing

Job costing is at the core of modern estimating. It leads to effective estimating because it provides the data needed to accurately predict project costs and improve future estimations by tracking actual costs against initial estimates. As a reminder, here are a dozen ways job costing affects your estimating and management capabilities. 

·       Job costing will help you identify your construction company’s most and least profitable areas.

·       Job costing is one of the best ways to develop an accurate budget for your construction firm.

·       You can use the information concerning labor and materials costs to aid in determining overhead expenses.

·       You can carefully analyze job costing reports for completed jobs and jobs in progress.

·       Job costing allows you to implement a billing system tied to actual and committed costs.

·       With job costing, you can learn which types of jobs are your bread-and-butter jobs.

·       Using job costing will allow you to see the division of labor and labor burden.

·       Job costing allows you to analyze where you’re spending so you’ll know more about what works and what doesn’t. 

·       Through job costing, you’ll obtain information to be more precise about billing.

·       Job costing shows you what margins you’ve been sacrificing on past estimates.

·       Through job costing, you can factor in overhead expenses to better understand individual job profitability or loss.

·       A mature job costing system allows you to categorize every expense your construction contracting business incurs.

Now that you know the “why,” let’s look at the “how” of simplifying estimating through job costing. 

Construction Estimating Simplified with Software

Rather than relying on “old-fashioned” methods, using the software available today allows you to be more organized, take control of your time, identify potential issues early on, make informed decisions, proceed confidently, and build accurate estimates.

We recommend Knowify, which is the software built around the concept of job costing. It allows contractors to track costs at every project phase, including material, equipment, subcontractors, and labor costs.

Here, we’ll let William Wallesen, the owner of PJ Roofing (and one of our clients,) tell you about it in his own words. (This is what he posted on LinkedIn.)

PJ Roofing has now tracked direct job costs by job for an entire year.

We use an internal inventory system to make sure we have all the materials in stock and ready to go, at wholesale prices.

There aren’t many trade companies who can say they do this consistently on 150 jobs annually.

While on the surface it may seam like a way to count pennies on jobs, what it’s is really allowing for is objective management of work.

Project managers should be given trust and freedom to perform, but you can’t do that unless you have simple metrics to judge success or failure by.

You also can tell pretty quickly who is using QC and management procedures and who isn’t.

[We do a] quarterly inventory, which we then entrust The Profit Constructors to perform their wizardry on to shore up our actual inventory value and counts in Knowify.

The Final Word on Construction Estimating Using Job Costing Information

Without job costing information, you’re building estimates in the dark. Using job costing reports to assemble construction estimates is critical to improving your business and business processes. Knowify is a mighty software that enhances your job costing capabilities, estimating competence, and construction contracting business.

Would you like more information concerning putting Knowify to work for your construction company? Get in touch, and we’ll let you know how this software can make your construction estimate make dollars and make sense.

Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:

• Clients and customers

• Employees and subcontractors

• Vendors and service providers

• Governmental entities

Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:

• Remain informed

• Avoid hassles

• Reduce risks

• Be future-ready

Ready for action? Or want to know more? Get in touch today to schedule a complimentary discovery call. 866-629-7735