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Construction
Cost Accounting


Construction cost accounting is where the owner builder (you) is able to tell how well all of his planning and other home building cost control activities are paying off. This is the record keeping function.

Accounting Tools!REASONS FOR KEEPING RECORDS
First, you want to be able to keep up with your financial progress during the home building process.

If you keep a record of your expenditures and compare them to your estimate as you go along, you may spare yourself some rude surprises. If you are under budget on some items, you may want to splurge on an upgrade to your jet tub or kitchen appliances!

Construction cost ACCOUNTING SYSTEMS
There are many sophisticated systems of construction cost accounting. And , of course, construction accounting software is availabe on the Internet.

What we are going to present here is a very simple method of keeping your records by hand or with an Excel spreadsheet.

KEEP EVERYTHING
A good rule to follow is keep everything - all of your receipts, packing slips, assembly and operating instructions, warranty and service documents, etc. The paper you toss is the one you’ll need . . . just as the garbage truck pulls away from your house!

construction COST ACCOUNTING FORMS
We have developed Construction Cost Accounting Forms, to help you keep track of your home building expenditures. They include a column for the date you make a payment, the check number, to whom the payment was made, and columns corresponding to each of the Cost Categories we used in our Cost Estimate Forms. The forms are available in executable Excel format here. Click here for forms that you can fill out by hand.


USING THE construction COST ACCOUNTING FORMS
In the first row on each page, just under the title for each cost category column, write in the figure which represents your estimate for that category. You can get this information from the last page of your Cost Estimate Form.

Note: The first column on the construction cost accounting pages is simply a reference number for each line. By using these numbers it’s easy to refer to a specific expense, like “the item on page one, line 14.”

When you make a purchase for your home, just fill in the first three columns with the appropriate information, and show the amount spent in the same row and under the heading which best describes the expense. Periodically, perhaps once a week, you can total the expenditures in each column and compare the total to the estimate at the top of each column. This will give you a feel of where you stand.

Below is a example of how your Construction Cost Accounting Forms may look as you fill them out. You can see in the example that this owner builder came in under budget by $38 on his Design and $5 on his Site Preparation categories. He came in over budget by $158 on his Footings, $32 on the Foundations, and $346 on the Slab.

 
 

The other cost categories will have additional home building costs coming in, so he isn’t sure how he is doing on those yet. The net overage is $493 ($536-43) at this point in the construction process. If coming in at or below budget on the job is critical, he may want to cut back somewhere else to make up for his overage to date.

Notice that the builder has included the cost of the Foundation Survey (line 19) and the Builders’ Risk Insurance premium (line 20) under the Construction Loan (Column 3). This is where they were included in the Cost Estimate. If you wanted, you could total all of the column totals across all of the pages and get a total spent-to-date for the whole house.

As usual we have included a blank Construction Cost Accounting Form (last page of the Construction Cost Accounting Forms), so that you can customize it to your own requirements.

Admittedly, the Construction Cost Accounting system included here is not very sophisticated. But it will do the job! You would be surprised to learn that many small builders do not even do this much. This is simply a decision making tool. It gives you some data on which to base spending decisions.

If used faithfully, it will help keep you on track financially. And as we said above, if you want or require more detailed data, there are other systems readily available.

Cost Accounting wraps up our look at the major areas of Construction Management. The other areas are Scheduling, Purchasing, Quality Control, and Cost Control. Click here to go back to Construction Management.



For additional insight on Cost Accounting,
see Lesson Twelve of our online course
Successful Home Contracting
.




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