I’ve been doing carpenter work since ’65, started my own business with small remodeling jobs in ’70. There are two or us now that have worked together for 23 years, informal partnership. We do a variety – electrical, drywall, carpentry, concrete, ceramic tile, painting, etc. We do one job at a time (this method from good advice I got from an old carpenter over 35 years ago – when I was going crazy trying to schedule jobs like a dentist I had worked for) – we don’t tell the next one we are coming until we get this one done. All our jobs are T&M. We aim to get a check every Friday for labor but since most of the materials are charged we usually go 2 – 3 weeks before getting a check for them. We aim to mark the materials up 10% and split that. My wife types the materials bill up on Excel from the information I give her. I always seem to end up pulling some prices out of the air. As you know or can imagine figuring the materials gets intricate. Some materials come from out of stock in various amounts – screws, thin-set, drywall mud, romex and various electrical materials, etc. I forget how much the romex and electrical boxes were – I may have had them for a year. Some materials on the tickets don’t end up getting used for one reason or another – design change, 3 from a bag of 10, etc, etc. At one lumberyard some things on the ticket are net and some are gross. Sometimes it’s the other guy that’s using the materials out of stock, etc. I know you can’t take the struggle totally out or it wouldn’t be called “work” but I keep thinking that I’m missing something fundamental. Is there a procedure that works great? I’m ready listen. I’m not enjoying this part of the business (ok, I do enjoy getting paid though, ha). This is a part of the business that is either a problem because I don’t enjoy it or I don’t enjoy because it’s a problem and there’s something missing in procedure. I’m ready to enjoy it and set up the procedure but I haven’t been able to see how.
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I work alone so I don't have
I work alone so I don't have to account for another human being placing stock material into service. But this might help you if you get him to follow the procedure.
I keep track of hours in a daybook (daily-page for each day) on the dash. Time in/Time out. On the same daily page I write down the "parts" I use from disposables (sawzall blades, sanding belts etc) to electrical parts, wood, etc..........anything of value for resale. On the same day page I note subs on the job on that day and usually the hours they spend. Meetings on that day are noted. Ordered material that day are listed. It's a job diary. My memory never was that good....
At billing I go through each day page and write down the hours for a total, parts and an assigned value are listed. I say assigned value as this inventory is as yours, the hodgepodge of stuff collected from previous projects. I know I cannot hit the right price and usually list it as misc. shop supplies on the bill-listing the items but no individual price. The total of 'shop supplies' is the only number on the invoice.
While you may gouge 'em on one item, I'm sure you'll save them a bundle on not having to go pickup these items or buy more than you need. It's a wash, but most important that you get dollars for the misc. It does add up.
So in your case, his daybook and his full list at billing time should include all the parts and amounts (or you put a number on them).
I also work alone so all materials come from my own shopping trips. That said I still have to bust my butt to keep track of stuff. What I've done is get a clipboard with a box built in. Inside that box are file folders for each job, every purchase receipt goes in the file for that job. As far as misc materials pulled from stock, if they wanted to do it themselves and needed a 10 foot piece of romex they would have to buy a 25 foot roll. I would buy the 250 foot to save some money then charge them for the 25'roll cost. If its something I have laying around like lumber I charge what it would cost me to replace it that day. Expendable items like blades and sandpaper I figure if I'm going through over half of the blades life on one job that gets billed for a new blade.That said I give away tons of screws, anchors, nails, caulk etc....
While some people may end up paying for part of someone else's materials I have to keep it as simple as I can for my sake
My method is similar to the other response. I've got a book that sits in the work area where I note my time, subs on site, stuff used each day, and then I can go through it at the end of the job (or week) and bill it all out. Receipts for purchases get tucked into that page too 'til I get back to the office and process them all.
I do mostly supply & install work, so it doesn't matter if I supply from my inventory or from another supplier, the customer buys it all from me. If there's a part container of something left over (caulking, let's say) I offer to leave it with the customer at the end of the work, since they've bought it already. Most people don't want it so it goes in my inventory and gets used later on. The work that I do is consistent enough that most customers get a few freebies from inventory and buy a few things that later get donated to inventory and it all works out.
Once in a while I have a customer who is really frugal and wants to keep every partial container and scrap at the end of the job. In those cases I add a 'misc. fasteners and adhesives' line to the bill with an approximate charge for the o&e used up. Not scientific but it saves the disproportionate effort (on my part) and charge of individually billing out every wire nut and drywall screw that gets used. Ironically those folks usually pay more overall than if they had let go of the remnants, but I'm fine with that.
j
For the everyday consumables (dry mud, nails, screws, caulk, standard blades) I would figure out how much I used in a year and how many billable hours I worked in a year and just add that number to my hourly rates.
This might help a little bit. Years ago I was in service where I had a lots of expensive and not not so expensive parts in my truck. Most of the time these items were in either boxes or bags but sometimes just loose.
I never wanted to write on each item a retail price because sometimes I could charge more and I sure didn't want to write on the item what I paid for it. Lots of times I wanted to give a customer a good deal on the part especially if I felt it had taken me longer to diagnose the problem.
I would write my cost in reverse on the item plus add a few zeros just to complicate it. So if something cost me $56.23 I would write 0003265. That way I wouldn't sell it less than I even bought it for maybe 2 years before.
I would be able to immediately tell what I paid for the item and if I wanted to add 40% markup or sell for cost.
As I said my system might not work for you but then again you can have, in plain view, a list of prices that only you can interpret. I used to say those long numbers were "stocking numbers" or "my accountants numbering system"
roger .
My work is both fixed price and cost plus. I have quite a bit of material in my shop, mostly fasteners and other hardware, all leftover from projects. I generally buy new, full containers of stuff that we need on jobs, and what is left becomes mine, including leftovers from cost plus jobs... but to balance that out I am constantly contributing materials from my inventory to those jobs, and I always have all sorts of specialty fasteners on hand for our various nail guns. It all balances out as far as I'm concerned, and I am not about to implement some complicated inventory billing system to try to determine if Mrs. Jones paid $100 for materials when in fact she should have paid $95 or $105 or whatever. I do not buy large boxes of stainless nails, bill them to the job, use a few, and pocket the rest... that just never happens. Most of what I have left over is small quantities and it costs me money to store them since I pay for storage space.
I feel sorry for plumbers, electricians, HVAC guys, and others who have to inventory a ton of stuff and bill it out to the job by the part. Presumably their markup on each part makes up for the headache.
I work like you do--t&m with a check every week. What I don't do however is wait to get paid for the materials.
Everything that gets used that week is billed--if an exact cost isn't known I estimate it and make an adjustment when the exact amount is known. If it's out of inventory I charge a best guess as to the current value of the item. If 3 things out of a bag of 10 are used the client pays for 10 and I'll credit for the other 7 if they can be returned otherwise I'm not going to pay for inventory that may not do me any good. I don't like inventory so items are not normally kept but either sold on craigslist or donated.
As for nails, screws, etc. I keep containers of all fasteners topped off so at the end of each job it's easy to see what's been used and I invoice accordingly. At times it's a WAG but it's in good faith and I've rarely had anyone question it.
Every day I make sure to add any materials to the invoice and photocopy a reciept or write up an explaination of the charge to keep everything straight.
Basically don't think you have to actually pay for an item before you can bill the client for it! Most people are completely fine knowing they are paying for materials actually being used that week.
Along the same lines I now require prepayment of materials that are expected to be used the next week as well. usually this is a guess off the top of my head rounded off to the nearest $100. I had a client stiff me two years ago for over $10k and I'm still fuming mad about it and won't ever allow it to happen again.
For those who think it's not fair to the client to invoice every week I totally disagree--I'm not going to finance the materials (which is exactly what a lumber account allows you to do) for a month at a time.
I get advice from the #1 construction attorney in town and he said the best protection I can have is my expenses paid in full each week--better than the best contract.
Just don't feel timid about invoicing--as long as you make adjustments to estimated numbers as they become available you aren't over or undercharging.