how do you guys handle billing misc materials such as nails, glue, saw blades etc and generally the stuff you stock your truck with….that get used on more than one job.
I am having trouble figuring out the best approach and I am finding these costs are adding up to a lot.
couple different things I have talked about with my book keeper include it to the labour burden, or perhaps including some sort of “shop” supply cost like mechanics do.
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Replies
hourly labor cost
Figured out a forecast for what I needed monthly. Track it closely, re-evaluate on a regular interval, 3 mos, 6 mos (whichever works for you, higher volume = more often) to be sure I'm not losing.
Thats what my book keeper suggested. he is going to add all my items up and see if we can arrive at a percentage.
But I was sure if I wanted to raise my rates. but rather bill it so it shows as somehting other than labour. View Image View Image
John,
We have the same situation in my business and I decided a long time ago to just include it in my labor rate. I dont know about you, but personally I hate seeing all these little add ons on bills. I would rather see one price and be done with it. I think most of my customers feel the same way.
Hope this helps,
Bill Koustenis
Advanced Automotive Machine
Waldorf Md
Edited 7/15/2007 6:41 pm ET by MrBill
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*Plus cabinet installation charges.
*Plus design charges.
*Plus demolition charges.
*Plus debrie removal charge.
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*Plus hardware installation chargesAnd proabably 2 dozen more..
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
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sometimes free ain't so free....
p
On most general repairs small time pcs /parts I include in Labor.
Ongoing repairs to the same party, I'll list it with the other materials only head it up on the invoice as Shop. Misc. fasteners, glue, caulk, shims, sandpaper, etc.
Larger jobs like a kitchen it might add up to a hundred dollars. Smaller jobs maybe only 20-25.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/
And those charges go to paying the salary of the MIL out in the garage supposedly packaging while watching 'Days of Our Lives'.
September 1, 1842. Mr. Thoreau dined with us yesterday. He is a singular character — a young man with much of wild original nature still remaining in him; and so far as he is sophisticated, it is in a way and method of his own. He is as ugly as sin, long-nosed, queer-mouthed, and with uncouth and rustic, though courteous manners, corresponding very well with such an exterior. But his ugliness is of an honest and agreeable fashion, and becomes him much better than beauty. He was educated, I believe, at Cambridge, and foremerly kept school in this town; but for two or three years back, he has repudiated all regular modes of getting a living, and seems inclined to lead a sort of Indian life among civilized men — an Indian life, I mean, as respects the absence of any systematic effort for a livelihood.-Nathaniel Hawthorne, from American Notebooks
It is called overhead. Find out an average of what it costs. Remember your truck etc and tool maintenance and come up with a percentage. then add it to the bill
what do you add it to the bill as? View Image View Image
As soon as you can?maybe he means as much as you can.;)I add as a miscellaneous items charge unless I hink it is more than fifty bucks worth, then I itemize. I can't see how it ccould be fait to spread it as an overhead into every job whjen it only hits some jobs.
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If your job is T&M then the materials should be listed on the statement along with the hours of labor charges and then the company's P&O (profit and overhead).
Or a factored labor rate that includes P&O plus all the consummed job site materials.
If your job is a bid/contract to be completed at an agreed upon price, then all those materials, labor and P&O should be included within your calculated contract price. Contingencies, buffers and burdens are essential internal modifiers to keep the business from going broke.
A good set of internal costing estimators is very essential to make sure bid jobs do render at a very minimum of breakeven and preferably a 7-10% net/net profit.
As usual, openly laying your methods out to the customer at the beginning of the business relationship is essential...no surprises! A sample of a past job invoice, or a sample billing will show how you run the books and billing for the agreed upon job.
Change order definitions,description and examples are also best explained at the beginning ...not when it happens at the jobsite. Many disputes and hard feelings can be avoided by having a clear understanding and use of change orders.
............Iron Helix
Thanks for the info Helix.
7 - 10 % seams low according to what my book keeper told me for profit. he said I sould be aiming for 30%. But perhaps I misunderstood. perhaphs 30% is to cover profit and over head? View Image View Image
Gross Profit as a % of Sales
Net Profit as a % of Sales
G & N Profit as a % of Labor
" " " " OH
Net Profit before Taxes
" " after "
Profit Margin
Markup %Your estimate times Profit Margin = Sales Price
(Sales Price - your estimate) divided by Sales Price = Markup %Profit Margin is what you apply to the estimate to insure you have a Net Profit After Taxes. At the end of the year, NPAT is what's left in the company compared to the company equity at the beginning of the year.7% to 10% is quite high for NPAT, but will send you to bankruptcy as a Profit Margin. Your bookkeepers' 30% sounds like Markup % which translates to ~43% Profit Margin, IOW, multiply your estimate by 1.43 to find your sales price. After Direct Expenses, this will leave 30% of your Sales Price to pay all expenses and OH and leave you some Net Profit After Taxes.Direct Expenses = all costs directly attributable to this project. IOW, your Estimate.Basic Math:
Estimate = $100,000
Add Profit margin = $143,000
Build project at a cost of $100,000
Collect final payment, pay suppliers, have $43,000 left.
$43,000 / Sales Price = 30% Gross Profit
Pay OH expenses share of $30,000 leaves $13,000 Net Profit before Taxes
Pay Taxes of $3,000
Bottom Line: Net Profit After Taxes = $8,000 Ya gotta ask yourself, "Is $8K enough Profit?" If not, raise your Profit Margin.Some Reports to help you see where you can improve your business practices:
NPAT / Sales Price (8000/143000) = 5.6% Profit as Percent of Sales
NPAT / OH = 27% Profit as percent of OH
NPAT / Direct Costs = 8% Profit as Percent of Direct Expenses
NPAT / Labor ($40K) = 20% Profit as Percent of Labor
NPAT / Material ($60K) = 13.3% Profit as Percent of MaterialSamT
Edited 7/22/2007 3:51 pm by SamT
Thanks Sam, Lots to think about and factor in. View Image View Image
Sam
Why are you showing formulas for Net Profit after tax as a % of Sales, OH and Labor?
Would those each be better stated as % of Sales? We watch Labor as a % of Sales. I'm not sure what Net Profit as a % of OH is going to tell you. Maybe how many jobs of this size to cover your OH for the year?
The bookeeper may have told him 30% as a Gross Profit figure. He heard Profit and extrapolated.
Why are you showing formulas for Net Profit after tax as a % of Sales, OH and Labor?Because the original question was about Profit, not Sales.OH, or expenses not directly related to sales and production can be thought of as captital. That is the cost of the company. Not the cost of performing contracts, that cost inludes labor and material and Cost of sales. Just the cost of keeping the doors open.NPAT as a percentage of OH is a way of looking at how much return the existance of the company made for the owner. Direct costs are those costs that are only incurred when you actually make a Sale; Commissions, shop labor, materials, interest payments, tool wear and tear, etc.Looking at one years NPAT/OH tells a lot about the health of a company. One years Labor/Sales says nothing by itself. Watching Labor/sales is a useful barometer for a company after there has been time to find it's normal level or as a target.All Sales:Direct Expenses metrics are Cash Flow related. All Profit:Indirect Expense metrics are Capital related.Gross Profit/Sales is a good metric to watch to see how good your systems are overall. If a business had perfect systems the GP/Sales % would never change. The more it changes from job to job the more the systems could be improved.Assuming good estimating systems, Labor/Sales will tell you if your construction techniques are good or need work. OTOH, If your construction systems are good, it can tell you something about your estimating systems. If that's the only metric you are using it can't tell you very much because Production Labor has two components which are proportionately tied to sales. Billable Labor/Sales should be pretty constant. Total Labor/Sales might help decide when to hire more help. But for Finances I'm missing it's significance. But that could be a brain fart, too.The more metrics you scan periodically, the more you can tell about every part of your company's systems.Why are you tracking Labor/Sales? Are you tracking Billable Labor or Total Labor? SamT
NET/NET ...what you walk away with as an owner$ per$onal bonu$ after everything is paid including your salary, benefits and truck w/ travel expenses.
.............Iron Helix
I always include these items in the materials list.
Even a small amount of primer or paint comes from a gallon, hence gallon charge. Gotta always have plenty of whatever material on hand, and a few others for any changes.
Expert since 10 am.
I make a 25 or fifty dollar charge. once I est it is lose to fifty bucks worth, I start to itemize it on the invoice. I ccontinually suprise myself how often I think I have 45-50 dolars worth of misc and it comes to 85 or whatever
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