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Understanding Construction Job Costing and Overhead Allocation

This fall, the Bonadio Group’s Albany Construction Team teamed up with NESCA, AGC, and ECA to present a series of webinars for construction contractors focusing on the basics of construction financials, understanding construction job costing and overhead allocation, and preventing and detecting fraud in your construction business.

The second edition of the series on November 12 was presented by Kait Bloss, Albany Commercial Principal, and Jared Amyot, Albany Commercial Principal, and focused on understanding construction job costing and indirect job cost allocation, which concentrated on the following aspects:

  • Why is proper job costing important?
  • What are the different cost classifications and what expenses should be included in each?
  • How should contractors approach the allocation of indirect job costs?
  • What are the keys to effective job cost reporting?

With so much uncertainty in the world around us, keeping tabs on the financial wellness and cash flow of your company is more important than ever. In the construction industry, where margins are tight and competition is high, having a good handle on your costs is essential. Without proper job costing procedures in place, it is almost impossible to have a true picture of how your jobs are performing. Accurate and timely financial information provides invaluable resources to business owners and management making key decisions that can shape the future of your company.

At the completion of the presentation, construction contractors were left with the following takeaways:

  • Proper job costing will help companies make better business decisions such as more accurate bid estimates and assist in obtaining profitability and growth goals.
  • Identify the costs that comprise direct costs, indirect costs, and general and administrative costs and ensure they are properly set up in your accounting system to provide better interim reporting.
  • There are several ways a company can choose to allocate their indirect costs, but the approach used should be systematic, rational, and consistent from year to year.
  • Develop a process for timely evaluation of actual job costs to estimated job costs.

A copy of the full presentation deck from the webinar is available for download here. Reach out to our experts today to further discuss!

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute an accountant-client relationship.