Getting Started with Cost Codes

What are Cost Codes?

“Cost Codes” are used to budget and track job hours and costs. Any sort of estimated vs. actual needs to be tied to a cost code. Each Cost Code can be set up to encompass the following cost types: Labor, Material, Subcontractor, Equipment, Overhead, and Other.

Where are Cost Codes Used?

• Cost Codes are used on Daily Reports and Timecards to show what an employee was working on and pull from the hours budgeted for that Cost Code.
• Cost Codes are used on Purchase Orders to pull from material, equipment, overhead, and other costs budgeted.
• Cost Codes are used on Subcontracts.
• Cost Codes are used on Change Order Requests. Approved COR amounts are then added to the original project budget at the Cost Code level to provide the revised project budget.

By default, there are no Cost Codes in your account. As you create Cost Codes, you will be able to track your project’s expenses more accurately.

Benefits of Using Cost Codes

See the following figure:

Example A:

Example B:

The two examples above are for the same project budget. Notice how the amounts in the “Job Total” for each example is the same. The advantage of Example B is that we are able to dial in on our inefficiencies to better allocate resources.

See the following figure:

Example A:

Example B:

It is easy to see from this figure how Cost Code scan help pinpoint our inefficiencies. In Example A, it looks like we are under budget, but in Example B we can see how we have gone over our material dollar budget for “Install Item Type 1” and over our labor hours budget for “Install Item Type 1” and

“Project Management”. This means we need to try to make up those overages in a different Cost Code if we want to stay under budget for the entire project. While the dollars/hours to date and dollars/hours remaining are the same, none of these inefficiencies are brought to light in the first Example A.

Disadvantages of Too Many Cost Codes

Now that we have discussed the benefit of additional Cost Codes, we should also touch on the disadvantages of having too many Cost Codes:

• Imagine you have a Cost Code for every piece of material you will use on your project. Is it going to be realistic to set up your project's budget with 1,572 different Cost Codes? -No
• Imagine you have a Cost Code for every piece of material you will use on your project. Is it going to be realistic to have your employees bill their time against 1,572 different Cost Codes? -No
• Imagine you have a Cost Code for every piece of material you will use on your project. Is it going to be realistic to have a PO line item for each of your 1,572 different Cost Codes? -No

The main idea with Cost Codes is to find the “sweet spot” between being able to break out your job cost reports and having to do too much data entry.

Determining Your Cost Codes

The three main points when determining your Cost Codes should be:

1. The ability to align your project's estimate to your project's budget in eSUB (estimate breakout should roughly match your Cost Codes).
2. The ability for an employee to bill their time against your Cost Codes (too many would make this very cumbersome).
3. The ability to easily bill multiple materials to a single Cost Code (if you set up a Cost Code for every screw, nut, and bolt, you need a line item on your PO for every screw, nut, and bolt).