There Are Many Methods To Calculate Breakeven In Construction
Breakeven For Contractors - Is very difficult to calculate because most projects are one-of-a-kind custom jobs. This means job costing and job profitability metrics must be used in conjunction with predetermined Universal Common Denominator(s) (UCD).
The Method Shown In This Article Applies To The Following Contractors:
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1-20 employees
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Annual sales volume between $100K and $5M
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Engaged in only one area of construction
This method is not useful for any contractor outside the parameters given nor is it of any value to contractors engaged in a mix of services for example:
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Residential remodel contractor that builds spec homes
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Commercial tenant improvement contractor that does residential remodel projects
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Plumbing contractors that do service work and remodel projects
First, Make Sure Your QuickBooks Version - Supports multiple unit of measure. QuickBooks Versions that support multiple units of measure per item:
QuickBooks Accountant
QuickBooks Premier Contractor
QuickBooks Enterprise Solutions
QuickBooks Enterprise Solutions: Contractor
If Your QuickBooks Version Is Not One Of These - Contact Sharie at 206-361-3950 or sharie@fasteasyaccounting.com and she will advise you which version is best for you. Then you make the final decision what to do and where and if to buy it.
Second, Make Certain Your QuickBooks Setup - Is designed for construction and that it has the proper Chart of Accounts and Item Lists for you particular situation. Not the "Easy Step Interview", rather the full-blown QuickBooks setup designed by a construction accountant with everything needed to generate Financial and job costing reports. If you are not 100% certain your QuickBooks setup is correct, you can contact Sharie at 206-361-3950 or sharie@fasteasyaccounting.com and schedule your no charge one-hour consultation.
Third, Analyze Your Contracting Company - To determine which Universal Common Denominator (UCD) is most commonly used for all of your contracting projects. Again if in doubt contact Sharie.
For Example:
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Cubic Yards
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Square Feet
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Square Yards
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Lineal Feet
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Lineal Yards
Fourth, Determine If Your UCD - Involves more than one dimension. Cubic yards of dirt moved per hour, square feet of wallboard installed per hour or per day. There are hundreds of two-dimensional combinations. It is important to keep it to just one or two dimensions otherwise the calculations and behind the scenes, analysis to generate accurate break-even reports will cost you a lot more than the information is worth.
Fifth, Run Job Profitability Reports - And if needed add time on job reports and export the results to Excel and run the analysis. Divide the job costs by the UCD to determine your contribution margin from each UCD and
For More In Depth Information About Breakeven - Please feel free to download the following e-Book Click Here to Download Break Even e-Book
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About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and construction accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and Xero accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.
Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes and Follow Randal on Google+
