Who should set up the chart of accounts and cost codes?
Two structures decide what every report can say, and they often get set up by whoever has the software open.
The chart of accounts is the profit and loss statement at the business level, and the CFO or the controller sets it up. Job cost codes are the profit and loss statement at the project level, and the CFO and the COO choose them, aligned with the business strategy and the work the company performs. The software implementor, the bookkeeper and the CPA don't choose the job cost codes. Once the codes are chosen, the controller and the implementor enter them into the accounting software. Then the COO and estimating align the codes with the estimate, so every kind of cost has a code: material, subcontractor, equipment, tool, labor and direct job expense.
Three moves, in order
Step 01: Job cost structure
Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words.
Other problems step 01 solves
Other things that go wrong
What owners ask
Who creates construction chart of accounts job cost structure?
Two structures decide what every report can say, and they often get set up by whoever has the software open. The chart of accounts is the profit and loss statement at the business level, and the CFO or the controller sets it up. Job cost codes are the profit and loss statement at the project level, and the CFO and the COO choose them, aligned with the business strategy and the work the company performs. The software implementor, the bookkeeper and the CPA don't choose the job cost codes. Once the codes are chosen, the controller and the implementor enter them into the accounting software. Then the COO and estimating align the codes with the estimate, so every kind of cost has a code: material, subcontractor, equipment, tool, labor and direct job expense.
Which part of the system fixes this?
The step is number 01, job cost structure. Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words. It's drawn from chapter 1 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% after taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Have the CFO or the controller set up the chart of accounts for the business level profit and loss statement.
Is this where an installation usually starts?
It usually is. Step 01 has nothing ahead of it in the chain, and it supplies step 03 and step 04. That's why most installations begin here, and why fixing this one unblocks work you haven't started yet.
Wrote CONTROL, the 8 step system behind these figures. More about the author.