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The Ultimate Guide to Overhead Costs in Construction for Contractors


Construction accounting can be a little intimidating, even for those familiar with accounting because the purpose of bookkeeping changes slightly when dealing with a construction business.

This article will cover everything you need to know about overhead costs and the unique aspects of accounting for a construction company you should be aware of.

So, What Are the Differences?

There are some key challenges that construction companies face that other businesses often don’t deal with. So, when it comes to accounting, these elements must be considered.

Project-Based "Profit Centers"

Firstly, most companies have an entire business, branch, office, product line, or factory that they manage as a profit center, where profit is directly generated from. These are stable and often fairly predictable.

Construction is much different, as each project is the company’s profit center should be accounted for as such. On top of this, each project has different costs, locations, and legislation to consider. These add up to a variety of expenses and conditions to keep track of, which is why calculating overhead costs is so important.

Inconsistent Project Times and Dispersed Production

Each project will be different from how long a project lasts, the possibility of multiple contracts in a single project, and location changes. This adds up to mobility costs, seasonal and location price adjustments, and labor cost changes.

This is what overall makes construction more difficult to account for—variability.

Keeping Costs Low

With all this to keep track of, how do you keep overhead costs low in the construction business? The answer is understanding your costs.

Costs: Direct and Indirect
You have two major cost types to deal with in construction: direct and indirect.

Direct Costs. These costs deal with anything you directly need to complete a project.

Indirect Costs. These costs come from the other services you need to keep a company running. Like:

  •    Marketing
  •    Legal Fees
  •    Accountants
  •    Travel Expenses
  •    And more...


Factors to be Aware of When Calculating Overhead Cost

The best way to make sure you are effectively calculating overhead costs is by keeping track of 7 key factors.

These factors are:

  1. 1. Building supplies and equipment
  2. 2. Labor
  3. 3. Vendor fees
  4. 4. Onsite facilities
  5. 5. Travel expenses
  6. 6. Offices expenses
  7. 7. Marketing costs


When you consider all these factors, you’ll have a better idea of what your cost of operations will be for a project, and you can analyze where costs can be reduced… or where your prices may have to increase.

Automating some of your processes can help keep these costs down. You won’t forget to adjust prices or end up paying too much for labor if you have a program helping you keep track.

When you consider all these factors, you’ll have a better idea of what your cost of operations will be for a project, and you can analyze where costs can be reduced… or where your prices may have to increase.

Automating some of your processes can help keep these costs down. You won’t forget to adjust prices or end up paying too much for labor if you have a program helping you keep track.

Getting Organized

As the owner, manager, or accountant of a construction business, there’s a lot to worry about. Consider how you can streamline your business processes more by seeing how Nationwide Notice can help make electronic data entry and contract filing easier.

We can help with that and so many other services. So, take the weight off of your shoulders. Be sure you’re following state and county legislation and leave the hard paperwork to us. Contact us today to see if our services are for you! Nationwide Notice is here to help you with your construction payment needs for all types of construction companies and contractors. We specialize in helping construction companies secure their lien rights and provide customers with a lien release one the invoice is paid.



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