This article explains cost codes, how to use them, and why. You’ve heard the term “cost code,” it seems like maybe you should be using them, but what are cost codes, where do you start? We’re here to help! Cost code use can help a business owner know how effective his crews are during a certain part of the job. Tying expense back to the original bid can be easy if cost codes are used. This tutorial guide will answer what they are, how to design a cost code structure and how to add them to busybusy.
What are cost codes?
A cost code is a way to track the cost or expense tied to a specific part of the job. You can design them to follow the phases of the job, particular types of work being performed, or types of costs (materials vs. labor).
Phases of the job are tracked when decision-makers want to know the cost associated with the different parts of the schedule. A simple example would be to track the horizontal construction of the job versus the vertical portions. Horizontal costs might include utilities, excavation, and concrete. Vertical may be framing, electrical & roofing expenses.
Specific types of work being performed can also be drilled into using cost codes. For example, it would be valuable for an excavator to know the labor expense of excavating a basement versus the backfill and compaction. Or a concrete contractor might want to know how much he's spending on footings and foundations versus slab on grade or curb and gutter. That information allows contractors to know the bid was on point or helps a team become more efficient at particular types of work.
The coolest thing about cost codes is that you can use them to get the data YOU need to make the best decisions possible for your company. It doesn’t matter if a company has five guys in the field or 500. Cost codes can be a 40,000-foot view into your project, or you can get down into the weeds. Cost codes can be grouped into common categories or set up to mirror bid line items. It’s easy to compare apples to apples with other stakeholders like the G.C. when a standard set of cost codes is utilized. |
How do I create a cost code structure?
Step One: Make some decisions about what you need out of a cost code
What information is crucial for you to know? For example, do you need to know if one phase of the job costs more than the next? Or is it the breakdown between material and labor that you need to get a handle on?
Check out the standard formats developed by AIA, NAHB, and CSI to see if any of them fit your needs.
If none of the above structures work for you (specialty contractors will find them too broad), then create your own!
Who needs to be involved in creating your cost code structure? It’s always a good idea to have someone from each part of the process involved, i.e., accounting, bidding, and production. These cost codes need to make it easier for everyone involved.
Step Two: Create the cost code structure
Start with what you have. If you’ve decided to format the codes to follow your bid structure, pick a recent bid and use it as a reference to start your outline.
Look for places to condense. If you have two widgets outlined in the bid, but knowing the data behind them independently isn’t essential to you or anyone else on the team, condense them!
Don’t try to build the system to cover everything you might ever do. You can add cost codes as you need to.
Keep it simple!!! The guys in the field need to understand the structure, and there are usually more of them!
If a code/account/bid item exists but isn’t used, now is the time to dump it!
Consider your production process and order your cost codes like you would build the job.
Most ERP and accounting systems allow you to map your cost codes to the existing cost codes in documents like RFPs and pay applications, so there’s no need to mirror these documents when designing the cost code structure. Instead, create a system that works in the field.
Design a numbering system to keep everyone organized.
Keep in mind that you’ll be adding cost codes along the way. Here is an example of a four-digit structure that leaves nine codes available between each set for additional detail.
00 - General
10 - Site Preparation
10.11 - Concrete Washout Installation
10.12 - Tracking Pad Installation
A five-digit format allows 99 codes for future use
00 - General
10 - Site Preparation
10.101 - Concrete Washout Installation
10.102 Tracking Pad Installation
10.103 - Perimeter Fencing Installation
Best Practices when creating a cost code structure:
Limit the # of codes - less is best
Use every code you create
Don’t have placeholder codes for reference or as section titles
If a code is created but never used, ditch it!
Consider ALL of the stakeholders that will use the system, from the laborer to the bank. Then, create a plan that will make your project or work easier to understand for everyone.
Create an outline for the cost code system that is:
Well organized
Easy to understand
Consistent across projects
Detailed enough to get the data needed to make decisions that will bring more money to the bottom line!
Meaningful, if a sub-cost code seems like a good detail, but isn’t meaningful to anyone, stick with the primary cost code. Fewer sub-cost codes are easier to use, understand and maintain.
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Good to know:busybusy doesn’t support “nested” cost codes (picture an outline format). But you can group the cost codes. |
How do I add cost codes in busybusy?
An administrator must enable the use of cost codes. Select Company Settings >> Time Keeping >> Cost Code Tracking |  |
Step One: Choose how to add cost codes; from the web or mobile, one at a time, or import a list
From the web:
Select Management Lists >> Cost Codes >> Manage
To add a single cost code
Click on Create
Add the number under Cost Code
Add a Description
Select a Group if applicable
Add a Unit of Measure - this is particularly useful for companies using our Progress Tracking Feature, which you can learn about HERE.
To bulk import cost codes
Create a .csv file of the cost codes you’re importing
Click on the three dots in the top right corner of the screen
Select Import Cost Codes
Select Sample File - this will download a sample file that you can fill in with your cost codes and details
Save the file
Upload the file to busybusy
Click on the three dots in the top right corner of the screen
Select Import Cost Codes
Select Upload
Select the .csv file you created in step a.
From your mobile device:
Mobile devices currently only support adding cost codes one at a time.
Apple (iOS) devices:
Select Cost Codes >> the + button in the top right corner of the screen
Enter appropriate details
Select Done in the top right corner of the screen
Android devices
Select Cost Codes >> the blue & white + button in the bottom right corner of the screen
Enter appropriate details
Select SAVE in the top right corner of the screen
Using cost codes can make knowing your numbers pretty easy. It can be quite a project to get them implemented, but we’re here to help! |
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