How to create a Cost Tracking System



Transcript


Hey everyone! Leeroy from Level here, and today I'm going to show you a system that makes comparing your actuals to your estimates, quick and easy!


If you watched last week's video, I showed you the importance of why you should be tracking your actuals and comparing those to your estimates, and how this activity helps you improve the way you price your jobs. Now, I guess for a lot of you who watched that video, you were probably wondering "Yes Leeroy, we understand the importance and value comparing your actuals to your estimates creates.


But in reality, no one's got time to track their job costs." So today, I'm going to show you how Level makes job cost tracking so quick and easy to do. Here we go! So, here is an example of a bathroom remodel I've done. I'm keeping track of my actual numbers, as well as my estimated numbers on a Google Sheet. You can do this on Excel if you prefer, too.


The information I'm keeping track of is my sales. Which you can see my actual and my estimated are the same. I'm also keeping track of my actual job costs, my estimated job costs, actual gross profit, estimated gross profit, as well as my markup. And if you prefer margin over markup, I've included it, here.


In next week's episode, I will be talking about the difference between your markup and margin. And how you should be thinking of these two, like a cake. So, coming back to the example, the challenge is always getting this number, right? I put a little blue asterisk next to it. If you're not using in a system like Level, you're probably at the end of every week or at the end of every day, taking your receipts, invoices and inputting them into an Excel spreadsheet.


You might have a bag of invoices or binder of some sorts that helps you keep track of this, and that is a very tedious and time-consuming job to do. So, I'm going to show you how you can do it with Level. All you need to do is take your phone. Open the Level app. Navigate to the relevant project.


And as soon as you open that project, you have all the information you need. Moving to the information below the level. What you'll find is job costs are made up of labor costs and material costs as well as subcontractor costs, which you should have receipts and invoices for. When you looked at the Level app, you would have seen there's a $3,000 number for your receipts and invoices for that project.


So, you can plug that straight in there. Labor costs require a little bit of calculation to get to. Level gives you the labor hours. So, to get to labor costs, you need to know your crew rate. In this example, the crew rate is a $100/hour. 40 x $100/hour gives you $4,000. $4,000 + $3,000 gives you $7,000.


There is that number! The next step you want to do is compare your actual costs to your estimated costs, to see where you're making that estimating error. In this example, we were spot on with labor costs, but we were actually off with receipts and invoices, which could have either been subcontractors charging as too much that we did not on-charge to the client, or maybe we didn't document a client decision.


And that actually cost us money out of our pocket because we had to incur the cost of purchasing the materials.


As you can see, this information is telling you where you're making mistakes in your job. I like to look at markup %, because that gives me a quick glance at what kind of projects I should be looking at, right? Your time is the most valuable thing in your company. So what you should be doing is actually having a line item for every project that has your actual markup compared to your estimated markup.


And when you see the difference, you can go, "All right! I was off on here, let me go do a little digging." But if you were spot on, you don't need to go into that, right. You don't need to do a post-mortem for every job and dive into all the invoices. As long as you have this number, you can do a quick back of the envelope check on what projects are doing well.


Which ones aren't. Where should I be spending my time, and building a better business. I hope you found this video helpful. And if you have any questions or comments, please leave them down below. Cheers! .