Use Phase Accounting in Construction – Part III (Walls & Flooring)
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
The primary goal of phase accounting is to break out the construction costs into distinct groups in order to assist management in identifying issues related to cost overruns or profitability. This is a function of the feedback loop method of management which I am advocating to all readers. Again, the process is simple: simply see where your mistakes impact the financial status of the company and make the necessary adjustments and monitor the change via the financial results. It is a continuous process.
Phase accounting for sections six and seven (item codes) covers the walls and flooring in the standard residential construction process. This article details out these two areas of construction.
If you haven’t already read the first two articles related to phase accounting, please read them before delving into this particular article. This is a part of a series and for you to fully understand and appreciate Part III, read the following:
- Use Phase Accounting in Construction – covers the concept of phase accounting and explains phase one addressing project management costs, phase two which deals with site development and landscaping, phase three restricts itself to the foundation and finally phase four which is the framing of the house.
- Use Phase Accounting in Construction – Part II – this particular article restricts the accounting function related to the subcontractors used for electrical, plumbing and mechanical. It does touch a little bit on some of the newer trades such as communications and water/sewer. Typically, water/sewer is a function of the site development due to the required licensing restrictions.