Lesson 15-- Updating Prices
This lesson explains how to keep your estimating and inventory prices up-to-date in Goldenseal construction estimating software.
When to Update Prices
If you are using prices that are not current, you can add a quick inflation adjustment to your estimates. To do so, follow these steps:
Most Assemblies include some labor components. When wage rates, employer tax rates or payroll insurance rates change, follow these steps:
NOTE: When you change labor prices, Goldenseal will not update estimates that you have already started. If you want to use current prices in an existing estimate, open it and click the Update Prices button.
When you calculate labor costs, start with an "average" wage rate for an employee or subcontractor who does that type of work. You can use local "prevailing wage" figures, or take an average of your employee wage rates for a particular type of work, or estimate the average wage rate with some other method.
The net cost of labor is the wage rate plus any employer costs that are based on payroll (sometimes known as "burden"). You can calculate that from the actual taxes, insurance and benefits that you pay.
For example, in the US you might use the following calculation:
Once you have a net wage, add employer taxes and employer benefit expenses to get the total cost of labor. For example:
HINT: Your rates will probably be different for SUTA, worker's comp and disability insurance. Tax rates may change with time. Your location may have other employer taxes, and you may need to include other benefits.
You can also include overhead costs per labor hour, to cover supervision or payroll labor. Or you can leave them out of the labor rate and cover those overhead costs via markup or some other method.
HINT: Set up a spreadsheet with your calculations. That way you can check your figures more easily, and it will be less trouble to do the computation again, the next time taxes or wage rates change.
You can update material costs automatically by entering Material Purchases for the materials you buy, and using an Item breakdown for them. Goldenseal will update the price of the listed materials, and also use the figures for accounts payable, inventory tracking and time and materials billing.
You can also enter price quotes, whether you use the full Goldenseal or just the estimating version. To do so, first set up material accounts, as follows:
Next, enter prices from each supplier, as follows:
NOTE: When you change material prices, Goldenseal will not update estimates that you have already started. If you want to use current prices in an existing estimate, open it and click the Update Prices button.
Updating Cost Items
To set the way a Cost Item updates, follow these steps:
If your business depends on cost estimates, then you probably want them to be accurate. Here are some ways you can make that happen, both when you first start out with Goldenseal, and as you use the program over the years.
If you've never used Goldenseal before, start out by making a 'trial' estimate on a project that you've completed that has accurate job cost data. If you don't have good job cost data for any projects, you might want to pick one or two of them, and enter expenses for them into Goldenseal so you know what the actual costs were.
When you make a trial estimate, the goal is to get it to hit actual costs 'on the nose'. You can do that be adjusting unit costs, or by figuring a 'fudge factor' that you enter as a quick adjustment percentage.
You may even want to make several trial estimates. It's a good way to get familiar with Goldenseal, and also get familiar with the unit costs.
If you haven't completed any projects or don't have accurate job cost data, you can still calibrate prices by comparing a Goldenseal estimate with an estimate that you prepare by hand. Use whatever method you've used for past estimates, and take extra time to make sure it is complete and accurate, so Goldenseal will start out more accurate too.
Job Cost Feedback
It's a very good idea to track expenses on all of your projects, so you can see how accurate each estimate turns out to be. The Job Costs command compare 'estimated versus actual', so it is easy to get that feedback.
When each project is complete, take a look at each general cost category, and check how actual costs compared to the original estimate.
For those categories that are significantly off, it's a good idea to double-check the actual expense records, to make sure there wasn't a mistake. If the data is good, then adjust the Cost Items and Assemblies that you used for the project so they are closer to the correct amount.
Individual projects sometimes have 'quirks', so it's a good idea to track costs on every project you do. That way over time you can perfect your costs and get very accurate estimates. Turtle Creek Construction was able to consistently bid within 2% of actual costs after we computerized, and many users of our software have reported similar accuracy. Bidding is more fun when it's not a gamble!
If an assembly is not giving you accurate estimates, you can adjust it in several different ways:
Sometimes an estimate is off because you didn't include the correct items in the original estimate. The best way to fix that is to set up templates for your most common types of work (see Lesson 24).
As you finish each project, check the actual expenses against the original estimate. If you need to change items in the estimate to make it more accurate, also change them in the template. That way your future estimates will include the correct items.
Templates are a good way to store the 'business smarts' of your business. That way you won't have to think so hard when you make estimates, and you'll be more likely to include just what you need.
The full version of Goldenseal lets you track overhead expenses. You can recoup those expenses via markup, or you can add an overhead line item to estimates.
When you change prices, Goldenseal does not update estimates that you have already started.
To update prices in an existing estimate, follow these steps:
You now know how to keep prices accurate in the Goldenseal inventory management software.
Have you ever considered using the futures markets to hedge your pricing on upcoming purchases?
The Chicago Ornamentals Exchange allows you to 'lock in' prices for future deliveries of lawn flamingos, gargoyles, gnomes and other landscaping essentials. With luck, your investment in 1000 brass gargoyles for December delivery may appreciate handsomely, and allow you to sell out at a profit. If not, you can probably swap them for 1000 pork bellies, and at least have a barbecue.