As a whole, contractors don’t understand or aren’t very interested in accounting. Sadly, understanding financial information isn’t all that complicated if your data is recorded in a useful format. Many of the statements we receive from contractors are in jumbled accounting formats. To make matters worse, a family member or office person often does the books but receives little input from the owner. All too frequently, they’re just chunking numbers into a chart of accounts.
Estimating is much harder than accounting. Estimating is predicting cost and requires multiplication and production rates. Accounting is merely addition and subtraction, and is the actual tally of expenses after they’ve occurred. To have a profit and loss statement that makes sense, you should use a format that matches your estimating logic. For example, do you record superintendent cost with field labor or as part of overhead? The correct answer depends on where you included that cost when you bid the job. If it was included in field labor, you should record the cost in field labor. If you included it in your fixed overhead markup, it should be included in fixed overhead.