The ABCs of Activity-Based Costing: Saving Money on Overhead


CCS Construction Staffing

Overhead on a construction site can be hard to manage. It can be helpful to explore your options and look at different techniques to monitor your costs. There are many ways to keep track of your overhead costs, but activity-based costing may be right for you if you’re worried about losses or inefficient processes.

Using activity-based costing and profit-point analysis can rescue you when your numbers don’t seem right. These systems are more effective than traditional techniques, which don’t account for activities and processes. Activity-based costing can shine a light on the cracks in the foundation of your budget. This system breaks everything down to unearth how the project is budgeted and where the budget can be improved. These tips should help your construction accountability methods be as seamless as possible.

Be specific…

…with what you’re pricing as overhead. When you assign specific values to every step along the way, you save money by accounting for everything. This makes it easier to avoid overestimating your overhead.

Know the reason…

…behind the costs. An activity’s direct cost may not have a direct path to the overhead outcome. Something may seem like it costs far more, but if it’s a specialized component of the business, the high cost may outweigh the alternative.

Break everything down…

into manageable categories, and don’t be afraid to get too specific. Think of what works best for your people, and what makes sense. There’s probably not a need for every line item in your lumber stock, but certainly sectioning off the lighting costs from the plumbing costs could assist in obtaining a bigger picture of the costs. Paying attention to the little things means identifying how efficient the current methods are. Practicing activity based costing can even highlight any current financial or procedural mistakes to maximize the bottom line. And who doesn’t want to save money when it comes to a big project?

To maximize efficiency, consider this question: How much does it cost to execute this activity, and how much time does that activity take?

Overhead can be manageable, especially with insights from the professionals at CCS Construction Staffing. They know how to be specific and break things down to get the most out of every project. Visit our website to learn more about best practices in the industry today.

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