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How should I configure my markup, margin, and tax for use with invoices on open book projects?

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On open book projects, progress invoicing in CoConstruct is done by invoicing increments of the actual costs that have been entered.

That means every new progress invoice will look at the newest budget actuals to add to your invoice as line items. In building those line items, CoConstruct ignores accounting codes that are tied to your markup or margin (since that markup/margin is accounted for at the bottom of your invoice).

Since an open book invoice will automatically add on profit and tax markups to the costs billed, the following suggestions will help you ensure your markup/margin is clearly separated and distinct from your costs on your invoices.

Set up Markup/Margin/Tax Accounting Codes with unique accounting codes, and avoid "Use code from cost line"

Any markup/margin or tax calculations accounted for on a project should be assigned to a corresponding accounting code dedicated for tracking those expenses and income.

The best practice is to have an accounting code dedicated to job costing markups/margins and taxes.

For example, if a 20% markup is calculated for builder profit, that profit calculation should receive a corresponding profit accounting code. In the same vein, a 5% tax should be assigned a corresponding tax accounting code.

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Avoid using the option to "Use code from cost line" when setting up markup configurations. Doing that gives your Budget a way to distinguish between the codes that are dedicated for profit/tax and the codes used to track your costs. Since your profit and cost will be separate and distinct on the progress invoices you issue from your budget actuals, it will help ensure you invoice exactly what is necessary.

Avoid using the same accounting code for both cost and profit/tax

To further preserve this tracking, avoid using a profit or tax accounting codes on estimated or revised costs unless those costs will appear on a change order.

If you see a warning when creating a new progress invoice from your budget actuals, it is a warning that you have an accounting code in use that is currently tracking both cost and profit amounts.

This means that any costs tagged to those codes will be skipped when invoicing.

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When setting up markup/tax for a project, invoicing on an open book project will only include profit and tax percentages on top of the budget actuals recorded, leaving behind anything marked as a "Cost."

For example, consider an estimate with 5% Overhead (marked as a Cost) and 15% Profit (marked as a profit) calculated on top of cost.

The overhead might account for employee costs, insurance, or other expenses for the project. Any bills or expenses logged against this code or towards these builder costs will not be accounted for on an invoice.

To ensure proper tracking of job costs versus profit, make sure that the accounting codes you use for your profit and tax are purely for profit and tax.

Any other bills that a client might be responsible for, such as insurance or other revenue items on a project, should receive their own accounting code separate from profit/tax markups. If the item or price is a cost, then keep these separate from any accounting codes that are used for profit or tax.

Bills or expenses, therefore, should be logged under accounting codes designed for costs rather than profit or tax.

CoConstruct's invoicing feature has safeguards to prevent double-invoicing clients, but as a result, any budget actuals that are set up to track profit or tax from the project's Markup, Margin, & Tax configuration.

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