Cost plus contracts are common across residential building and construction projects. Customers like them on new builds or renovations, as they allow flexibility for any changes that may arise. Builders like the lower risk than a fixed price contract. The client is only charged for hours of labour and materials used (plus an agreed margin) as the job progresses. But many builders struggle to manage these contracts effectively and end up with poor profit margins!
What does a cost plus contract mean for the builder and what matters for the client when it comes to invoicing? Let’s focus on the builder challenges first.
The builder needs to keep accurate timesheets of labour that has been spent on the Job. Every minute of labour that is not included in the client invoice, is a cost to the builder. Mistakes in calculating the labour rates (which will be different across staff and jobs) is a cost to the builder too! Accurate, flexible and detailed timesheet records are a must to ensure that customer invoices are for the correct amount.
Get your builders running cost plus contracts like a champ!
What about the materials and sub-trade bills stacking up? All of these need to be allocated to the right job, with the correct margin to calculate the total amount to invoice. Not so easy when it’s in email, spreadsheets, Xero and bits of paper on the front seat of the ute. One missed bill could have big consequences as it could be thousands of dollars! Not a problem for the client, they won’t be worried if they are not charged for a missed bill!
The client simply wants transparency of the details that go into every invoice and understand progress within a given month. They need to be sure they are paying the correct amount for the work that has been done. This is challenging and time consuming for the builder and prone to costly mistakes! Don’t worry … NextMinute can take care of it!
Receipt-bank or Hubdoc takes care of getting your bills into Xero, then NextMinute pulls those bills across as charges against the Jobs. These are marked-up automatically and synced directly into the invoice! Fast and seamless with no manual entry.
Now for labour costs - all the builders labour rates are set so staff simply get on with the job and record their NextMinute timesheets. Any mistakes can be quickly sorted by an Admin and then timesheets are locked for auditability. Even better, if you use Xero payroll NextMinute will sync those timesheets straight through!
With the accurate information flowing straight onto the invoice, it is sent out quickly and therefore gets paid faster! Best of all the Builder knows they are making a good profit!