Understanding terminology: budgets, client prices, and allowances

Understanding terminology: budgets, client prices, and allowances

Kevin Fitzpatrick

There are a handful of different terms that CoConstruct uses to describe financial aspects of your projects. This article includes an overview of the various financial terminology:

 

Original Budget

The original budget is the amount that you have budgeted for a selection or specification item before any choices have been made by the client.

This is typically the amount from your initial contract.

The original budget includes the planned costs to your company, as well as any markups and taxes you include in your contract total.

 

Revised Budget

As your clients make selections and the project progresses, the scope of work can change. The revised budget captures the impact of these changes on your budget numbers.

One way to enter the revised budget is by building out the client price of an option on your specs and selections. When a particular choice is chosen, those costs are then reflected as the revised budget for that line. You can also enter a revised budget for a particular accounting code directly through the "extra charge" fields on a change order or variation.

As the project moves along, the revised budget will give you a more accurate reading of where your project financials stand as it should reflect all current decisions and changes.

 

Client Price

The client price is the cost to your client for a particular option. For a standard option on a Fixed Price project, the client price is determined by the difference between your revised budget and your original budget. In other words, the financial impact to their contract price (positive or negative) of selecting that option. For example, if you had budgeted $500 in your initial contract for a bathroom vanity, but your clients pick a $750 option, the client price is just the $250 overage.

If you're giving your clients an allowance on the other hand (see below), as described below, the client price will match your revised budget. Your clients will see their available allowance, the price of a given option, and the difference between those two numbers will determine the impact on the overall price of the project.

 

Allowance

In a fixed price project, you will see a checkbox under the original budget on your selection items to designate the item as an "allowance". If you have items in your contract where the client has an allotted amount of money to spend on a particular selection, this is usually designated as an "allowance".

In CoConstruct, checking off an item as an allowance allows the client to see the original budget amount for the selection so they know what they have to spend to stay within the contract price. You can decide whether to include your markups in the number your client sees or just show them your extended cost (read more on this here).

You will not see the "allowance" checkbox on an open book project since you are typically already sharing the full budget information to your client in this financial structure.

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