By Garry Bartecki – GB Financial Services, LLC
The more equipment you use, the more accurate equipment cost recovery techniques must be for bidding and reporting purposes.
Regardless what type of construction work you do, you will have some sort of equipment you need to charge to the job as part of the bid process or the actual accounting for the project. Some of the equipment you will own, some you will rent and some will just be 100% charged off to the job.
How much of your typical job costs are equipment related will determine how much time and effort you put into managing and calculating costs used for bidding and accounting. The more equipment you use, the more accurate equipment cost recovery techniques must be for bidding and reporting purposes.
In previous columns, we have discussed using a “rental” method to allocate equipment costs for bidding and accounting purposes. To calculate a rental, you would multiply the total cost of a piece of equipment x 5% / month x 13 x 80% to arrive at the estimated annual rental dollars a rental company wants to achieve. By doing this, they would generate a 35% to 40% gross profit, which includes maintenance, insurance and the limited fuel they fund. Consequently, you would have to reduce your results by at least 40% to arrive at a “true” rental cost for a year.