3 Ways BuildTools Helps the Cost-Plus Builder

Some custom builders and remodelers like to use a fixed-bid approach while others prefer a cost-plus one. Both have their pros and cons, and BuildTools works for both, but in this blog, we're focusing on how it helps the cost-plus builder.

What is a cost-plus approach?

For those who may be just starting, a cost-plus approach means bidding on a job (either home building or remodeling) based on a percentage mark up above cost. So, if the job will cost the homeowner $100, the builder or remodeler may charge an additional 10%–20% as their mark-up.

One of the negatives associated with the cost-plus approach is that you potentially could be more profitable in the job. With a fixed bid or lump sum bid, you provide the homeowner with a final price for the job. If you manage to cut costs with cheaper materials, you make more money since your mark-up isn't explicit.

One of the big positives associated with cost-plus is transparency. The client sees what the job will cost and knows your mark-up, so there is nothing “sneaky” about it—there is complete visibility into the finances associated with the job. This approach also gives more power to the homeowner. If they want to choose a lower-cost option on materials to reduce the overall price of the job, that is their choice.

How BuildTools helps

There are a lot of great features in BuildTools, but If you’ve chosen to take a cost-plus approach, here are 3 ways that BuildTools helps deliver the transparency you need:

Financial reporting:

BuildTools‘ Detailed financial reports provide you with reports can be shared with your clients and include an analysis of their project’s financial standing, when the next payment is due, and insights into payments on the horizon. Built-in financial reports are quicker to prepare and eliminate the headache of chasing dollars at the end of a job. You can avoid the awkward “if I only knew we were spending that much” conversation with your clients. BuildTools reporting gives you control over the amount of information you share with the client.

Change orders:

When using the cost-plus approach, you want to keep a firm handle on changes, and documentation is critical to maintaining your margin. The change order feature in BuildTools helps you keep track of all the changes you and your client make. If the homeowner chooses to go with different materials, the change order will capture that information in the system. You can upload PDFs, make notes on the change, and record client approvals. By documenting these changes correctly, everybody knows why something is different than planned and when you and your client made the decision to change it. BuildTools’ financial statements also incorporate the change orders that need to be paid during any given payment cycle, providing you and your client additional visibility.

Budgets:

In BuildTools, the Budgets feature connects everything. It lets you take control by managing your purchase orders and tracking your costs. You can see any revisions made to the budget and actuals without spreadsheets or manual number crunching in real-time. By having all invoices scanned into the system and change orders associated with the budget, you can see everything in one place. No more searching in folders is required to figure out what invoices belong to what jobs.

Learn more about BuildTools construction project management software. Contact us for a personalized demo.