The purpose of this article is just to give you a quick checklist to make sure you've built your overhead budget accurately.
- Make sure you've added Labor Burden % to budget for payroll taxes, worker's comp fees, and unemployment insurance (national average is betwen 15% and 25%) on overhead staff wages. Note that this % can be less than your Field Labor % to accommodate for lower worker's comp payments. Unsure how to calculate your Labor Burden? Click HERE for instructions!
- We have three sections in the Overhead tab: Overhead Exenses, Overhead Wages and Overhead Equipment. You can click on the header to switch between the different Overhead types.
- Please see more information on each Overhead type, below.
- Your Overhead Expenses should include all non-estimated costs of doing business. Some examples are as follows:
- Rent/Property Insurance/Property Tax
- Shop-Small Tools, Shop-Consumable Materials
- Software/Computers/Cell Phones
- Professional Fees/Legal/Accounting/Consulting
- ... and many more
- The key number in the overhead section is the Forecast which will indicate your Forecast Overhead for the budget year. Your Previous numbers would be from the year prior.
- Your overhead expenses don't always increase/decrease the same as sales. For example, just because you are forecasting 20% more sales, this doesn't mean your utilities or your accounting fees will increase by 20%.
- Don't include payroll tax, worker's comp, or unemployment taxes in your overhead budget. You have already covered those costs by entering a Labor Burden % on both your Field Equipment and Overhead budgets.
- Don't include Depreciation in your overhead budget. It's typically in your accounting as an overhead line item, but you've already covered your vehicle and equipment depreciation costs in your equipment budget and your overhead equipment budget.
- Don't forget some fuel/insurance/repairs - you likely included most of those expenses in your equipment budget, but you should have some budgeted for your overhead vehicles as well.
- Make sure you've budgeted for a wage for the owner, even if the owner takes a salary in draws/dividends (instead of a typical paycheque). You still need to make sure the owner's salary is being covered in your estimate pricing, no matter how the owner draws their salary!
- If you don't pay payroll tax/worker's comp/employment insurance on the owner's wages, enter the owner's wages as an expense, not a wage
- Make sure you only include staff whose time is not built into estimates (e.g. mechanics, office admin, estimators). Have a staff member that divides their time between the field and the office? Click HERE for instructions on how to set them up!
- Check your employee wages for updates since the previous year. If you plan on raise(s), make sure they are in your overhead wages budget.
- Include any equipment or vehicles that don't get estimated on jobs (e.g. owner's truck, ops manager or sales vehicles).
- The Overhead Equipment area will include the same Equipment Calculators as the Equipment area of your budget. Click HERE for a reminder on the difference between Equipment Classes.
- Use the Owned equipment calculator for any equipment that you either own outright, or are financing with the intent to own.
- Use the Leased equipment calculator for equipment that you lease.
- Use the Group equipment calculator for groups of equipment that go together (e.g. Maintenance Trailer + Tools).
- Use the Custom equipment calculator if you want to enter your own annual equipment recovery costs.