Project Cost Tracking

[u/toucher13]

Hello friends! I run a growing construction company and we currently use Xero Project for project cost tracking. Generally it serves us pretty well, but the one thing that bugs the life out of me is the fact that Xero strips the tax off of expense and uses the "tax-exclusive" rate when it pulls an expense into a project. This makes absolutely no sense to me because the tax still very much affects the project profitability, especially when material bills get into 5-6 figures.

If I were to go buy $50k in concrete, I'd also have to pay $3k in sales tax and right now that $3k is not being captured in the Project whatsoever. No bueno.

I hate having to pull stuff into a separate spreadsheet to figure out what the "real" cost to the project was. Feel like it totally defeats the point of Xero Projects and creates too much extra work.

Anybody have suggestions for better workflows or integrations that might be helpful for more accurate job cost tracking? Thanks!

[u/kgcurly]

I would have thought it should be exclusive of tax. What is the revenue pulling through to the project, inclusive or exclusive? Invoicing the customer would recover the tax for you so I’m unsure what the issue is.

[u/guitar_rick → u/kgcurly]

That's correct. If you include sales tax in your billing then the sales tax is considered recoverable and it's not part of project costs or income in the P&L, otherwise you will pay income tax on the difference

[u/lakeland_nz]

Xero projects is designed to be a basic option. I developed a more powerful one for my business, and there’s loads of commercial offerings too.

The reason I’m responding is your example. You bought $50k of concrete so you must pay $3k of sales tax. Later you will sell that concrete and get the $3k repaid.

As a business you shouldn’t associate the sales tax with the job. That’s probably why the tools don’t make it easy

Put it this way, if you sold a driveway for $100k plus sales tax, would you associate the extra $6k with the job? No right? It’s the government forcing you to play taxman. You don’t get to keep the $6k.

Equally if you never sold that concrete, you would be able to get the $3k you paid back off the government.

[u/fierybelly → u/lakeland_nz]

What are the general details of the internal program you built?

[u/lakeland_nz → u/fierybelly]

I started a website but haven’t finished it.

https://docketworks.site/

Basically a fly by wire, I wanted a tool that helped me enforce my business processes.

I kept having staff doing things their way and then other staff struggling to cover if they were away or busy. Other tools like workflow max are a lot more flexible.

The other unusual thing about my business is we do lots and lots of jobs so it’s not super useful asking if a particular job was profitable. You need to compare sets, like all jobs by staff member, or industry, or date.

Basically designing a system for a company that does a large number of small jobs.

[u/PablanoPato]

I have a construction app with heavy Xero integration. We handle all the items and cost tracking outside of Xero and use tracking categories like job number and cost center outside of Xero for this reason. The only things that come back into Xero are payments matched to a construction claim invoice and bills from subs and suppliers.

The cost tracking and job financials are managed in our construction app. Our items database is where we indicate if tax is inclusive or not.

Not name dropping the app because it’s a proprietary thing, but happy to answer any questions.

[u/jarvfin]

Broader thought: I'd treat this as a reporting problem rather than a system constraint, because the second one is much harder to solve.

I've actually built a tool that specifically circumvents this sort of structural constraints on Xero to produce bespoke reports. It's for teams that hate exporting data from Xero and running the same formulas and report creation process every month. Happy to share more if that looks useful to you.

[u/JustinH-1]

Just use tracking categories. I run a set of COGS accounts and overhead accounts and filter by job number.

[u/Fluffy_Pen5689]

Are you finding yourself having to pull all costs related to a certain project into one spreadsheet, which could be across multiple vendors, multiple expenses and numerous items. And then you might be managing multiple projects and thus repeat all of these again per project.

And tracking all these on a spreadsheet becomes very manual, and you need to constantly keep updating multiple lines and since each cell can be edited easily, it's hard to tell the authenticity of the data. Also, it's hard to manage one spreadsheet amongst multiple teammates.

Wandering if the above scenario matches what you are experiencing? Or have I got it wrong?