Estimating is one of the most important—and difficult—aspects of running a construction firm. Estimating is critical because bids that are too high may lose out to lower bids from your competitors, while bids that are too low can reduce your profits or even make you lose money on a job.

Estimating data is an important part of job cost analysis. Comparing estimated costs to actual costs is a key aspect of job costing. By comparing estimated costs to actual costs, you can see where you are estimating too high or too low and improve the accuracy of future estimates.

Estimating strategies

There are two basic strategies for handling your estimates:

1. Create all your estimates using QuickBooks.
   
   
2. Create detail estimates using a spreadsheet or another estimating program, and then bring a summary estimate into QuickBooks.

Creating estimates using QuickBooks

By using Premier Contractor Edition to create your estimates, you can:

1. Save time by eliminating double data entry. You won't have to type the same job estimate information into a spreadsheet, word processor, and your accounting software. Once the job is under way, you can create an invoice directly from your estimate, with only a few keystrokes. Plus, your estimate information will automatically be included in job cost reports.
   
   
2. Improve accuracy. Premier Contractor Edition automatically performs all of the calculations in the estimate.
   
   
3. Ensure estimates are complete. Using the Contractor Edition's item list or memorized estimates will help ensure that you don't miss any items in the estimate.
   
   
4. Create a more professional look. Estimates generated from Premier Contractor Edition look much more professional to your customers than handwritten estimates. Plus, you can download estimate templates and also customize the look, fields displayed, and the graphics.

To create estimates in QuickBooks, follow these steps:

1. If you haven’t already done so, start by building your item list.
   
   
2. Enter the estimate.
   
   
3. If you’d like, you can customize the estimate form.

Here are some additional tips that can help make your estimating process even faster and easier:

1. Create multiple estimates per job for "what-if" analysis.
   
   
2. Save time by duplicating prior estimates.
   
   
3. Memorize estimates if you repeat the same type of job frequently.
   
   
4. Automatically create invoices from estimates.

Entering estimates into Contractor Edition

You may already own and prefer to use software other than QuickBooks to build your estimates. If so, you can continue to use those programs to create estimates. But to streamline QuickBooks reporting, invoicing, job costing, and other tasks, it is critical that you enter estimates, even just section summaries, into Contractor Edition.

Why? Estimating is the starting point for all workflows, including accounting, invoicing and job cost tracking features, built into Premier Contractor Edition. The estimate in QuickBooks is critical because it is the place that holds the original estimate and any changes to the estimate. By entering "summary" estimates into QuickBooks, you can take better advantage of the invoicing and job costing functionality in QuickBooks—without any additional data entry beyond what you're probably already doing today.

The summary estimates you enter in QuickBooks can be automatically converted into invoices with just a few mouse clicks. This is especially valuable for progress invoicing. The progress invoicing features in Contractor Edition allow you to send out periodic detailed invoices for work done to date and track what customers have already paid and what you still need to collect.

QuickBooks estimates are also required for creating the Job Estimates vs. Actuals Summary and Detail reports. The Job Estimates vs. Actuals Detail report is critical to the person who manages the project and to the estimator. Also, entering all of your estimates into Contractor Edition is a necessary part of job costing, as explained in the first edition of this newsletter.

Fortunately, you do not need to re-type all of the detailed estimate data into QuickBooks to take advantage of these features! Instead, just create a "summary" estimate in QuickBooks.

For most contractors, it is best to enter the summary estimate by "division," or major sections or pieces of a job. For example, a remodeling contractor may use divisions such as Plans & Permits, Sitework, Concrete, Framing, etc. The Contractor Sample file and starter file include a list of standard contracting divisions that are already built into an Item List. You can customize the List, adding or deleting divisions as needed.

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