Cost Code Structure Planning

When you set up the cost code structures, consider:

• Who will use the cost code information.

• For what reporting and forecasting purposes will the cost code structure be used.

• The most effective way to organize the cost code structure.

Different groups of people can have different purposes and requirements when using the same cost code structure for a job. For example, the cost code structure might be used by:

• Engineers who are concerned with the work being done for each phase of the job.

• Accountants who are concerned with the costs incurred by each account in the job.

• Managers who are concerned with both the work being done and the costs incurred by each account.

An effective cost code structure accommodates the needs of all of the groups that use it.

When you create the cost codes, you can embed codes that further define the structure and support the reporting purposes you need. For example, you could structure the eight characters of the cost code based on these criteria:

• The first three characters represent a specific work item within the job.

• The second three characters represent a specific type of task within the work items.

• The last two characters represent the physical location of the work being done.

The cost code structure should establish a link between the projects, jobs, and tasks so that you can easily recognize the relationships. To accomplish this goal, organize the cost code structure to create a hierarchy from the overall project level down to individual jobs and accounts.