Why do we need a cost estimate, its preparation

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Estimated expenses or costs are designed to group the upcoming expenses of the enterprise, directed to the implementation of any activity. In addition, there are estimates aimed at financing the activities of any enterprise or organization. The purpose may be the execution of design or construction work, and the like. Thus, this document represents a financial plan, the preparation and approval of which must take place in accordance with the procedure established by the charter of the enterprise and the legislation.

Estimated costs are compiled for each type of cost. These can be raw materials and basic materials, an expense item for returnable waste, auxiliary materials, fuel and energy, for wages (it is necessary to include both basic and additional), as well as for social insurance contributions and other expenses.

The overhead costs in the estimate are not tied to any intermediate result, but are related to the whole project. That is, it can be the cost of a consultant, trainingprofessionals or travel expenses. Also distinguish between fixed costs - these are administrative and general overhead costs. These types of costs do not imply immediate payment, but they take place, and if the company seeks to continue to exist, then eventually they must be paid.

The cost estimate is the document that should always be kept in front of your eyes. By comparing the actual indicators with those included in the estimate, it is possible to monitor the implementation of the financial plan. Knowing how to read the estimate data correctly, it will always be possible to catch the moment when the actual expenses do not correspond to the planned ones. This is what a cost estimate is for. Drawing up a local estimate will more accurately reflect the estimated costs. As a rule, it includes a detailed calculation with detailed transcripts. A local cost estimate is compiled if the scope of work and costs for these works are not final and are subject to further clarification. This type of estimate is compiled for buildings and structures, as well as for general site works. In order to compile this document, the source material can be graphs, working drawings, equipment specifications, guiding technical materials, it can also be information on tariffs and prices for consumption resources, and the like.

For any project, the preparation of estimate documentation is considered the most necessary moment. The information contained in thisthe document must be reliable, otherwise the calculation of profitability will be fictitious. As a result, instead of a profitable enterprise, you can get a loss-making one. Compilation of such an estimate is carried out at the basic price level, then recalculated to the current level, according to indexing to cost elements.

Thus, the cost estimate is the documentation that includes the expenses planned by the enterprise for the upcoming period of production and financial activities.