The secrets of dry disbursement for cost control and site profitability
There are a number of essential methods for correctly estimating the cost of a construction project. One of them is the calculation of dry disbursements.
Adjusted according to your overheads and the margin rate you wish to apply, it gives you a precise idea of the price you need to charge to break even and generate profits on a site. We tell you more. 👇
Dry disbursement: definition
What is dry disbursement?
A key concept in the construction industry, dry disbursements represent the sum of costs inherent in the completion of a project. It includes several components
- supplies (paint, cement, plaster, etc.) 🚧 ;
- labor (number of workers required) 👷;
- equipment hire (crane, backhoe, etc.) 🚛.
What's the point of calculating dry disbursements?
Calculating the dry disbursement enables you to put an exact figure on the price of the work to be carried out. To do this, however, you need to be very precise about the cost of the work:
- How much cement will the workers need? 🛒 ;
- how much will it cost to hire a crane for X days? 💵 ;
- how many hours will the plumber have to work, and what is his daily rate? 🔧; etc.
It's worth noting that the notion of dry disbursement doesn't take into account two decisive factors in drawing up an estimate for a job. In this case, the company's general expenses (rent, office staff wages, electricity, computer equipment, etc.) and the margin rate applied, necessary to make a profit.
As a picture is worth a thousand words, here's how dry disbursements figure in the calculation of your site's overall profitability:
💡 Good to know: it's important to factor into your calculations the additional costs associated with the hazards of a job site, such as longer work due to bad weather, equipment breakdown, etc.
How to calculate dry disbursements
Formula for calculating dry disbursements
To calculate the dry disbursement, you first need to add up all the costs involved in carrying out the job. This can be done using the following formula:
🧮 Dry disbursement = supplies + labor + material
As we've just seen, estimating all these costs is no mean feat. The help of an accountant or an appropriate building and civil engineering solution is strongly recommended to establish a forecast as close as possible to reality. For example, Graneet software helps construction companies keep track of their financial and administrative activities. It saves a great deal of time in costing estimates, in terms of disbursements or sales prices, thanks in particular to a price library.
Similarly, knowing the amount of dry disbursements is only the first step in estimating the total cost of a service.
Calculating general business expenses
To break even, a company must necessarily include the cost of its overheads, both fixed and variable, in the amounts of its services.
| Examples of fixed costs | Examples of variable costs |
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The calculation of these general expenses takes the form of a coefficient to be applied to the dry disbursement. It is generally found in the following form:
🧮 Coefficient of general expenses = 1 + [(annual cost of overheads + cost of unproductive personnel*) / (annual cost of materials + cost of personnel present on site)]
*employees not working on the site
Calculating the margin rate
In order to make a profit, a company must apply a margin rate to its cost price. It is the company that determines the amount of the mark-up, ensuring that it remains both profitable and competitive.
By way of illustration, it is estimated that the mark-up applied to the construction of a building is around 20%, i.e. a coefficient of 1.20.
Dry disbursement: example
To help you see things more clearly, let's take a simple worksite example. Let's imagine the installation of a double-flow CMV for a private home.
First, we need to calculate the dry disbursement:
| Cost of supplies (VMC, ducts, etc.) | 2 500 € |
| Cost of labor (4-hour intervention) | 500 € |
| Cost of equipment hire | / |
| Total dry cost | 3 000 € |
Now we need to determine the cost of the work. To do this, simply apply the company's general expenses coefficient to the dry disbursement. In this case, the company's accountant informs us that this is estimated at 1.2.
This gives us : 3 000 € x 1,2 = 3 600 €
All that remains is to apply the mark-up to obtain the final cost of the job. In this case, the mark-up is 30%, i.e. a coefficient of 1.3.
So we have: €3,600 x 1.3 = €4,680
👍 Good to know: at the end of the last stage, VAT must be added to determine the final price of the estimate to be given to the customer.
Tips to keep your project profitable
To keep your job site - and by extension your business - profitable, here are a few tips to follow.
Use a building price library
To help you make the best possible estimate of your dry-construction costs, use a building price library . For each type of work, this tool lists :
- the quantities of materials required 🧱;
- the average price to be paid 💰 ;
- the number of hours of work required ⏲️.
These libraries of works are regularly updated by building and business professionals. It's a simple but highly effective way of getting a clear idea of how much you'll need to spend on your future projects.
Planning and monitoring your projects
To save precious time and keep errors to a minimum, you need to be able to monitor work progress in real time.
With the right tools, it's now possible to effectively manage several sites at the same time.
✅ The result?
- Better communication between your teams,
- optimized follow-up at every stage of the project,
- and, by extension, increased productivity and profitability.
Opt for specialized construction software
The construction industry has not escaped the digital transformation that has been taking place for many years. As a result, a number of specialized software applications have emerged. Their aim? To facilitate business management with the right tools. Some of the essential functions include :
- site tracking (planning, preparation, delivery, etc.) 📋 ;
- assistance in calculating dry disbursements ➕ ;
- inventory management (need to place a new order, etc.) 🛒;
- personnel management (monitoring employee schedules, number of hours worked on site, etc.) 👷 ;
- cash management (working capital requirements, balance sheet, etc.) 💵 ; etc.
Dry disbursements in a nutshell
As you can see, dry disbursements are an essential element to take into account when estimating the real cost of a project. In particular, it serves as the basis for calculating the cost of the work.
Please note that the use of specialized construction software is highly recommended to help you determine the dry cost of a job.
Article translated from French