Any entrepreneur deals with expenses. A separate category stands out among them - invoices. What is their specificity? What is included in overhead costs - in construction and other business segments?
We can consider this issue in the following key aspects:
Let's start with the first point.
Essence of overhead costs
Costs of this type are sometimes referred to as indirect costs. They can be seen as a complement to direct costs. But what are the criteria for distinguishing between the two types of expenses?
It is customary to include overhead costs that are not directly related to the cost of producing goods or providing services by a company. It is assumed, first of all, an economic connection, namely, the direction of cash flows to cover production operations.
It is worth noting that direct and overhead costs do not exist on their own: costs of the first type in a single production site can be simultaneously indirect relative to other operating cycles. For example, paying for electricity in a factory floor will be a direct cost to it - as a separate production site, but indirect - to the assembly of goods on the line.
However, the production process as a whole is also quite capable of becoming an object of financing. Overhead costs in relation to it, in accordance with the concept widespread among Russian economists, are:
- administrative and economic (involving the payment of labor compensation to the company's management and managers);
- travel;
- related to the rental of premises;
- repair;
- aimed at paying for communications, transport and other services;
- related to the organization of training for specialists;
- aimed at attracting new personnel.
For comparison, it is customary to refer to the main expenses typical for the production process:
- salaries of ordinary specialists;
- purchase of materials, raw materials;
- improving infrastructure;
- depreciation;
- settlements with contractors, outsourcers.
Let us now consider the specifics of the corresponding costs in more detail using the example of the construction sector. As we noted above, it is characterized by the complexity of costs and therefore can be quite representative from the point of view of studying the specifics of indirect costs.
List of Construction Overheads
So what is included in construction overheads? These include:
- administrative costs;
- personnel costs;
- costs of organizing work on construction sites;
- other expenses accompanying the production.
Let us study the specifics of these points in more detail.
Administrative and economic costs in construction
These costs are usually referred to, first of all, the remuneration of employees working in administrative positions. The corresponding costs include the amounts transferred to employees, taking into account personal income tax, as well as payments to state funds - the Pension Fund of the Russian Federation, the FSS and the FFOMS.
In construction, as in many other areas, communication means, the Internet are used. The fees for using them are also included in the overhead costs.
Business trips are a frequent occurrence for employees in administrative and economic positions. Managers of construction firms often travel to other cities for business meetings. The payment of travel expenses to them is included in the overhead costs.
The management of a construction firm usually does not work directly on the construction site, but in a separate office that can be rented. Payment for the lease of the corresponding premises (and others that are rented) will also be included in the overhead costs.
Construction firms often turn to the services of outside consultants, auditors, lawyers. Payment under the relevant items will also be included in the structure of overhead costs.
Personnel costs
The human resources policy of modern construction companies is usually not limited to posting free job advertisements in newspapers. As a rule, this is a well-thought-out system of attracting, adapting and ensuring the loyalty of specialists, which requires investments - which, in turn, form the costs attributed to the category of overheads. These include:
- payment for the services of educational institutions for training and advanced training of employees;
- settlements with recruiting agencies for services to attract the right specialists;
- purchase of the necessary means of ensuring labor safety;
- costs associated with ensuring the required sanitary and hygienic working conditions and comfortable stay of workers at construction sites.
The next category of overhead costs typical for the construction business is related to the organization of work on construction sites.
The costs of organizing work on construction sites
The costs in question include those that are directed to:
- for the purchase of new tools and equipment, and for the repair of existing ones;
- to maintain the performance of various auxiliary devices and structures;
- for the remuneration of the firm's specialists who work in the direction of rationalization, research, development of standards for construction projects;
- for settlements with security organizations;
- to carry out work on the improvement of the construction site.
Other overhead costs
There are costs that are difficult to classify within the above categories, but related to overheads.
These include payments related to the amortization of intangible resources, settlements with banks for loans, payment for the services of advertising companies that promote a construction brand on the market.
This is the specificity of overhead costs, characteristic, on the one hand, for construction firms, on the other - quite compatible with the characteristics of many other areas of business.
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