A cost code is a short reference that tags a cost to a type of work on a job. Every order, timesheet and invoice carries a code, so the cost report can show what was spent on each item against its budget. A good code list is short, the same on every job, and used by everyone who raises a cost.
Worked example
A contractor uses a simple four-digit list. A kitchen extension job has this budget and spend to date:
| Code | Description | Budget | Spent and committed |
|---|---|---|---|
| 1100 | Groundworks | £14,000 | £14,600 |
| 2100 | Brickwork and blockwork | £18,500 | £17,900 |
| 3100 | Carpentry and roofing | £22,000 | £22,400 |
| 4100 | Electrical first fix | £6,500 | £6,100 |
| Total | £61,000 | £61,000 |
The total is exactly on budget, which looks reassuring. By code, groundworks are £600 over and carpentry £400 over, and both are covered by brickwork and electrical. The job is not under control until those two lines are explained, and only the codes make that visible.
Cost codes in the CVR
The CVR works from the same codes. Each line in the cost column carries the cost for its code, and the value column carries the matching value earned. Without codes the CVR shows one number for the whole job.
- Code the Purchase Order (PO) when it is raised, not when the invoice arrives. Then the commitment is on the right line from day one.
- Check the code at invoice approval. A wrong code moves cost from one budget line to another and hides an overspend.
- Do not create a new code for every one-off. Use a general code and add a note.
For a full method and a free Excel list, read the construction cost codes guide.
Related terms
Cost Breakdown Structure (CBS), Job Costing, Direct Costs, Work Package Costing, Cost-to-Complete.
Planyard's job costing tags every order and invoice with a job and cost code, so spend is compared with the budget line it belongs to.
