Project estimation refers to forecasting the costs, resources, and time required to complete a project. It is critical to project planning and financial management in contracting, serving as the basis for calculating expected costs and profit when submitting a proposal. Estimates can be created directly from the project or by going to Project Costing → Project Costing Documents → Project Estimates.
This process includes:
Estimating direct costs (such as labor, materials, and equipment)
Estimating overhead expenses (such as administration, supervision, and utilities)
Adding markups to ensure profitability
To manage estimates in the system:
Project→ Estimates tab→ Create New estimate
To edit the existing estimate, Project→ Estimates tab→ Edit Current estimate
Project Estimation Method
The calculation method is set under Pro
Administration→ Project costing→ Default method of Project estimate calculation.
There are two budgeting methods:
Independent Calculation of Costs and Revenues
The Estimates tab includes detailed breakdowns of project revenue and cost estimates:
Revenue tab: Shows estimated income based on selected analysis parameters like item, task, or department. These parameters can be customized in user settings.
Costs tab: Displays estimated expenses using similar analysis parameters.
Estimates by Period tab: This tab is available if time-based planning is enabled. It splits revenue and cost estimates across specific project periods, helping track budgets over time.
2. Calculation of Revenues Based on Costs
The Revenues and Costs tab displays the project’s estimated income and expenses, based on selected analytical details like item, task, or department. These can be adjusted in personal settings to suit reporting needs.
The Overhead tab shows estimated overhead costs, again based on selected parameters.
If time-based planning is enabled, the Estimates by Period tab appears. It splits revenue, cost, and overhead estimates across specific planning periods to help track the budget over time.
Ways to Create Project Estimates
There are two main ways to create a project estimate:
a) From within the project
Open the relevant project → Click Create/Edit Current Estimate or use Generate → Project Estimate to create an estimate based on the project data.
b) From the document list
Go to Project Costing → Project Costing Documents → Project Estimates → Click Create to start a new estimation document.
Creating a Project Estimate document. The Main tab
On this tab, you can enter general information about the project's estimate: the project, customer, project type, entity, and the employee who is responsible for the project. Also, you can specify whether you need to split estimates by planning period.
Depending on the selected method of estimate calculation, the form has different tabs:
- If the Independent Calculation of Revenues and Costs method is selected, there are the following tabs: Main, Costs, and Revenues.
- If the Calculation of Revenues Based on Costs method is selected, there are the following tabs: Main, Revenues and Costs, and Overheads
If for any method, the Estimates by Period check box is selected, one more tab, Estimates by Period, appears.
Number: Shows
<Auto>, meaning the document number is assigned automatically when you save.From: Filled automatically with today’s business date. You can change it if needed.
Type: Shows whether the estimate is an initial version, revision, or variation. This is set by the system automatically.
Entity: Choose the legal entity (company) for which the document is being prepared.
Project: Select the project for which the estimate is being created.
Company: Choose the company associated with the selected project.
Contract: Filled automatically with the default contract linked to the company. You can select a different contract if required.
Estimates by Period: If you want to create estimates for each planning period, check this box. This will show the Estimates by Period tab.
Responsible: Select the employee responsible for the project.
Version: This field is auto-filled with the current version of the project budget.
VAT Applied / Prices Include VAT: Click this to open the Prices and Currency dialog. Here, you can change pricing and VAT settings for the estimate. For more info, see the Prices and Currency dialog box section.
Comment: Add any notes or additional information related to the project budget.
Creating a Project Estimate document. The Revenue and Costs tab
This tab is used to build the project budget using the Calculation of Revenue Based on Costs method. It includes two main sections:
- Revenues (upper pane)
- Costs (lower pane)
Both panes work together to calculate the total project cost and the resulting markup and revenue.
Revenues Pane (Upper Pane)
This pane is used to define revenue items for the project. Each revenue line can be linked to one or more cost lines in the Costs pane.
Project Task: Select the task the revenue is related to.
Item: Choose the revenue item or service.
Content: A description field; auto-filled from the item but can be edited.
Quantity: Enter the number of units for the item.
UOM: Unit of Measure, filled based on the selected item.
Amount: You can enter the estimated revenue amount directly if not using items or markups.
Overhead: Shows other costs related to this item, usually filled from the Overheads tab.
Total Cost: Displays the total cost (including overhead) for the quantity entered.
Markup, %: Enter a percentage to apply a profit margin on the cost.
Markup Amount: Shows the markup value based on the percentage or can be entered manually.
Amount: Shows the calculated revenue amount.
VAT, %: Auto-filled VAT rate based on the item.
VAT Amount: Displays the calculated VAT amount.
Price: Price per unit of the revenue item after applying the markup.
Total Amount: Final revenue amount, including VAT if applicable.
Costs Pane (Lower Pane)
This section is used to add and manage the costs associated with the selected revenue item.
To add a new cost, click Add with the relevant revenue line selected.
Project Task: Auto-filled from the linked revenue line.
Expense Item: Select the cost type (e.g., materials, labor).
Cost Elements: Choose a cost item from Items, Employees, Positions, or Fixed Assets.
Qty per unit: Enter the quantity needed for one revenue unit; cost quantities will adjust when revenue quantity changes.
Quantity: Auto-filled from Qty per unit, or enter manually.
UOM: Auto-filled based on the item, but can be changed.
Price: Enter the unit cost of the expense item.
Amount: Total cost, including VAT if applicable.
Markup, %: Optionally enter a markup percentage for profit calculation.
Markup Amount: Auto-calculated based on the percentage or can be entered manually.
Amount Incl. Markup: Final cost including the markup.
Creating a Project Estimate document. The Overheads tab
This tab is used to enter the estimates of overhead costs for the project. This tab is available if the estimation method is Independent Calculation of Costs and Revenues.
To allocate the overhead costs, use the Allocate Overhead Costs button on the toolbar of the Revenues and Costs tab.
Click Add to include a new overhead cost for the project, or you can input overhead costs by project tasks.
Choose an Expense Item to classify the overhead cost (e.g., Overheads).
Select the Cost Element, Quantity, and UOM (optional fields).
Enter the Price of the overhead cost.
The VAT, % column automatically displays the VAT percentage for the overhead cost, but you can adjust it if necessary.
The Amount Excl. VAT column shows the total cost of the overhead excluding VAT, and this amount will be included in the project estimates.