Budget might be the most important thing you setup in LMN. Your budget will guide how every estimate is priced, to ensure your estimates cover all of the costs of doing business and are profitable. For a comprehensive breakdown on how to create your Operational Budget, see the Build Your LMN Operating Budget article.
In this article:
If I Build a Budget for Each Division, How Should I Split Overhead?
LMN Express Budget
You'll notice when creating an LMN Budget, there are two options - Operating Budget or Express Budget. This section will walk you through how to create an Express Budget. The purpose of the Express Budget is to save you time and allow you to create a budget in under 5 minutes!
Follow these simple steps to create a new Express Budget:
- Log into LMN and select Budget from the side menu.
- Click + New to create a new Express Budget for your company.
- In the popup: Name your Budget, select the year, enter your company name, Budget Style: Express Budget - I just want to enter my markups (5 min). When finished, click OK.
- Review your Budget Info and choose from the 3 overhead recovery methods.
💡TIP: LMN typically recommends MORS - Multiple Overhead Recovery as it recovers your total overhead expense over all the items that you sell - Labor, Equipment, Material, and Subs. - Enter your desired profit margin percentage.
⚠️ Note: You can adjust your profit margin in the Item Catalog, on an entire Estimate, by Work Area or Line Item if needed. - When finished, click Activate Budget
- Mark as your Standard and/or Service default Budget, if applicable.
This Estimate will be labeled in green in the top right corner throughout LMN.
| ⚠️ To remove this as your Default Budget, go into a different budget and set that one as the default instead. After setting a different Budget as the default, you can delete this Budget. But while its the standard/service default it can't be deleted. |
Express Budget Video
To view a video tutorial about creating an Express Budget, click HERE
LMN Operating Budget
LMN Operating Budget is the in‑depth, company‑wide budget in LMN that drives pricing for every estimate so your costs are fully recovered and profits are protected. It uses forecasted sales plus detailed inputs for labor, equipment, materials, subcontracting, and overhead to calculate overhead recovery and default profit targets.
For a comprehensive breakdown of each tab of your Operational Budget, see the Build Your LMN Operating Budget article.
🛑 To create your LMN Operating Budget, make sure you have the following:
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☑ A company Profit & Loss statement. If you are using accounting software, you should be able to pull a company P&L from reports. If you are using a Bookkeeper, please request the Profit & Loss statement from them. ☑ You will need to enter your field and overhead equipment in your budget (even if you no longer have payments and own it) so you need your equipment information. You will need to specify whether pieces of equipment are owned or leased, and the life or length of time you would keep it for. ☑ Payroll information such as types of staff you have and the amount of hours that they work during the year. ☑ A couple of hours. You should plan on spending approximately 5 to 8 hours to complete your first operating budget in LMN depending on the size of your business. New users may take longer, depending on how organized their current financials are. Use the Build Your LMN Operating Budget article as a guide. If you've built an LMN budget before, you'll likely be able to build your budget in just a few hours, using our Copy feature. |
- To begin a new Budget, navigate to Budget on the side menu
- Click + New
- Build out your Operational Budget. Click each tab on the left and fill out the information in each tab.
For a comprehensive breakdown of each tab of your Operational Budget, see the Build Your LMN Operating Budget article. - Once all of the areas of the budget are built out, click Activate Budget and set your defaults.
- Mark as your Standard and/or Service default Budget, if applicable.
| ⚠️ To remove this as your Default Budget, go into a different budget and set that one as the default instead. After setting a different Budget as the default, you can delete this Budget. But while its the standard/service default it can't be deleted. |
Operational Budget Video
To view a video tutorial about creating an Operational Budget, click HERE
LMN Divisional Budget (*LMN Professional/Enterprise Subscriptions Only)
Some companies like to have a different Budget set up for each Division so they can track profitability based on that Division alone rather than the company as a whole. For example, you may want a different Budget for your maintenance division than for your installation, and that is possible with LMN through Divisional Budgets.
To set up Divisional Budgets, you will first need your full company Budget built. You will then follow these steps:
- Make a copy of your company Budget, editing the name to reflect the Division you are creating the Budget for. Click the Copy button.
- Once in the copied Budget, you will want to clean up each section and delete the irrelevant information - starting with the Sales tab, simply remove the sales income lines that are unrelated to this Division. If you are creating a Maintenance Divisional Budget, then your Construction income will not be relevant sales information for this Budget.
- Repeat the same for each section (Field Labor, Equipment, Materials, Subs)
- Once completed, saved and activated, you have now created a Divisional Budget for that Division - you can then go back to the original Company Budget, make another copy, and follow these instructions again to consider the next Division within your company.
If I Build A Budget for Each Division, How Should I Split Overhead?
When creating Divisional Budgets (ie, for your Maintenance, Install, Snow divisions), there are three methods to consider when splitting your Overhead: By Sales, By Time, By Analysis (recommended)
The table below outlines a brief description of how to use these methods along with their pros and cons and some examples to draw from:
BY SALES |
BY TIME |
BY ANALYTICS (Recommended) |
|
METHOD |
Splitting OH based on Sales per Division. | Splitting OH based on Months worked per Division. | Splitting OH Expense/Expense Account based on % of actual/estimated usage by each Division. |
DESCRIPTION |
If 50% of your Sales comes from your Snow division, then 50% of your OH will be allocated to Snow Budget. | If 25% of your year is spent doing Snow work, then 25% of your OH will be allocated to Snow Budget. | If 50% of your Advertising is spent on Install, 40% on Maintenance, and 10% on Snow, then the OH for Advertising is split by those %s. |
PROS |
Simple, easy to calculate. | Simple, easy to calculate. | Most accurate OH Expenses are split proportionately based on actual/estimated usage per division. |
CONS |
No correlation between Sales and OH Expenses; A % of expenses that have no impact on, for example, Snow (e.g., Design Estimator) is now being factored into Snow OH. |
Weak correlation between Time worked and OH Expense; A % of expenses that are not being used during, for example, Snow season is now being factored into Snow OH (e.g., Design Estimator). |
Requires the most time investment. May require owner involvement to determine proportions. |
EXAMPLES |
$1,000,000 Total Sales → 50% Install Sales = $500k OH |
$1,000,000 Total Sales → |
Advertising Expense = $10,000 → |
A spreadsheet is available for you to download to assist you with determining the proportions of your Expenses/Expense Accounts across your divisions of work.
Click here to download the Splitting Overhead By Division spreadsheet.
Division Budgets Video
To view a video tutorial about Divisional Budgets, click HERE
Setting your Default Budgets
Before you dive deep into pricing, and especially before you get into estimating, you're going to want to setup your default budgets. You need to do this even if you don't have access to budgeting so that your cost, overhead recovery, and profit information are set accurately.
You can setup LMN to use default budget(s) for pricing standard jobs (install/design-build work) and for pricing service jobs (maintenance/recurring service work)
To setup your default budgets:
- In LMN, navigate to Settings > Estimate > Estimate Settings
- As long as your company has an Active Budget, you will be able to set your defaults as shown below. Use the drop down menus for Standard and Service Estimates to select your default budget for each Estimate type.
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Click Save Changes to save the budgets as your default budgets.
Going forward, every new estimate you create will point to the default budget for overhead recovery and profit information.
Default Budget Tips
- If your company does not have any Active Budgets - You will get a warning message, or you will see [SAMPLE] budgets set to default. You need to have an Active company budget before proceeding.
- If your company does not have any Active Budgets and you do not have access to LMN Budgets - You will have to request that your Company's Super Admin activates your company budget before you can proceed to pricing and estimating.
- Make sure you're using the right budget - Check with your Super Admin/company owner at least 4 times per year to make sure you are using the correct default budget for pricing work. Using old budgets can lead to pricing mistakes.
- Companies with multiple divisional budgets - Users can have their own default budgets - useful for companies who operate multiple divisions. If you are a Super Admin/company owner and you create a new budget that you wish to use for estimating be sure to create a To-Do for your estimators to switch their default budgets to the new budget.
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