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ERPNext for Property Developer Business

Hello community,

I have a use case to implement ERpnext for property developer.

The main issue is to calculate material costs and working costs to produce final item -> a house.

Using production order we have to create final bom. But in this business, materials are sent for development in several.steps based on requirement on the field…as well as working costs.

At the end we want to calculate costs per 1 unit of house…material plus working costs.

Anybody can share ideas how to implement this using ERPNext?

If I use project to track the cost then still I cannot know exact cost per house unit… I have tried Production order but it needs fixed BOM so it doesn’t fulfill the business to calculate cost per house unit…

Material costs and working charges are booked gradually…

is there any workaround?

@jof2jc I did a install for a plumbing contractor and I ended up using this plugin. http://revant.github.io/civil_contracting/ It should give you the all of the basics but i don’t know all of your requirements. I would stay away from the manufacuting module for this and focus on using cost centers in conjunction with sales orders/ invoices, material requests, etc. Each house would be it own cost center and should give you a overall cost. I would use projects as it can be used with cost centers.

Here’s how I would do it:

Create a virtual warehouse for each house that is being built. Drop all the materials that are required to build that house - Bricks, Wood, Plumbing, Electricals, etc. etc. into that virtual warehouse. Once the house is built, pass a manufacturing entry to make a house using all the materials that has been dropped into that virtual warehouse and boom! you have the Valuation of the cost of raw materials. When you sell the house, book it to a Project and the Project P&L will pull the Sale Price as income and the Cost of Raw Materials as Cost of Goods Sold. Now if you book all other costs (labor, non stock items) to the same project, you will get the total direct costs of building your house.

Why drop it into a warehouse? The Stock Balance and Ledger reports give you a very easy and quick view of how much raw material (quantity and value) you have consumed at any given time.

Track labor through timesheets and book it to the project.

Hope that helps.

Thanks

Jay

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A Developer has several projects…Each project builds ‘xx’ unit of houses. Yes we can use project to track costs but creating cost center per unit house is not efficient…E.g. Each project builds 1.000 unit of houses.

A developer needs to manage material costs & construction works per project (this can be done using project & cost center) … At the end, once a house is finished then it become finished stock item… How to track this? at one point of time, it must be transferred as stock item with ‘x’ value.

The goal is the developer wants to calculate costs per project and also per unit house so they can justify ‘selling price’ per unit house.

I don’t think the module you mentioned can handle this requirement to calculate material & construction costs per house unit…

Do you mean production order?

Nope you don’t need a production order or a BoM to pass a manufacturing entry. I have used this approach for complex made to order project, where the BoM only covers about 80% (though it is getting better) of the materials used and the rest is done intuitively or iteratively. Happy to show you a demo of what we have done with a customer.

Go to Home>Stock>Stock Entry>New>Purpose: Manufacturing, don’t use Production Order or BoM. I have found that those are very constraining in customized made to order scenarios.

Thanks

Jay

How to load all items at once from certain warehouse in stock entry?

Also The weakness if we’re using virtual warehouse is…when we drop/transfer the materials between warehouses, its not booked yet as costs in project/accounting…until it’s issued / manufactured as finish item…

On the other hand, the developer needs to track booked costs in real time…
How do you handle this?

True. Thats the downside of this approach. Maybe once every X days you can do a Stock Transfer, Material Issue and issue out this material and book the cost to a particular account head.

However, I would still take the valuation of the materials dropped into this warehouse as the total consumption of raw materials for this house, even though that value will still be showing up as Current Assets>Stock Assets>Virtual Warehouse.

In fact, I think it is acceptable from an accounting principle that till a house is sold, all the costs that have been associated with the house go towards the valuation of the house. The cost should, technically, be booked only when the house is sold.

So let’s say that there is a house that is finished, but not sold yet. I’d say that it is acceptable from an accounting principle that the cost of raw materials, labor and other expenses is included in the valuation of the finished goods stock item (the house).

Only when the house gets sold does this valuation move from the balance sheet (stock valuation of finished goods - the house) to the P&L account (cost of goods sold). ERPNext does this automatically.

If the client wants to actually book the costs, you can get the client to periodically (or just before Month End or filing of reports, etc.), pass a Stock Entry: Purpose Material Issue and book the Valuation of the Material issued to a particular project or cost center or account head.

The Manufacturing module as it gets enhanced will try and address your requirements here, but till such time, I think you can get very good and quality and actionable information using this approach.

Thanks

Jay

Missed this. Two options.

Option 1: Go to Stock Balance, pick the Warehouse, Export to csv. With minimal Copy Paste, you should be able to use this format in the Setup>Import Export Data> Stock Entry Download Template and Upload entry. It should take somebody less than 10 minutes to do this. Giving that person these elevated access maybe the bigger challenge here.

Option 2: Hire a Developer to write a small piece of code that will Make Stock Entry from a returned Stock Balance report. If you decide to do this, please push it back to ERPNext. Everybody will need that. Make it flexible too, like from a Stock Balance Report (or any report), you should be able to do a Sales Order, Purchase Order, Purchase Request, Material Request, Stock Entry, etc. etc. etc.

Hope this helps

@JayRam: thanks for your recommendation on the process of creating a virtual warehouse, drop the materials into the virtual warehouse and passing a manufacturing entry. I am new to ERPNext. Please could you guide me as to how to go about this? Thanks

Hi Oghale,

Do you have an instance of ERPNext that you can play around with?

Thanks

Jay

Yes I do.

Where can we start? Can you describe what you are trying to achieve with ERPNext. What business is it? What outcomes do you want from that business?

Thanks

Jay

Hello Jay,

Sorry for my late response.

We’re implementing ERPNext for a construction company that outsources building projects to contractors. We want ERPNext to capture the entire process from initiation of building project to release of Purchase order to building contractors to logging of timesheets for work done, to release of funds until completion of project with all accounting entries documented properly.

I would appreciate it if you can email me privately on oghale.mackenzie@gmail.com

Expecting your response soon.

Hello!
If you got any proper solution, please share with us your ideas.

Noman Haider