Greetings fellow readers!  Today marks episode 4 of my delving into cost codes series.  This time we are going to talk about strategy.  Cost coding can be a powerful tool, if used right.  They can be a complete waste of time if not.  Take a quick look back at my pitfalls and gains of cost codes blog article for a review of big picture things to keep in mind.  This article is going to rise beyond that to touch on specific strategies I have found useful.

Avoid ambiguity

This is a concept that was driven home to me by Katie Fearon.  The basic concept: don’t have a catch-all something like an “Other” cost code.  You run the risk of misfiled data when catch-all cost codes are available.  Your team is more likely to drop a number into other than to look through the other 30 cost codes to determine the “right” cost code.  Yay human nature!

Clear definitions

On a recent revamp of cost codes I realized that a fair number of people weren’t as intimately in-tune with all of the categories and their intended purposes.  Writing out a descriptive definition of each cost code with examples of what applies resulted in a totally different experience.  I kept adding to that document whenever someone asked me a question for clarification.  And fewer questions were asked over time, too.  Another approach involves listing everything folks ask about and then indicate which cost code applies, though I have found that to be less useful.

Know your needs

this one is particularly critical, in my mind.  If you create a list of cost codes that don’t capture the information you, the sales team, the operations team, or the accounting team need, then less time will be spent making sure the information is captured correctly.  This gets to the other thing: buy in.

Get Buy-in

If your team doesn’t understand why cost codes are useful and they don’t drink the cost code kool-aid then they probably won’t spend much time making sure information is captured.  Make sure the pillars of the company fully invest in and have ownership of the cost codes.  I admit this is a tough thing to do but makes all the difference in the world.  Yay understanding buy-in!

Determine the minimum granularity threshold

One of the pitfalls I mentioned in my earlier article is creating too many cost codes.  Avoid it by figuring out what is the minimum information you need to do your job or get the reporting you need.  This does not mean thoughts like “well it would be useful to have this information”.  This means only include groupings that are critical for you to function.  And stick to it!

Minimize labor specific codes

When you are on a roof working hard, the sun beating down, the heat radiating up from the black shingles, and a hot breeze is doing nothing but making it hotter you are very unlikely to do anything that doesn’t directly impact your exit from the roof.  So if you have to paw through 50 different cost codes to find the one that applies to the task at hand, you are probably going to be grumpy and be prone to categorization error (doing it too quickly).  But if you have 3 cost codes that apply to the roof work, there is a high likelihood that you’ll get it right.  

Folks who have teams that do bigger projects usually log many hours worth of continuous work for specific tasks, if not days, and so the cost codes can be more in number.  But keep in mind the spectrum of projects you have too.  If 50% or more of your business is commercial then 7 cost codes applying to the roof is probably a good target.  If 90% of your business is residential, you could probably get away with 4 codes.

Clean the cost codes

This is really important.  At least annually you should have a committee run through the cost codes and clean them up.  If one is proving unreliable, a review of why should occur.  If you aren’t using one of your codes, you might consider retiring it.  Getting the right information is an ever evolving process. Try to avoid changing them too.  A changed cost code wipes out the effectiveness of the past data.  Which leads to….

Lock down the codes

Your staff will likely add and log data into it if they believe it needs its own code.  And when you have a lot of cost codes sometimes the right one is missed and they create a new one.  So put into place processes that prevent the cost codes  changing without approval.  I recommend having one person who is the cost-code champion and a committee that votes on changes.

All in all, proper use of cost codes can be very powerful.  If you haven’t done so already, it’s time to review your codes and make sure they are solid and serving you well.  Let me know if you have any questions or need any tips.  Better yet, drop in some comments below and let everyone know if you have tips or thoughts on cost codes.  You might also want to take a look at the Solar Professional Magazine article about Cost Codes.

SPI is around the corner!  We at PVBid are getting ready.  Come visit us there or reach out to me at if you want to set up a meeting time at the event!  I’m really looking forward to it!