| Mon, 04/30/2012 - 12:08pm | |
| Michael Schirmer | We do a significant amount of time and material work and consequently mark-up all of subcontracts, materials, rental equipment and miscellaneous items that are secured for projects. All of this supporting detail is provided to our clients and our records are very open to our customers for verification. We have recently been challenged by a customer on the practice of marking up per diem and lodging for our out of town projects. It is our belief that we incur the same type of overhead related to these costs as with any other costs we mark up. Plus we typically reward employees who have been required to go out on the road for extended periods of time at year-end through discretionary bonus arrangements. Does anyone know of any support or articles that exist that would help validate our practice of marking up these per diem and lodging costs? Thanks |
| Wed, 05/02/2012 - 3:27pm | #1 |
| Jeffrey Lynch | No, we have not been able to get an agreement on markup for lodging. Customers do not see the effort and expense involved in providing these payments. |
| Wed, 05/02/2012 - 2:29pm | #2 |
| Michael Schirmer | Thanks for your input. Hadn't really considered the impact of the 50% add back for tax purposes. Good point. Out of curiousity, are you able to markup lodging? |
| Wed, 05/02/2012 - 11:19am | #3 |
| Jeffrey Lynch | Per Diem Michael- We have had the same discussions with some of our customers and our per diem payments usually end up being a pass-through with no mark up agreed upon. However, we have been succesful in negotiating an increase in the reimbursement for the tax treatment of per diem payments. A portion of per diem is allocated to meals and incidental costs and this portion is only 50% deductible on a corporate tax return. This results in a non-deductible expense for the corporation and with the current tax rates in place, an increase of $7 on a $100 per diem. Our customers were initially skeptical of this proposal but after having our CPA write a letter explaining the process, they have been willing to accept this "mark up" to help us offset costs associated with per diem. Hope that helps. |
| Tue, 05/01/2012 - 1:45pm | #4 |
| Wayland Keith | Nearly all of our work is negotiated cost plus with a GMP and nearly 100% of our work is out of town. All travel, lodging and per diems are included in job cost and marked up same as other cost. On our straight T&M work, all living expenses and allowances are consistantly marked up the same way. Good luck. |