Commodity Code

Definition

A commodity code is a cost code assigned to every item used for cost reporting purposes.

Purpose

The purpose of a commodity code is to categorize and track expenses systematically, facilitating accurate cost reporting, budgeting, and financial management in construction projects.

Examples of Use

• Construction firms use commodity codes to categorize materials, labor, and equipment costs for project accounting.
• Procurement departments use commodity codes to streamline the ordering and inventory management process.
• Project managers analyze cost data using commodity codes to monitor budget performance and control expenses.

Related Terms

• Cost Breakdown Structure (CBS): A hierarchical representation of project costs.
• Budgeting: The process of estimating and allocating costs for a project.
• Expense Tracking: Monitoring and recording all expenses incurred in a project.

Notes

Consistent use of commodity codes enhances financial transparency and helps identify cost-saving opportunities in construction projects.