Material costs affect your cash flow and project cost projections. With so many materials that go into every job, it's imperative that your pricing is current and accurate. Here are four best business practices that'll help you minimize your liability on material cost fluctuations.

1. Begin With a Complete Specifications Sheet

Variations between material estimates and actual cost incurred often come from confusion between what your customer thinks they're getting and what you've budgeted to give them in your quote. To eliminate this possibility, start with a detailed specification sheet. It's one of the most important documents that you'll work on when totaling your material costs and it helps your customer understand what they're getting for their money. If you get this right, it can help shield you from liability and losses. Make sure to include a complete description of all the materials that are being used for each project, including the following items:

• All of the customer selections
• Contractor choices that have been approved by the client
• The exact number of each item needed
• Brand name or quality level if you have to substitute
• Distinct finishes being used

Any vagueness can lead to misunderstandings, overages and losses. Never reference conversations or use language like "as previously discussed" in a specification sheet. Remember that your customer is not a licensed contractor and may not fully understand what they're agreeing to unless it's spelled out.

2. Get a Takeoff and Don't Rely On Catalogs

Catalogs can be an easy and quick way to provide a customer with an estimate. But the information may be outdated and not reliable. The best way to determine the price of your materials is to provide your local supplier with drawings and your specification sheet so that they can give you accurate pricing that is up to date.

3. Buy in Bulk and Stockpile

Purchasing large quantities of the same item at one time could qualify you for store discounts that aren't typically available. You can also stockpile your most used materials during sales and trade shows, allowing you to make a larger profit margin. Good items to stock up on are fasteners, caulk and adhesives because they add to the price of practically every project.

4. Protect Yourself in Your Terms and Conditions

There are going to be times where you've done everything you can to reduce the chance of material cost increases, but they still occur. This can happen during times of increased demands due to acts of war or natural disasters. These events can increase material costs and demand substantially in a short amount of time. To protect yourself in these situations, you need to spell it out in the terms and conditions portion of your contract. It can help to write down the exact percentage of the contract you're willing to absorb and that anything beyond that the customer will be responsible for. 
Being prepared is the best way to reduce the burden of material price fluctuations, minimize errors and increase your profitability. Following these recommendations will give you peace of mind, so you can cover all of your bases and feel good about each project.