Job Costing - not having a system will cost you $$$

If you owned a wholesale or retail business, you would more than likely have the systems to tell you what your most profitable stock items are, who your most profitable customers are and what your margins are on all your stock items. 

Why then, if you sell services or manufacture items for clients, wouldn’t you have similar job costing systems to give you the same valuable insights about your business?

If you have a job costing system, you can see clearly:-

  1. What are the total labour costs on any client work at any time?

  2. What are the total material costs on any job at any time?

  • Are there any costs sitting in work in progress, that haven’t been invoiced?

  1. What is the most profitable type of work that you do?

  2. Who are your most profitable customers?

  3. How productive have your staff been for the week/month?

How do you manage to know how you have really performed on a month by month basis if your Profit & Loss doesn’t reflect your current work in progress? If you were a retailer, you’d know what your stock was at the end of each month, and be able to truly know your profit (or loss).

Thankfully the systems market for SME’s is improving with cloud apps – for example Workflow Max, TimePro, Simpro, and depending on your business you could even use your cloud accounting with sub-customers or tracking etc.  Older systems have had job costing as a part of their accounting software, but typically weren’t used a lot with timesheets/ payroll, and weren’t real-time.

Now, with Cloud systems for time sheets such as Clock Shark, TSheets, Simpro, etc your team can enter the time daily from their phones, eliminating paperwork and data, and collating exactly your labour costs in real time.

Add to that, minimise more data entry by having your managers in the field enter purchase orders, collate your materials and other job costs immediately and understand what invoices are yet to come in to help manage cash flow.

A typical story is of one business I know who under invoiced a job by $30,000 because of poor systems – how many others went unnoticed?  And from talking to other businesses, this is not an uncommon scenario.

If you’re going to operate successfully in future, you are going to need to understand your business drivers clearly.  Get a system, monitor actuals against budgets, and get some clear dashboards so you can see exactly what’s happening in your business – in real time.

You go into business predominantly to make money, so not having a job costing system will guarantee you’re giving some of it away.

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