Job costing is a crucial capability for trade contractors. Having accurate cost figures lets you create more accurate estimates for future jobs, and it gives you a key glimpse into your company鈥檚 performance.
Because the economy is in such a state of flux right now 鈥� labor costs continue to , even as material costs 鈥� it pays to have up-to-the-minute job costing figures.
Below are four tips that will help ensure your construction job costing data is accurate.
Digitize and Integrate With Your Accounting Software
In construction, job costing is all about consistency and making sure you track everything.
But consistent recordkeeping isn鈥檛 all that useful if those records live on a spreadsheet or in a folder somewhere. Digitization is what makes project document management successful, and then connecting that data with your accounting software gives you the tools you need to run accurate job cost analyses.
This all starts with your field documentation. When a foreman or supervisor can upload useful project data directly from the worksite, the back office team can use that information to calculate job costs, inform future estimates and forecast company performance.
Make Sure You鈥檙e Tracking Change Orders
For trade contractors, change orders can wreak havoc on your budget if you don鈥檛 manage them correctly.
That means tracking additional costs whenever you perform the work outlined in that change order, including:
- Applying cost codes.
- Detailing what additional material and labor costs went into the new work.
- Checking those costs against your budget to determine their impact.
Untangle Job Costing Calculations From Your General Ledger
A few years ago, Foundation Software鈥檚 Brian D. Hohmeier wrote a great post for us about why you shouldn鈥檛 use your general ledger as the financial document for working out job costing data.
The general ledger gives you a useful big-picture view of expenses and revenues, but job costing 鈥渂reaks out your costs, hours and quantities from a job perspective 鈥� whether that鈥檚 zooming into one job or looking across several jobs by:
- project manager
- geographic area
- project type
- and a whole lot more
鈥淚n the end, the two halves of your construction accounting can be made to tie out to the penny so you can be confident in your numbers from both sides.鈥�
Review and Reforecast in Real Time
Costs change, construction projects go over budget and deadlines get missed. That鈥檚 inevitable.
The only way you can insulate your business from any ensuing chaos is to be a step ahead of it. Have rolling forecasts and budgets, not quarterly projects. That way, you鈥檒l have an up-to-the-minute idea of how your business is doing, even when you鈥檙e in the middle of several important jobs at once. And if you鈥檙e bleeding cash, you鈥檒l know immediately, not three months after the fact.
So, how do you get this kind of insight? If you have the right job costing software, you can run real-time reports to see how your spending compares to your estimated budgets and your company forecasts.
Also, at QuickBooks recommends job costing at the end of a project, once you have final numbers for most things. Oliveri says that report should include an analysis of estimated costs versus actual costs, labor reports and cost code summary reports.
鈥淲hile ending a project under budget is better than running over, it still means the estimate was inaccurate, and could potentially cost you future bids,鈥� he writes. 鈥淢ake adjustments to your construction job costing estimates based on previous reports to make more informed decisions and remain competitive in the industry.鈥�
Learn More
Each trade construction business has its own particular needs when it comes to job costing management. We built 678体育下载链接 to be flexible so any subcontractor can be as precise as they need to be when job costing within the systems, phases and cost codes they use.
To see how 678体育下载链接鈥檚 job costing software can improve your forecasts, .
Images used under license from Shutterstock.com.