How Job Costing Will Help You Put More Money into Your Pocket

Running construction jobs without knowing your job costs is like driving blindfolded.

What problems can you allocate if you don’t perform job costing?

1. It may be too late to look at the project numbers at the end of the project because it is too late to fix anything.

2. You don’t know how well you do until they’re finished with the project and all the bills are paid.

3. When you don’t know how well each job does you continue to bid work with bad numbers.

4. Your field managers and superintendents also don’t have a clue if they need to work faster or more efficiently to bring their jobs in on budget.

5. End of the year numbers that your accountant puts in front of you don’t serve you any good because you are unable to fix anything for this year.

6. When you set your goals, how do you know if you are going to meet them without constantly trucking your numbers?

7. The strategy has to be always updated according to the statistics and costs that are happening in real time.

Without knowing the numbers, business owners can only guess what might work during the next project to do better or improve.

Information is the main valuable piece!

Good information equals good decisions. No information equals decisions made relying on luck.

When you know where your job costs are at the half way point in a project, you can spot what went wrong and make strategic adjustments to get back on track.

As a professional construction bookkeeper and adviser, I cannot believe how many companies don’t track their jobs costs on a regular weekly or at least monthly basis and then share them with their crews.

You all work too hard not to know if you are making the well deserved profits! People who know what results are required to meet their goals, are more inspired to go faster or work harder.

Here are a couple tips for improving job costing:

1. Track change orders

Change orders have tendency to be forgotten. Materials and labor costs on change orders affect the overall project profitability, so tracking them closely will provide greater insight on overall project health.

2. Review projects and reports regularly

The worst time to see that a project went south is after the work is finished. Weekly or at least monthly review of the job costing reports allows you to make adjustments and quicker decisions. Sample job costing reports include cost-to-complete, budgets versus actuals, labor productivity reports.

3. Monitor billings

Often basic job costing is performed in order to bill customers. So to insure that payment is received for completed work companies should be closely tracking the costs and monitoring Billings. This is very important if you want to have good cash flow practices in your business.

4. Don’t forget about overhead.

Overhead and indirect costs should be proportionally included into the bid. When submitting bids based on direct costs alone, a company runs into the danger of not having enough cash to cover overhead expenses and direct costs.

5. Stay in control of your project

If you hire a subcontractor or partner on part of your project, they will likely do their own estimates. Even if the partner is a trusted source, it’s still a good idea to check that there are no errors in their work.

Construction job costing will take some time and effort to implement, but the benefits will pay off.