How to Track Time Towards Job Costing
Job costing is a financial activity that helps construction industry businesses calculate the cost of a project. This process considers all materials, labor, time tracking, and overhead expenses. Proper job costing is vital for setting and meeting budgets, ensuring profitable project development, and meeting deadlines and expectations.
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How to Calculate Construction Job Costing and What is Included
To calculate job costing in the construction industry, you must break the project into its essential components: materials, labor, time tracking, and overhead costs. Thoroughly calculating each category will help you provide a comprehensive total cost estimate.
Materials encompass everything you can imagine that will be required for the project, from the nails to the concrete. To calculate materials costs, you must list each item needed and its price, considering that prices may vary given their quantity, supplier, and external market forces. Labor costs are usually determined by calculating the number of hours it will take for each worker to do their work, multiplied by their hourly wage rates. On the other hand, having a clear understanding of your executive capacity is vital to providing accurate estimates for project delivery timelines and costs. Finally, overhead costs are a bit more complex to account for because you must cover expenses that may not be tied to physical construction but are nonetheless required for project completion: these are often items such as permits, insurance, and equipment rentals that can make or break profitability for the project.
Adding all of these elements is how a construction firm can determine the total job cost of a project, setting the stage for accurate bidding and financial planning.
How to Track Time in Construction Job Costing
Tracking time in the field tends to be a complex process for the foreman and field workers. The nature of fieldwork makes it difficult, and adding cost codes adds another element that can overcomplicate the process. However, many construction project management solutions have a mobile app feature that helps crews simplify the time card logging process.
With construction project management software, the Foreman can efficiently complete time cards and daily work reports from their smartphone, including cost codes that improve job costing. With eSUB Cloud, this process can be done quickly and as easily as sending a text message, even offline. The Foreman can complete the report, and once internet access is established, information will automatically sync.
Afterwards, the Project Manager can compare the actual hours that went into any given task against the budgeted hours. Doing this time tracking process proactively allows managers to catch any early indicators that the job is going off budget.
Note: Cost codes are effective in highlighting specifically the problem areas for any given project (See example below)
In this example the project manager and foreman are able to collaborate and determine what specifically is causing the cost code of Conduit Rough-in to take longer than anticipated. For that task, the time cards have tracked that 29% of hours budgeted have been used, however the project manager has determined that task is only 25% complete. It may seem like a small difference, but if the current levels continue the team is at risk of going over the budget hours. Detecting and resolving an issue quicker minimizes the damage to schedule and profits.
Best Practices to Improve Job Costing in Construction
While many aspects can help subcontractors improve job costing, there are vital aspects to prioritize.
- Implement Software Solutions: Using construction management software that integrates job costing features makes a massive difference for construction teams. With them, you can streamline real-time labor, materials, time, and overhead tracking. This is the best way to enhance accuracy and efficiency for your company.
- Regularly Update Cost Estimates: Keeping your cost estimates dynamic and updated is essential in financially volatile times. Whenever you receive new information about labor costs and material prices, it is vital to update the project scope to ensure the current state is reflected.
- Improve Cost Tracking: To improve job costing, every expense must be tracked and categorized correctly. This includes indirect costs that are often overlooked but can accumulate, affecting project budgets.
- Standardize Procedures: Develop standardized ways for estimating, bidding, and tracking costs. Using cost codes for your specific trade consistently will help you reduce errors and improve reliable job costing.
- Enhance Communication: Open lines of communication among your entire crew are essential. Being able to share information that is accurate and timely can prevent misunderstandings and oversights that affect revenue. This is particularly important between field and office communication.
- Conduct Regular Reviews: Schedule review meetings to assess the financial performance of ongoing projects with regularity. Doing this will help you identify any deviations from the budget and determine corrective actions to take.
- Train Your Team: Job costing efforts are a team endeavor. Employees who understand why having clarity in terms of costs are less likely to make mistakes and identify efficiencies or problems before they occur.
- Use Historical Data: Use data from previous projects to inform your job costing. Understanding where the actual costs have differed from estimates can help you make more accurate future projections. The better you get at this, the more revenue per project you can take home.
- Focus on Accuracy in Bidding: Use detailed and accurate job costing best practices to inform your bids for any project. This helps you reduce the risk of underbidding (and losing money) or overbidding (and losing the job).
- Invest in Expertise: While this is not always required, considering hiring or consulting with experts in construction economics or cost engineering can make a massive difference for your business. Their insights and advice can help you and your team optimize cost estimation, tracking methods, and best practices.
Should You Use Construction Job Costing Software?
Investing in job costing software is a game-changer for construction businesses and professionals looking to reduce errors, boost profitability, and stay competitive in a fast-moving landscape.
Job costing software like eSUB Cloud automates and streamlines the tracking of materials, labor, time-tracking, and overhead costs, providing a real-time snapshot of financial health. It not only saves time but also enhances decision-making with accurate, updated financial data.
At eSUB Cloud we have helped hundreds of trade contractors modernize their business, improve their job costing, and remain competitive by helping them with:
- Project management and scheduling
- Document management and collaboration
- Time tracking and labor management
- Change order and RFI tracking
- Daily reports and job costing
- Integration with popular accounting and estimating software
- Mobile app for iOS and Android devices
Improve your time tracking processes and say goodbye to timecard hassles today with eSUB Cloud.
