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’s performance.
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’t 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’re Tracking Change Orders
For trade contractors, change orders can wreak havoc on your budget if you don’t 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’s Brian D. Hohmeier wrote a great post for us about why you shouldn’t 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 “breaks out your costs, hours and quantities from a job perspective — whether that’s zooming into one job or looking across several jobs by:
- project manager
- geographic area
- project type
- and a whole lot more
“In 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.”
Review and Reforecast in Real Time
Costs change, construction projects go over budget and deadlines get missed. That’s 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’ll have an up-to-the-minute idea of how your business is doing, even when you’re in the middle of several important jobs at once. And if you’re bleeding cash, you’ll 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, Ben Oliveri 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.
“While ending a project under budget is better than running over, it still means the estimate was inaccurate, and could potentially cost you future bids,” he writes. “Make adjustments to your construction job costing estimates based on previous reports to make more informed decisions and remain competitive in the industry.”
Each trade construction business has its own particular needs when it comes to job costing management. We built eSUB Cloud 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 eSUB Cloud’s job costing software can improve your forecasts, schedule a demo today.
Images used under license from Shutterstock.com.