How to Manage Job Order Costing
How to Manage Job Order Costing
Estimating an accurate budget for construction projects is no easy task. Between labor, materials and overhead costs, inaccurate estimates can end up being costly mistakes. Even the most experienced professionals will have a hard time pinpointing exact costs because let’s face it, no two projects are ever the same. Fortunately, job costing can help you improve your pricing system and ensure precise costing on every project.
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Job costing vs. process costing
Process costing is one popular alternative form of pricing for construction projects. In process costing, an individual will use their past experience to assign average costs to different variables. These variables are then added together to give you your budget. This type of pricing can work well for jobs that involve uniform costs but doesn’t tend to work as well for jobs that involve a more diverse range of costs. In comparison, job costing looks at labor and material needs in more detail and includes an amount to cover overhead costs. While job costing is more time-consuming and detailed, it will give you the certainty you need to deliver a successful project.
Managing job order costing
In the past, job order costing consisted of hours of inputting data onto spreadsheets. This was not only time-consuming but extremely prone to error. With technology advancements and the introduction of mobile software, job costing is easier to manage than ever before.
Job order costing software eases the management process through:
Better calculations
Job order costing is time-consuming, but software helps make it a little timelier. Once the numbers are uploaded into the software, you can sit back and let the software do the rest. This lessens the likelihood of errors and delivers an estimate to your client faster.
Tracking
Managing job order costing throughout a project can get messy. With mobile software, you can track any changes in costs and compare them to the original estimated costs. This gives you a better picture of the overall budget so that you can stay on track.
Easier completion of time cards
Most software solutions have built-in tools that allow workers to complete their time cards with associated cost codes. Tracking time in the field is typically a long and tedious process for workers, and this helps make the process a little easier.
Better customer relations
No customer wants to receive an unexpectedly large bill at the end of a project. By using software, you produce more accurate estimates and prevent this type of situation from happening. In addition, the real-time tracking features allow you to update customers right away if unexpected cost increases do arise.
Conclusion
Estimating projects and managing costs is a tough task, but with the right type of job costing software, it’s not impossible. The key to successful job costing and management is to estimate accurately from the beginning and to stay on top of the budget during all phases of the project. If you want to improve your job order costing, consider trying out a construction software solution. I guarantee you won’t regret it!
Sources:
Xero – Construction Job Costing
eSUB – How to Track Time Towards Job Costing
