August 17 2017
Have you ever won a bid for a construction project only to find after you’ve tallied all the bills and invoices, that the significant profit you had hoped to make wasn’t there? If so, you’ve encountered one of the biggest challenges in running a profitable construction company — job costing. Bidding on jobs without knowing the real costs is akin to driving a car while wearing a blindfold. It's what separates the successful construction companies from the hundreds that go under every year.
Why you need job costing
Accurate job costing is key to growing your business. Here's why:
-Successful forecasting of projects is key to obtaining loans and lines of credit
-Accurate job costing reveals what types of projects are profitable so you can bid on those while avoiding those that make less money
-It helps motivate your team to reduce costs and increase output
-It allows you to compare actual costs with budgeted costs as the project is underway, not after the project is completed. Job costing helps get a handle on which costs have fallen out of line.
-You can track actual versus planned work-hours for each cost to draw valuable insights into a project's various aspects
-It keeps you from forgetting some of the overhead costs that are often improperly allocated such as, equipment and cost of upkeep, computers and software, interest charges, and salaries of those overseeing the project
Job costing software
If you're still using spreadsheets to do your job costing, it's time to step up to proper job costing software. Also, don't make the mistake of thinking you can use your budgeting software. Estimates and budgets are two very different things, and most construction companies can't use the same system for both.
Here's what you should look when choosing job costing software:
- It must integrate with your accounting software. There shouldn’t be a need for a lot of data entry. That’s where costly mistakes can happen. If you'll still require a spreadsheet for some of your accounting, it’s not the right software. For example, you should be submitting time sheets that go directly into the payroll so it can automatically update the job costing.
- It should take into account the various payroll expenses, such as taxes, worker’s comp, etc.
- Look for a system with a robust reporting feature. Look for the reports that work with your needs, not just the software that offers the most reports.
- It should be customizable. Job costs structure varies with each construction company, so you’ll want to be able to set codes for multiple cost levels.
If you need help in finding the perfect job costing software, we can help. Contact us today.
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