14 Dec Job Costing Best Practices
Job costing is a pretty basic requirement for all construction projects. You have to track and account for all costs associated with a project. To take it a step further, you should also categorize these costs based on their relationship to the project. Common examples of these include labor, materials, equipment, subcontract charges, and burden.
The best way to track these costs is by categorizing them based on the phase or task within the project because this will give you a more granular understanding of your costs. This alone will give you deeper insights and help you to modify your process to better account for costs related to a job in the future.
Modification in labor and schedule are benefits that can be directly driven from a more granular look at costing. Over time, collecting this data will help create more efficiency for your firm. In the future, you will be able to better plan for what it will take to successfully budget for labor from a financial standpoint and a time standpoint as well.
Understanding of profitability is another important part of job costing. Knowing if you have been profitable on a particular job is vital to a firm’s longevity. Proper job costing gives you that. You can also fine-tune individual phases and tasks based on your findings. Data will be available on your profitability, because of proper costing efforts, to aid you in making these decisions. Future projects of a similar nature will be directly impacted because of your ability to tweak your approach.
True job costing should not leave out what is usually chalked up as “overheard,” however. Keeping your numbers competitive is important, and that is why items like office supplies and expenses are often left out of job costing. To give your firm a real handle on estimates for the future, however, adding some of these costs, such as printing costs which can be quite large, makes sense. Printing costs include the plans, subcontracts, owner agreements, and schedules. The total for this can come in at the thousands. Categorizing this as part of your job costing helps you plan for the future, offset some overhead costs, and even generate income for the project.
Last but not least, technology is not always accounted for in job costing. Having up-to-date technology gives you a huge advantage, but the cost is not always cheap. Although many see technology as a black-hole, it should not be considered overhead. The technology used includes the iPad used by the superintendent, a laptop used on the job, project management software, accounting software, and the like. A firm should account for the work done in the background. Reporting on it is a great way to start, but taking it into your job costing will
As projects and technology both continue to evolve, it is important to evolve your processes as well. Reevaluating areas of your business, like job costing, with a fresh perspective, could help you streamline your approach and achieve greater efficiency.