What you need before you start job costing

Job costing… All construction owners want to have the information job costing can give you. It helps in managing budgets, cash flow, profit margins and your construction company overall. The key to job costing is having financial data accurate and timely. Many believe job costing can be implemented right away, but the truth is that there are some very important steps and processes that need to be in place before you can even think about job costing. 

Here are 5 things that you must have in place before you can get started job costing.

1. Software

   You are going to need software in place. At the very minimum, you will need to have accounting software, such as QuickBooks, so you can track money coming in and money going out. Project management software, like BuilderTrend and CoConstruct, will also make the process easier. ClockShark is another software you can use if the only thing you sell is labor. Getting labor details and information alone is a big part of having accurate job costs. Having your software integrated will be bonus because you will avoid double entry and create a streamlined process. 
   
   

2. Current jobs

   This sounds like a no-brainer but you do need to have an active job with estimate details to have something to “job cost”. This isn’t necessarily a process that you can set up ahead of time. You need real job information to get track, which makes the first project you get the best one to start tracking job details against your estimate.

3. Bookkeeping process

   You can have many job details but if you don’t record them, they are no good to you. The point of job costing is that you can review job related transactions against the estimate in real-time as you work through your project. It is crucial you have a bookkeeping process in place to record costs and revenue, otherwise, the job costing process won’t be worth doing. If you wait until the end of the project to “see how you did” by calculating receipts and invoices, it will be too late. You won’t have accurate data, won’t be able to manage the budget, and won’t know where adjustments need to be made throughout the project to stay in budget.

4. Financial project management process

   As much as bookkeeping is crucial to job costing, so is project management. Since there is time and resource involved in entering job data, it is just as important to make sure someone is looking at that data. Remember, job costing allows you to make real time decisions and looking at the budgets, getting the billing done timely and managing change orders and purchase orders is crucial to its success. Don’t just enter the costs, make sure to evaluate and manage them too.

5. Commitment to the process

   Job costing can be a big undertaking and a lot of work if you are not fully committed to the process. Like said before, the purpose is to get real-time job information (while the job is happening) so you can adjust as necessary and have a good handle on project cash flow. If you don’t take the time to review jobs throughout, it defeats the purpose of going through the work to implement this process. You aren’t job costing if you are waiting until the job is over to record and review what has “happened” with that job. It not only takes commitment from you as the owner, but also members of your team and crew to make it successful. Everyone has a hand in it so having a clear process for all pieces and everyone knowing their role will make job costing successful.
   
   

This probably sounds like a lot of work. And that there are a lot of pieces to have done before you can even start job costing. But don’t let that hold you back from starting. Having these things in place beforehand will make the process worth it. Job costing gives you control over your business so you can effectively manage budgets, know your financial position and make real-time decisions with accurate data. All of the items listed above are important regardless if you’re job costing or not.

The team at 24hr Bookkeeper understands job costing and why it is so valuable to your construction company. Making sure you are set up right from the get-go will allow you to truly benefit from what job costing truly does for your business. Our team will get your books where they need to be and create a “real-life” financial process that works so that you can get the information you need, when you need it, making job costing possible. 

If you want more information on job costing, get a hold of us or set up a meeting today!