Owners of small construction companies like you are the men and women who keep everything moving in the right direction. When the economy changes, you quickly adapt because you are a survivor, not a large giant behemoth dinosaur unable to respond promptly and dies in its tracks.
Most articles about Job Costing are for large contractors with dozens of employees, doing millions of dollars in sales every year. This article is not about them; it is about you!
Job Costing links the money you spent on a job against the money you received to do a particular job.
In Construction Accounting, there are two types of Cost of Goods Sold (COGS): Direct Construction Costs and Indirect Construction Costs. Both are equally important to generating useful Job Costing Reports.
There are four types of Direct Job Costs (L.M.O.S.)
1. Labor costs for your construction workers including your payroll
2. Material you purchased for the job
3. Other charges like permits, inspection fees, and utilities
4. Subcontractors
There are several types of Indirect Construction Costs. Everything that is not Overhead or Other Income and Expense. For more on this, ask your construction accountant.
Job Costing Reports can show you where you are making and losing money, which is the foundation for finding out the answer to the most critical question you need to know to grow your cash flow and profits: "Who Is My Prime Client And Who Is Not?"
What Your Construction Bookkeeper Needs To Generate Useful Reports:
1. Uniform Naming Convention (U.N.C.) establish a simple method for naming your customers.
> First Name, Last Name
> Last Name, First Name
> Company Name
2. U.N.C. to identify different jobs and projects using a numbering system or predetermined project titles 001 to 99999
> Remodel, Drain Cleaning, Replace Electrical Panel, etc.
3. Every field worker's time card must have the Job Name, and preferably the task performed.
4. Every expenditure for Labor, Material, Other Costs, and Subcontractor needs to have a Job Name on the document, no exceptions. Any document without a Job Name will be assigned to "Customer Unknown" or worse yet, no Job Name at all.
In conclusion
Job Costing is a lot of work, but the results are worth it. You can save money in the short run by doing it yourself, hiring someone to work in your office, enrolling in our
online class or you can spend a bit more money and outsource it to a company like ours Fast Easy Accounting, which specializes in Contractors Bookkeeping Services; the choice is yours. Just be forewarned to setup QuickBooks for your construction company, do the data entry, payroll, quarterly taxes, construction accounting, and Job Costing and do it right will require a substantial skill.
About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, and QuickBooks For Contractors Expert. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and Construction Accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.
Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes.
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