Even in the best of economies more contractors go belly up than not. Knowing this, many builders reason that the best solution for dealing with risk is to keep their business modest. And yet, many fail.
Nonetheless, for every failure, there is a success. What separates the winners from the losers? Job Costing software and best practices.
Using job costing software is a lot easier than most trade pros believe it to be. The Small Business Administration study that established how risky the construction industry is, also found that staying small increases the odds that a contractor will fail. Growth is necessary for small contractors to win.
Contractors perish because they fail to accurately supervise construction job costs. They can easily monitor job costs by using construction job accounting techniques and job costing software.
Construction Job Costing Software – What Is It
You can’t know for sure that you are profitable if you don’t know what your expenses and income are for each job.
To recognize how much you actually expend and make on each job, you must directly track spending for labor and material costs. It is also indispensable to track operating costs directly to their various jobs within the proper period. Many contractorss can be tempted to put everything into general overhead, but allocating expenses to individual jobs is a fairly simple matter.
Professional job costing software and cost accounting will give you the power to:
- link an precise job estimate directly to a bill
- track precise receipts info to each customer
- take specific job material costs and break them down by client
- correlate time used to each job with actual dollar amounts
- create reports that monitor profitability on each job
- track profitability trends across jobs and time scales
- promptly find the profit leaks and secure them up fast
Setting up a job and entering a budget for it is the initial matter you need to attend to for precise use of job costing software. You already do this task when you produce your detailed estimate and customer quote.
An estimate is never a single figure, but actually a series of smaller numbers, each estimate distinguishing a different area of the project. Each phase has a sub-budget for labor, equipment, subcontracts, material, and a miscellaneous general category. Unit cost estimating lets you to get well-defined bids in. There is also a category classified as ‘burden’ that distributes the cost of the operation back to the job by tallying a percentage of the general and administrative overhead. You can quickly work out if every job is exercising its fair share of paying for the business as a whole by using job costing software.
Budgets and Job Costing Software
The job costing software will keep track of your subcontractor bills and vendor invoicing, your labor time along with its classification, and your customer billings. All of your costs will be accounted for as they are accrued.
Good job costing software uses accrual accounting. Accrual accounting is a technique that acknowledges your expenses as they are incurred, instead of waiting until you get paid. As you enter each cost, it gets assigned to a project. This way, your true job costs are compared, tracked and compiled immediately to the budgeted costs. Forecasting the completion costs for each project is possible using construction job costing software.
Do You Really Need Job Costing Software?
Using job costing software with job cost accounting allows deep peace of mind for contractors, as it supplies current, detailed true cost information. If costs in any area go into overrun, the contractor has time to stop, work out what the trouble is and fix it. This way, you can minimize time and money harm, and increase your profitability. Using construction job costing software and job cost accounting every day, as a regular part of the process, is obligatory to all successful contractors. It allows management to effectively control costs through monitoring. Job costing software reduces risk, builds profitability and guarantees success.
Job Costing Software is the Key To Success
Job costing software is much more than a simple tool that construction contractors require in order to avoid catastrophe, it’s the straightforward key to their success. Contractors that don’t use job costing software are either lucky or bankrupt. Do you want to bet your future on luck?