How a Job Costing Solution Provides Clarity and Keeps Your Business Profitable
One of the most straight-forward ways to increase job profitability is to decrease job-related spending. But that requires a clear and accurate view of your job costs.
There’s no doubt you’ve heard something described as the “meat and potatoes” before. The saying refers to the most basic or fundamental aspects of something. For your cleaning or security company, the meat and potatoes of your business are your jobs. But keeping your cleaning and security jobs profitable is a challenge — especially now, when labor costs and other overhead expenses are on the rise due to added costs of the pandemic.
In an industry where profit margins are already thin, you don’t have a lot of wiggle room to dip into your profits to offset new and increased costs. So, it’s especially important to maintain a clear and accurate picture of your profitability at all times. That’s why a fully-integrated solution with a focus on job costing is a necessity in today’s world. You’re probably already managing your business to some degree with technology. But what’s the “meat and potatoes” of your software solution? If it isn’t job costing, you could be missing out.
It should be a given that if a particular revenue or expense exists in accordance with a contract, then it should be included in your job costing. But the real challenge is getting accurate numbers and recording them down to the job level. Typically, costs you should be allocating per job include labor costs, payroll taxes, workers compensation, general liability insurance, umbrella insurance, supplies, materials, fuel, vehicles and more.
Often times, it will look like a job is profitable when seen from the 1,000-foot view. But when you dig into some of the expenses that are coded to overhead jobs, you find some of those larger, true cost overhead expenses are what really make up a good chunk of costs at the job level, too. For example, worker’s compensation typically isn’t expensed down to the job level because it’s hard to manage. Depending on the specific services you provide, worker’s compensation could be more costly than specific payroll taxes. So, if you aren’t accounting a portion of worker’s compensation expenses as a cost per job, you really aren’t getting an accurate picture at what it took from your expense budget to service that contract.
The right industry-specific job costing solution can properly allocate your true job costs. Look for a technology solution that ensures every financial transaction processed includes a job number, from Payroll, to AR, to AP, to AJEs. Also look for additional features that allow for payroll taxes and miscellaneous insurance costs to be taken down to the job level, based on payroll dollars at that specific job.
After recording all associated activity to the job level, the rendered data can be used to review accurate accounting practices, compare the data to budgets and (of course) make sure you’re profiting. This information can and should be heavily relied upon for contract renegotiation and bidding future work that might be similar to an already existing job.
So, are you job costing? Are you doing so correctly? Do you analyze the data and put it in action? As a security or building service contractor, you need to be asking yourself these important “meat and potato” questions to know whether you have a clear view of your profitability.