Job Cost Tracking

Job Cost Tracking for commercial construction contractors

Who needs Job Cost Tracking?

You do.

That is, you do if you’re a commercial construction subcontractor, and you are determined to manage a profitable, sustainable, and worthwhile enterprise.

Successful construction contracting business owners know the part they play. They do the analytical work, and they make the decisions. Consequently,  the financial reports they receive and review regularly enhance their ability to accomplish these tasks.  For example, one of those important reports is known as Job Cost Tracking or Job Costing.

 

Proper project costing produces preferred profitability.

 

Plus, it leads to better future project estimating, contributes to enhanced management decision making, and supports timely financial reporting.

Job Cost Tracking enhances project control

To clarify, resources are limited and must be utilized as efficiently as possible.

Therefore, a few of the ways you can leverage job cost tracking are:

  • avoid risky assumptions and stay in control of profitability
  • know where projects are going right and where they’re going wrong
  • make adjustments as you go
  • be alerted to find more cost-efficient ways to handle issues
  • gain the advantage in the estimating process going forward
  • see a true reflection of gross profit

3 Components of job cost tracking

Measure

Defining and measuring your resources is the basis for creating a job costing system. For example, a few of the steps involved in setting up, maintaining, and using a job costing system are:

  • Gather the information from past and present projects
  • Categorize and store the information
  • Assure the information is accessible to those who need it
  • Input information as projects progress
  • Analyze information regularly
  • Adjust actions and expenditures as necessary

Control

Managing the resources at hand means maintaining control of the project as it progresses. Consequently, through the proper use of the information garnered through job costing, you can:

  • Track any deviations from the original estimate
  • Find and analyze possible solutions
  • Support those who will need to make adjustments

Improve

Whether taking small steps as the job progresses or finding major process strategies that must be enhanced, job cost tracking gives you footing for company improvement. For instance, you can:

  • Determine to include those things which went right in future projects
  • Learn from mistakes which were made and change the necessary factors
  • Communicate the findings to employees and subs

Answering questions through job cost tracking

Likewise, proper job costing analysis aids you in answering critical questions such as:

 

  • Which jobs are running within budget?

 

  • Which are not?

 

  • Are we within our target margins?

 

  • Who are the most profitable and least profitable general contractors we work with?

 

  • Do we have operational inefficiencies?

 

  • Who are our most productive employees, subs, teams, or departments?

 

  • When is the right time to hire? Or fire?

 

  • Where should I invest my marketing dollars?

 

To sum up, producing an accurate and useful job costing report is not just an accounting exercise. A job cost tracking report is an excellent tool used by savvy construction contractors to enhance their ability to lead and manage well.

The Job Cost Tracking Tool!

The Job Costing tool our office knows, uses, and highly recommends is Knowify. Knowify is a (cloud-based) easy to use software that (among other functions) provides a system for Job Costing from start to finish.

 

We desire to familiarize you with business concepts, which will make it easier for you to be a better commercial construction subcontractor through our blog posts. Some are new ways of looking at things, and others are refreshers. 

Schulte and Schulte Provides Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs! Call us 866-629-7735

Counting the Cost in Construction Accounting

Counting the cost in construction accounting.

Counting the Cost in Construction Accounting

Counting the Cost in Flood Waters

There is an interesting law here in Arizona which is known by the name, “Stupid Motorist Law.” It says something to the effect of “any motorist who becomes stranded after driving around barricades to enter a flooded stretch of roadway may be charged for the cost of their rescue.” Apparently, the law can be found in Arizona Revised Statutes section 28-910. Also, just as apparently, the law isn’t regularly enforced.

So, for those of us who don’t drive around barricades when the summer rains create raging rivers where before there were only dry creek beds (or simply dips in the road) it doesn’t mean much one way or the other. For those who do, it only means they won’t be charged by the state for their stupidity. Yet, they will still likely be “taxed” because of their poor decision.

  • Towing
  • Repair
  • Beyond repair
  • Missed time at work
  • Lost opportunities

And, don’t forget all that schplainen’ they’ll have to do with rescue workers. Not to mention spouses, parents, children, friends, insurance companies, and so on.

Counting the Cost in Words

Yet, being wise to the way of words, I would replace “stupid” with the word, “ignorant.” Here’s why – being stupid means you don’t have the brain cells to get the job done. Being ignorant means you haven’t as yet learned.

See the difference?

This article will help you understand it better if you’re ignorant of how the two are different.

Counting the Cost of Ignorance

And, just like the wayward, water plunging drivers there are some who are guilty of breaking the “Accounting Ignorance Law.”

And, what that looks like is, they don’t yet understand how they can be aided in growing their construction contracting business through correct use of their financials – and it is going to cost them.

Here is the deal. Average Joe Contractor isn’t the competition they need to be concerned about. It is the up and moving commercial construction contractor who has gotten savvier and more sophisticated. It also means the General Contractors (who are also more savvy) expect their subs to bring a better level of efficiency and expertise not only in the field, but also in the office.

This has led to higher expectations which makes the cost of not knowing what you’re doing with the financials much higher these days.

And its not just the competition or the GCs.

Counting the Cost in Construction Accounting

It’s the complexity of software, SaaS, apps, construction bookkeeping nuances, and so on.

One of the huge benefits of QuickBooks and integrated apps is how much information you can obtain from having all the correct input in all the correct places. Its job costing, bidding, accounts receivable management (with or without AIA style billings,) estimating, invoicing, timesheet data, reconciliation of balance sheets, WIP reports and supporting documentation, making appropriate bill payments, certificate of insurance management, project close-out documents management, and on and on.

What that leaves us with is that understanding (and using) all the great benefits you can get from QuickBooks and the supporting apps is more complex these days, and even more so now that you’re ready to Run With the Big Dogs.

So, my advice?

Don’t drive around the barricades!

And don’t leave your construction business accounting needs to wishful thinking or chance. It will cost you.

You can get in touch with us here or give us a call Toll Free: 866-629-7735.

Outsourcing Accounting – How to know when it is time

Outsourcing accounting is how savvy contractors grow their businesses.

Outsourcing Accounting – How to know when it is time

Outsourcing accounting too soon

If you:

  1. Are an average (non-construction related) small business owner who factors in the time needed for administrative and accounting tasks you can probably wait to outsource until such time as you become quite busy.
  • Can’t identify the business result you want to see (an actual benefit to you or your business) perhaps you should wait. You must be clear in your own head about what you’re paying for and what you expect as a result. If you think of an accounting specialist as a cost generator rather than a business and profitability advisor, it is likely you’re not yet ready.
  • Are hell-bent on having your fingers in every piece of the pie. If you’re an (as yet) unconverted micro-manager who has a low trust level, it is probably better that you wait.

Outsourcing accounting when it is too late

If you:

See that your books and therefore your business is so messed up, so in debt, so unorganized, as to be on the brink of bankruptcy – it is probably too late.  

Outsourcing accounting just in time

If you:

  1. And your office staff are constantly feeling as if you have too much to do and not enough time to get it all done, it is a prime time to begin looking for an outsourced accounting provider.
  • Understand outsourcing your accounting duties can be a total game-changer for your construction contracting business, then finding a virtual accounting firm should be your next move.
  • Know you’re ready to delegate the accounting operational tasks so you can focus on tasks of a business owner designed to grow your business, it is time to pick up the phone.

Outsourcing accounting pays off

For example, you have time for networking, meeting with in-progress clients, selling your services, and developing more ways to serve both your clients and your employees.

As independent contractors, virtual accounting specialists are part of your team without the “headache” of extras. Extras such as benefits, taxes, sick pay, and so on. This article from Entrepreneur tells why outsourcing certain functions can mean better talent at lower costs.

Outsourcing accounting with the Schulte and Schulte team means:

You get the best of our extensive construction contracting accounting knowledge and acumen.

Here are a few things we are good at dealing with for you:

  • Job costing
  • Audit readiness for high-risk workman’s comp companies
  • Complicated sales tax issues
  • Payroll
  • Inventory tracking
  • Systems development and deployment
  • Financial planning

Quick checklist

This quick checklist will be of help when you’re trying to decide if you’re seeking an outsourced accounting firm just in time.

Your business is growing.

You or your staff find you’re spending more time learning than doing.

You’re drowning in administrative tasks.

Your office staff is fraught with overwhelm.

You’re running out of time to focus on what makes you money.

Your personal life is taking a toll.

 

Wondering if now is the time to outsource your accounting and back office needs? Get in touch here and we’ll talk.

The Top 5 Critical Problems Schulte and Schulte Solves for Owners of Construction Contracting Companies

 

When you first became a construction contractor or construction service business owner it was pretty simple – get a job, do the job, get paid, see how much money you made. Now, things are different. You have people working for you, people who rely on you in order to make a living.

Knowing the whats, hows, and whys of construction accounting has become much more difficult.

Following are 5 critical problems Schulte and Schulte solves for clients on a regular basis.

Not knowing how to maintain cash flow

“Projecting future cash flow is something I’ve never understood how to do.”

Solution: Once the system is implemented you’re “in the know” daily concerning all the angles of cash flow.

Not having proper records for the IRS and for other potential needs – like proving credit worthiness

“I’m not even sure what I should keep, much less how to keep it.”

Solution: Your records are brought up-to-date and kept current so you’re always ready for both the IRS as well as for investors or loaning institutions.

Constantly having to chase work to build revenue

“It seems if I’m going to make money I always have to find new work (some I don’t even want to do) and it drains my time, energy, and capital. There’s got to be a better way.”

Solution: You’re taught smarter ways of maximizing revenue rather than the eternal work chase.

Not understanding their job costs

“I know it is more than just what I pay my people and how much I paid for supplies, but I’m not sure what all goes into job costing.”

Solution: You know what the job costs are for each job and for each type of job, giving you valuable insight concerning future jobs.

Not having enough time in the day to do it all as a small business owner

“I don’t hardly have time to breathe, much less time for figuring out all the ins and outs of construction business accounting.”

Solution: You’re relieved of trying to “figure it out.” The Schulte and Schulte pros take away much of the “drudge” of bookkeeping while informing you regularly about the financial health of your construction contracting or service business.

Solution: Maximizing Your Profits.

Now that you know we offer solutions for your critical problems, it is time to stop messing around and trying to figure it out yourself. Reach us through this number 480-442-4032 or get in touch here.

Do You Really Understand the Financial Position of Your Construction Contracting Business?

 

 

If you’re like many people who own construction contracting and service businesses, you likely have little to no financial training. That’s OK, you probably have a slew of other skills which allowed you to move into the realm of business owner.

It is also likely that you put a lot of time and thought into knowing where your crews are, what they’re doing, and which tools and supplies they’ll need for the day. Yet, you may be less likely to know where your dollars are, what job each dollar has, and how well they’re pulling for the team.

Run a better construction contracting business

While business management is a multi-faceted matter, one of the best ways you gain acumen in the business world is to know and understand how to make best use of the money you control. You know you’re “getting it” when you can:

  • Grasp the benefits of Job Costing

 

  • Discern the difference between Revenue and Gross Profit

 

  • Recognize the importance of Document Management

 

  • Increase your savvy in the Budgeting department

 

  • Focus on the Important Data

 

Getting to the money matters part of accounting means you can know (not just guess) when to put your marketing dollars to use or which types of jobs will never be your friend. It means you can make sense of what was once a whirlwind of numbers and terminology.

Why build your money management skills?

Develop your money management expertise so you can help your construction contracting or service business prosper. When you see where your company’s money is actually going, you’re better able to build a path toward success.

How Schulte and Schulte fits in

Our goal is to assist you in creating an easy to follow and understand bookkeeping process. Further, we explain what is happening along the way, giving you the benefit of discerning your financial standing and taking advantage of that knowledge.

Let’s build this together. Call 480-442-4032 or get in touch here.

A Dozen Reasons Construction Contractors Use Job Costing

You’ve already figured out that when you own a construction contracting or service business your world is colorful. Some of the myriad of “things” on your mind are job sites, retainage, percentage completed, purchase orders, prevailing-wage rates, payroll, change orders, subcontracts, AIA billings, and equipment usage.

But did you know about the contractor’s friend called Job Costing? Did you know job costing is really designed to make all the above “things” take their rightful place in maintaining the overall health of your construction firm?

Look at job costing as a way to Measure and Monitor, to Weigh and Watch, to Quantify and Qualify.

Getting it all out in the open

The information gathered through job costing is invaluable to you as you grow your construction contracting or service business. And here are a dozen reasons:

  1. Job costing will help you identify the most and least profitable areas of your construction company.

 

  1. Job costing is one of the best ways to develop an accurate budget for your construction firm.

 

  1. You can use the information concerning labor and materials costs to aid in determining overhead costs.

 

  1. You’re able to carefully analyze job costing reports for completed jobs as well as jobs-in-progress.

 

  1. Job costing allows you to put into action a billing system that is tied to actual and committed costs.

 

  1. With job costing you can learn which types of jobs are your bread-and-butter jobs.

 

  1. Using job costing will allow you to see the division of labor and labor burden.

 

  1. Job costing allows you to analyze where you’re spending so you’ll know more about what works and what doesn’t.

 

  1. Through job costing you’ll obtain information that will allow you to be more precise concerning billing.

 

  1. Job costing shows you what margins you’ve been sacrificing on past estimates.

 

  1. Through job costing you can factor in overhead expenses in order to get a better understanding of individual job profitability or loss.

 

  1. A mature job costing system gives you the ability to categorize every single expense your construction contracting business incurs.

Don’t work in the dark

Without job costing information you’re working in the dark.

Using job costing reports is an important way to improve your business as well as a way to improve the way you do business.

The Schulte and Schulte team is excellent at helping construction contractors make heads or tails of job costing set-up and use. Want to know more? Give us a call 480-442-4032 or Toll Free: 866-629-7735

KNOWIFY: Manage Your Entire Contracting Business in One Place

In this monthly post, it’s my pleasure to introduce you to one of the many apps that we at Schulte and Schulte endorse and recommend to our customers.

As a firm of construction accounting specialists, we love to help companies in the construction industry with their books and finances, part of that help is finding different apps or software that can help our clients out. During this monthly feature, we take a look at several apps that we love at Schulte and Schulte, and dig a little bit deeper into our favorites.

This month, we would like to introduce you to Knowify.

Knowify is an app that is a huge help to any subcontractor, whether that be commercial or residential. Some of the features that won us over at Schulte and Schulte:

Job Costing & Estimating
With Knowify’s powerful estimating tool, you can plan your jobs, itemize your material budgets, and schedule your people to create comprehensive cost estimates. These estimates can be translated into bid line items with a single click.

Bids, Contracts, & Service Work
You can quickly create bids and contracts on your own letterhead and send them through Knowify for electronic signature. You can also easily create service tickets and schedule technicians on work orders.

Time Tracking & Scheduling
Replace the whiteboard, create and maintain your schedule in Knowify so that all your people can see what needs to be worked on while they are in the field. As your people work on work orders, they can punch in time and reimbursements via Knowify’s mobile app. As your people put in time, Knowify will track how you are performing on each job compared to your budgets and estimated costs.

Knowify is truly cloud-based. You can access your Knowify account on your desktop computer, laptop, or tablet; it’s time tracking is most easily handled through the mobile app that is available for either Android or iOS.
We’ve been impressed with Knowify’s truly unified, fully integrated platform. All of its different modules (contracts, time tracking, purchasing, and invoicing) integrate seamlessly to ensure that the products and billable time covered by our client’s contracts are billed correctly.

We love Knowify, and would love the opportunity to share it with you. If this sounds like an app that you would be interested in checking out, please let us know!

3 Things Contractors and Sub-Contractors Should Be Doing in Their QuickBooks Software

2016-06-27 18.27.53As a QuickBooks ProAdvisor and a bookkeeper who has worked with QuickBooks software in the construction industry for the last nearly 20 years, I am always surprised when I speak with people in the construction industry who use QuickBooks for their business, but don’t use it for job costing. Whether you subscribe to QuickBooks Online or have purchased a QuickBooks desktop version, there are many features inherent to the program that can be very useful for even the smallest of subs or handymen. Even more surprising are the larger scale contracting companies who aren’t using the robust features available to them in the QuickBooks program that they own.

Here are just three of the things that EVERY contractor who uses QuickBooks ought to be doing in their QuickBooks program:

 

  1. Estimating
    Anyone who has ever created a bid for a job knows that it can be a very intimidating process – everything from stressing over whether or not you have the right projected costs, to anticipating material delivery times, to making sure you are properly accounting for overhead can contribute to an overwhelming process. Here is where it is good to let QuickBooks ease some of the burden. Just a few things that you can do with QuickBooks to take some of the mindless work of estimating off of your plate include:

    • Create more than one estimate for a job to look at more than one possible scenario.
    • Create a copy of an old estimate to save time on a new one.
    • Memorize estimates if you frequently perform the same type of job. (Note: In QuickBooks Online transactions are called ‘recurring’ rather than memorized.)

    When creating estimates in QuickBooks, the item list is your friend. If you haven’t already done so, you should create an item list before estimating any jobs. There is more than one way (depending on your particular specialty) to set up the item list – either as a straight inventory and services based list or as a phase accounting method list where each phase of the job is assigned an item number for proper tracking. Don’t forget that you also need to make some items double-sided. Anything that you purchase from someone else (including subcontracted labor) needs to be two-sided to work within QuickBooks properly. (Another note: In QuickBooks Online the Item List is renamed the Products & Services list, but it is still the place to start.) One more thing about estimating: in both QuickBooks desktop versions and in QuickBooks Online you can customize how your forms look for ease of customer understanding – which goes a long way in determining whether or not they will eventually accept your bid.

 

  1. Using Class Accounting
    In QuickBooks Online Plus and in the desktop versions of QuickBooks you have the ability to turn on class tracking features that can make your job of understanding exactly where and how your business is making and/or losing money that much easier. For a general contractor this might come in handy keeping track of the difference between the homebuilding side of the business and the remodel side of the same company. Perhaps you want to see how well the residential part of your sub-contracting business compares to the commercial portion. Or, in a location such as the Phoenix valley, it may behoove you to sort your class tracking into geographical areas, either by city or by regions. Whatever classes will be most helpful to you and your bookkeeping professional in better understanding profit and loss is what you should use.

 

  1. Doing Proper Job Costing
    Correct and useful job costing for contractors begins with the proper item list, followed by precise entry of job estimates and appropriate class tracking setup. It is also important to note here that job costing should include direct and indirect costs as well as labor burden. Any expense your business tracks can be assigned or allocated to jobs. You can job cost in both QuickBooks desktop versions and QuickBooks Online versions, but the terminology in the programs is different. In desktop versions, you will see that you can create new Customers and new Jobs. In QuickBooks Online, you’ll be doing something very similar when you create new Customers and new Sub-Customers. A sub-customer in QuickBooks Online functions very similarly to a Job in QuickBooks desktop, but there are some differences. It is worth knowing the differences when determining which version of the software would suit best for your business. Even so, you can do job costing and even a comparison of estimates to actuals using either program.At the end of the day, job costing can make or break a business. By keeping track of which jobs made or lost money and by how much is the first step in determining strengths and weaknesses within the company and/or understanding how outside factors are affecting the bottom line. Like any other financial tracking tool, job costing reports should be used regularly to help management understand the overall health of the company. Another thing to keep in mind is that, by properly tracking job costing regularly during the course of a job, management can see if perhaps a change order is necessary to offset any cost overruns.

 

Everything comes full circle. That daunting task of estimating mentioned at the beginning of this article can actually be made simpler once a proper job costing feedback loop has been integrated into the company’s systems. Suddenly you can see in black and white how estimating errors are coming into play and correct those errors on future estimates.