Job costing is a type of accounting procedure which deals with assigning the project costs of a particular job.
In the construction industry, job costing is used to allocate expenses to specific projects. Proper job costing involves a commitment to including all costs. Incomplete data will not be useful.
A proper system of job-costing can help construction companies reap several benefits. Since this practice provides a data point which can be used in conjunction with total income, the gross profit can be estimated as well.
JOB COSTING CAN HELP BOOST PROFIT
The main benefit of accurate job costing is that it can improve profitability. Construction companies have an incentive to keep costs low while performing their best at every individual job. Regardless of the terms of the contract for a given project, a proper job costs report can help with savings. Cutting back expenses in this manner can have a noticeable impact on overall profitability in the long-term.
This type of data can also help a company respond to changes in each job. Estimates can sometimes be inaccurate, but a job cost report can help identify problems with budgets. This allows them to be changed beforehand, which can make it easier to stay on track and see a project through until the end.
HOW THE IMPROVEMENT PROCESS WORKS
How exactly does job costing help to boost productivity and increase responsiveness in a work environment? Construction companies that have their performance measured and analyzed can use this data to make improvements on each job they perform. Accurate totals can help make change easier to achieve, and these improvements can have a multiplicative effect on a company’s overall performance.
HOW TO DEVELOP A JOB COST REPORT
Developing a proper job costing report requires a few key pieces of information. This includes any equipment and materials used on a project. Labor and subcontractors should also be accounted for. Finally, it is important to remember overhead. Though this aspect of job costing is often overlooked, it can be useful when developing job cost reports for multiple projects within the same company.
IMPROVING FUTURE PROJECTS WITH JOB COSTING
With accurate overhead totals and a proper approach to job costing, any construction company can help ensure their projects are managed more efficiently. Getting a higher profit in the long-term is not only dependent on getting enough projects – it is dependent on managing the costs of all projects in the proper manner.