For businesses whose projects regularly fluctuate in scope, timeline, or workforce configuration, job costing is a vital and indispensable tool. In essence, job costing involves the meticulous tracking of revenues and costs related to each specific business project.
The beauty (yes, we’ll go there) of job costing lies in its universal applicability; whether you’re running a small landscaping business, a large marketing agency, a construction company, or a different small-, mid-, or large-scale business, the same benefits await you.
By calculating the expected costs of labor, materials, and overhead, and engaging in thoughtful employee time tracking, job costing ensures accurate project estimates now and in the future. Job costing demystifies the costs, profits, and labor strategies necessary for each project – turning what feels like an incomprehensible slew of factors into an opportunity to improve profitability, accurately generate project estimates, streamline management decisions, and ensure efficient financial reporting.
Above all, job costing reduces the occurrence (read: the unpleasant surprise) of unexpected costs. No deterioration of profit margins, no inaccurate employee scheduling, and no unhappy customers billed beyond the original estimate.
Lastly, if you’re looking to win the hearts of your company’s accounting and finance staff, remember that job costing makes tax filing, back-office processes and holistic evaluations (and forecasts) of your company’s financial standing infinitely easier.
Note: Are some of your projects more predictable and consistent (say, steady manufacturing runs of the same item)? Maybe process costing is a better fit for you, or additional tool to add to your arsenal. To explore the applications of job costing vs. process costing, read our article on “Understanding the Difference Between Job Costing and Process Costing” for some additional insights.
Now that we’ve established that job costing is a more than worthwhile consideration for your business, let’s explore its benefits in greater detail. As we mentioned, job costing is usually most beneficial to businesses pursuing projects with multiple stakeholders, workflows, inputs/outputs, and a range of employees (in-house, contractors, or otherwise).
Although material and overhead considerations are crucial factors in the job costing process, especially for construction companies, manufacturers, and others, in every case, there is an equally important dimension of employee timekeeping. Let’s explore this and other reasons why job costing is so beneficial.
Job costing is a highly effective accounting and time-tracking process, but its implementation can be complicated. You can maximize the value of this method by working with PayHub’s Human Capital Management System and Time and Labor Management System. Used in unison, these tools can provide your business with all of the benefits outlined in the article, namely:
At its core, responsible job costing brings efficiency, transparency and predictability to companies whose work and workforces are dynamic and malleable. We’d love to help you streamline this process for the best possible results. Contact us today to discuss how we can track labor costs, improve labor allocation, and – through the setup of our payroll/HCM software - bring peace of mind to your business’ job costing process.