In construction, accurate estimates can make the difference between an average year and a great year. To dial in accurate estimates, historical and real-time figures must be readily available to project management. Project management can include an estimator, project manager, superintendent, and owner, depending on the structure of your business. It is essential that all areas of project management are actively communicating and working together throughout the construction project.

JOB COSTING

Job costing is the process of tracking expenses related to a construction project and provides management information related to the costs incurred at a specific point in time. When it comes to construction projects, there are both direct and indirect costs that need to be tracked.

Direct costs

Direct costs are expenses directly applicable to the construction project. They are specific and straightforward. These often include labor, cost of materials, and subcontractor expenses.

Indirect costs

Alternatively, indirect costs are not specifically allocable to the construction project. These costs include overhead, equipment and tools, and labor burden. Overhead can include items such as support staff, trailers, supplies, insurance, and other miscellaneous costs. Equipment includes depreciation, repairs, maintenance, taxes, and insurance. Labor burden includes FICA taxes, workers compensation insurance, federal and state unemployment, vacation, and other fringe benefits.

Most contractors and construction companies aim to obtain and review detailed job costing information regularly to identify trends and opportunities. To get the most out of your reports, here are some helpful tips to think about:

• Review cost codes to streamline data and eliminate repetition. Use account numbers that tell a story.
• Implementation of paperless processing for payroll, payables, and billings can create efficiencies during a tight labor market.
• Improve reports, so they blatantly communicate inefficiencies.
• Export job cost information in a consistent manner that does not need to be modified prior to analysis.
• Think about automating recurring reports that run regularly out of your accounting software using Microsoft Power BI or other data analytic tools.

Benefits of Improved Job Cost Tracking

1. Enhanced estimates

Accurate job costing gives your project management team detailed information about expenses, making them more accurate in predicting future project costs. Once you understand what it takes to complete a project, future estimates will be improved.  Getting the facts right in terms of expenses and job costing is a major tool for the success of your construction project.

2. Team management

Timely and specific job cost reports allow project managers and superintendents to adjust performance and implement changes on-site in real-time with the project team. They also allow for labor to be deployed more efficiently during these constraining times. 

3. Tracking job progress

A good job costing report allows you to keep track of your construction project expenses, which is the main component of percentage of completion revenue recognition. This means that timely job costing helps assist with timely and accurate billings, which aids with company cash flow.

4. Profitability

Improving your company’s estimates, team management, and job cost tracking will enhance the lives of your employees and help drive profitability. When your business is able to track outputs against inputs, you are able to dial in opportunity costs and focus on work that truly aligns with internal goals.

For more information on our construction accounting services, technology, or data analytics, please contact us today.