Valuable job cost reports provide crucial information about the current status of a job and can help estimate how you will finish on each job from a cost and revenue perspective. If you have many jobs in progress it can be difficult to manage, which is why it’s important to understand the reports so you can quickly identify exceptions and job overruns before it’s too late and address them accordingly.
In order to ensure you have real-time reports, you will require a truly integrated construction accounting and job costing software solution. It’s important to map out electronic workflow processes to ensure accounts payable invoices, purchase order and subcontract commitments are entered in as quickly as possible and distributed to the proper job allocation. If there are many jobs in progress, there is a strong chance that costs will be incorrectly assigned, but the function of the job costing system makes that highly auditable.
Job costing provides discrete “buckets” of information about each job so that the accountant can allocate costs directly to the job and division code, commonly referred to as the cost item. Advanced software solutions such as Premier provide cost item grouping and up to five levels of job cost breakdown for greater transparency.
If a job is expected to run for a long period of time, then the cost accountant can periodically compare the costs accumulated in the bucket for that job to its budget, and give management advanced warning if costs appear to be running ahead of projections. This gives management time to get costs under control over the remainder of the project, or possibly to approach the customer about a billing increase to cover some or all of the cost overruns. A considerable amount of costing precision is required especially when dealing with cost plus contracts where the customer pays all costs incurred. In most companies, controllers may cost code a job incorrectly which can misrepresent the job cost breakdown. For situations such as that, electronic approval systems are becoming a must have when evaluating job cost accounting software solutions.
Another advantage of utilizing proper job cost tracking is that you can better ascertain whether specific jobs are desirable to pursue in the future or what changes should be made next time bidding on similar work. It can be time consuming to enter in all the costs to the proper cost items but the introduction of mobile apps and proper job cost accounting software allows for real time costing and makes it easier to capture the information, thus leading to greater efficiency in the long run. The lack of detailed job cost reporting is why companies end up moving away from smaller accounting focused programs such as QuickBooks. Here are a few sample reports that you should be able to run directly out of your accounting job costing system to determine variances, work in progress, and if you are over or under billing. Click HERE to see how Jonas Premier can help your business!