What is Job Costing?
There are a lot of people who want to do business with success. On the contrary, not all businesses go with flying colors. One secret of successful business management is to be able to learn the ropes of doing business and the positive attitude with perseverance. Learning the basic skills of running a business may greatly help. A sufficient knowledge of accounting such as Job costing may prove to be a great tool for business success especially for those people who are building contractors, subcontractors, consultants and architects.
How can Job costing help? Job costing enables a businessman to determine which areas of the business is most profitable or not. By knowing these key areas, doing business will be more productive and most likely to succeed. Job costing pertains to a way of knowing the labor and material costs for every job. By knowing such costs, product pricing with its actual cost, overhead and labor cost could be known that will aid in preparing quotation for every customer.
Cost accounting or ob costing as part of management accounting has three key areas to be considered. These are costs tracking of all costs involved in the job, ensuring that all costs are indicated in invoice for the customer; reports showing the details and costs related to job. There are also vital areas in job costing such as quotes, bids, or proposals. Time and material job, fixed fee jobs, revenues, items, direct costs and standard costs.
What is a quote? It is a document to give the customer an estimate on the cost of a particular job before its final awarding. Fixed fee jobs are an agreement between the customer and business owner that the job is completed for a set cost. Time and materials job is when the all the cost of labor and materials are paid by the customer. Markup and margin are built-in and sellers are at an advantage. Items are the products and services that a business or company offers.
While Job costing may be difficult to work on, there are available software tools that could be utilized to keep track of business and manage job effectively and profitably. Some of these software tools are Profitool 6, ComputerEase, and We Timesheet Project & Billing Edition.
Simply put, remember the following in doing Job costing: First, be sure that there is a good estimate of the labor required to the job. It should be the actual cost of labor and time to do the job based on the required skills to do it. Then, estimate a typical overhead charge by taking the whole non-job related costs of and dividing it by the exact count of working days in a year. Also, multiply the value by the total number of working days to complete the job. Lastly, monitor all expenses incurred during the course of the project. Compare job costs against actual costs and find out if the project required less or additional resources towards the middle and end of the project.
Successful business goes hand in hand with proper management and accounting skills such as Job Costing.