| To choose software for
your contracting business you will want to focus on how Job Cost interfaces to all other
applications. There are a number of subtleties that you should be ware of when conducting
a software search. For example, Payroll generates both direct and
indirect costs. Direct costs are those that can be charged to a specific job. Direct costs
can be broken down by skill (master plumber, supervisor, etc.). Payroll can also include
additional costs such as payroll taxes, employee benefits, worker's compensation, premium,
etc. These are labor burden items. These costs should be allocated on a job-by-job basis
in order to present a more accurate picture of total actual costs of labor.
Vendor invoices enter
through accounts payable vouchers, where costs and quantity data are entered by job, phase
and cost code. Information related to quantity and unit cost is posted to job cost records
along with dollar amounts.
Subcontractor
transactions are entered to accounts payable but are usually handled separately from other
vendors due to special data relating to insurance certificates and committed costs.
Equipment costs are important for contractors who have substantial
investments in equipment, which is used for many jobs. Associated costs of depreciation,
maintenance, etc. must be allocated to jobs.
A
contractor’s inventory may be kept in a warehouse, on service trucks or on a job
site. Information on item costs should be allocated to jobs when inventory is moved or
installed on site.
The Job
Cost journal is a subsidiary ledger, which can be used to reconcile job costs accumulated
in the General Ledger with job costs allocated to specific jobs. The totals in the General
Ledger should match the Job Cost ledger.
The relationship between Job Cost and General Ledger varies between
systems. Some systems will not allow you to post costs to a job which are not posted to a
job cost- related General Ledger account (i.e. cost of sales or work in progress), while
others permit posting to jobs which does not update the General Ledger. The latter
approach can result in an imbalance between General Ledger and the Job Cost ledger.
Setting up of job cost codes and budgets is another area, which is
handled differently in job cost accounting systems. Some systems include a proprietary
estimating system which links directly to the company’s job costing system. Job cost
estimates can be entered for each cost distribution or can be duplicated from another job
(or master job) template. In some systems users can duplicate the cost code set-up or
choose items by cost type by copying them from an existing job to a new one. Some systems
also provide an ability to duplicate individual line items.
Other features within Job Cost which you
should consider when selecting software:, (Not all features are available within all
products.)
- Job Cost can potentially integrate with Accounts Payable, Payroll, General Ledger,
Inventory Control, Purchase Orders, Equipment Costing and Accounts Receivable. This saves
time and reduces clerical errors. Job Cost reports should always reflect the latest costs
and income because most entries have already been made in the other modules.
- Job Cost reports let you compare actual to estimated costs for each cost code and for
the total job, resulting in more accurate estimates on similar jobs in the future.
- Job Cost reports project cost to complete by each cost code, phase and job to help
control costs while the job is in progress, so that you can take corrective action before
it's too late.
- A job cash flow report can project profit by phase, using to-date and projected
remaining costs and income to help identify cash flow problems in time to do something
about them.
- A change order listing shows pending and approved change orders from the owner,
as well as contract changes issued to subcontractors. These include cost estimates giving
an audit trail of pending and approved change orders.
- A Subcontract Analysis report shows the status of each subcontract on a job. It
shows the contract amount, retention amount, change orders, billed to date, paid to-date,
retention paid to-date, and contract balance, which allows you to track the status of your
subcontracts on each job.
- Labor reporting shows estimated
versus actual hours to date, estimated vs. actual hourly cost, and estimated versus actual
hours per quantity, enabling the contractor to manage the productivity of their work force
and the labor progress on the job.
- Company-owned equipment (along with material from inventory and miscellaneous labor not
charged through payroll) may be charged to a job at an hourly rate. Equipment
reporting can identify costs per hour and cost per unit of production for equipment
used on a job.
by
Sheldon Needle, President |
