Quick Tips: Construction Job Costing

Quick Tips: Construction Job Costing

Presented by:
Robert Scherer, President of Plumb
Olivia Roemer, CCIFP, Accounting & Software Consultant, Sage Certified Consultant, Plumb

Purpose: The purpose of job costing is to provide accounting with contract performance and assist in managing the job, as well as, provide management with relevant information regarding contract activity in order to make business decisions.

Contract Cycle
Contract Cycles vary significantly from contract to contract, as well as, from the type of work performed. Shorter contract periods may make the job costing process a little more difficult, but no less important.

Keys to Job Costing:
• Identify Key Cost Components
• Tracking Cost Components
• Performance Measurements
• Monitor Results
• Make Adjustments

Identify Key Cost Components
Labor, materials, equipment, and subcontractor costs are typical components of job costs. Identify any other significant costs that relate to your contract performance. These would typically be the same costs you estimate in the bid process.
Great Tip – Closely monitor and watch major cost components, in order to make future adjustments. Were they accurate? Make sure you give this data to Estimators, so they have better information in the next bid process.

Tracking Cost Components
Determine a method to track the costs by job, keeping in mind the keys to accounting. Consideration should be given to the accounting system in place and its ability to generate and track cost flows. Include bid and revised estimates within the job cost system.

Performance Measurements
When designing the system, consideration should be given to include performance criteria within the job cost system. Items such as pounds/yards; per man hours; material per square foot, etc. These performance measurements may provide you with additional information as to job performance outside the typical cost information.

Monitor Results
Review the results on the job to assist in evaluating performance, as well as, assist in estimating future bids and making business decisions.

Make Adjustments
As the business or the jobs change, the job cost system may need to be modified to meet the new changes. If you’re monitoring the results on a regular basis, the adjustments needed should come to light.

Accounting & Job Costing
Rule of Thumb Strategy:
• Keep the accounting and job cost process simple.
• The information produced should be relevant and understandable.
• Review and use the information to make individuals accountable and to make business decisions.
• Accounting and job costing are not the answers, but they can assist in getting you the answers.

Sign up for the next Construction Financial Management Course with Plumb and the AGC, San Diego Chapter.
Banking and Bonding Management

Wednesday, March 27th
11:30 – 1:30
$99 for AGC Members
$129 for Non-Members
Register HERE

Beyond the Numbers…
Plumb supports and strengthens your company’s accounting department and management with outsourced bookkeeping, controller and CFO services. Whether you are a CFO who could use a quality controller once a week, a controller who needs bookkeeping assistance, or an office manager looking for higher level finance and accounting oversight, Plumb can fill the need.