INTRODUCTION

If you are running a business that offers different products or services, job costing can help you. It can help you check how much each product or service earns. Job costing is also a good method of accounting for businesses that sell unique or not standardized products and services. These products and services are likely dependent on a customer's specifications such as construction-related projects. Such projects require different operations and tracing the expenses of the project might be a tedious task. This is where job costing shines.

Why Job Costing?

For complex products and services like construction, job costing is the most efficient accounting methodology for calculating the cost. This, in turn, gives you a good picture of how much you can earn in the project. Job costing covers labor, materials and indirect costs like overhead. For example, construction projects can vary in the amount of delays and extensions that will occur. This can be due to unforeseen variables such as bad weather, workers filing a leave of absence, and project alterations by a client. Job costing is also used in analyzing each unique job in a project. It is accounted as a separate unit cost thus allowing you to know the cost of each job.

Using job costing, accountants can easily determine if a profit or loss made per job. This is done by comparing the cost of the job with respect to its price. The method, in particular, becomes more valuable when the project is intermittent or not continuous. With this, accountants can also accurately determine overhead cost when actual job cost is determined. There are numerous businesses that adopt job costing given its efficiency to their type of business. This includes engineering workshops, foundries, furniture makers, a variety of consulting firms, event planners, and so on. Such businesses don't incur selling or distribution expenses unless a client places an order.

In short, here are the main features of job costing below.

• Tells you if your business is making a profit, based on real costs for jobs.
• Important for businesses that are into production of unique goods and services with intermittent or not continuous operation
• Important for businesses that operate on an order basis

Job costing is just one of the many accounting tools bookkeepers can use today. Thankfully there are job costing software available today for businesses to use that is easy and accurate. Job costing is one of the many ways you can monitor the finances of your business. This is especially if you want to know how much each job makes. There are cases wherein a highly-skilled worker with a larger pay grade could earn you more than hiring average workers. This is a scenario that can be observed in engineering and consultation firms.

Plexus Software features job costing as one of its key tools that's easy to use and very versatile. With Plexus, you can pull in costs from employee loaded wages, expense reports, vendor bills, and ancillary costs. This compares with the original estimated cost, allowing management to gauge their actual margins on an order-by-order basis. Learn more about Plexus and its features here.

UP NEXT

Tips in Investing in Technology for Your Business

By Matthew Anderson