Examples of profit leaks:Ī building contractor who notices framing labor costs are already at 50% of the budget, but the framing labor is only 30% complete. Then we consider what estimated-cost-versus-actual-cost detail will be the most valuable for managing the job in progress and analyzing the accuracy of their estimated costs after the fact. When I work with clients to set up their job costing system, we usually start with their detailed take-off estimate. When it comes to job costing and profitability tracking, the amount of detail you choose to track is up to you and may be unique to your industry or business. In addition to identifying and mitigating very specific profit leaks and providing solid information for future jobs, project-level job costing and profitability tracking is the proof or reference you need to understand whether the markup you're charging or profit you're making on jobs is being realized overall and is ENOUGH to support your business. And it can help you reflect when it comes to bidding on and accepting future jobs. Job costing and profitability tracking can be a powerful tool when it comes to managing things like job cost overruns. Additionally, projecting what it might take in time and costs to complete a job up front can be challenging. Whether you’re entirely confident or more on the cautious side when engaging with clients on certain types of work and bidding on jobs, variances and unknowns are likely to crop up during projects. If you have a project-based business such as contracting, interior design, architecture, and the like, you know projects can vary widely in scope and complexity. For project-based businesses, tracking and analyzing the profitability of a job at the project level is critical.
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