Job costing can be a difficult thing to get right. In sectors like project engineering and contract services, it’s a critical part of turning a profit – but tracking and measuring all of the variables involved can be a herculean labour.
As such, a lot of companies have trouble putting together accurate quotes for their customers, and all kinds of nightmares can arise as a result. Whether they fall into traps like attempting to cost complex projects with little more than Excel, or using off-the-shelf ERP software with limited job-costing functionality, they end up losing time and money over mistakes that should have been easily caught.
Here are five examples of job costing nightmares we see regrettably often.
1. Job costing failures on complex projects
When you cost up a complex project, it’s vital that you take steps to manage risk and protect yourself against unexpected changes in the spending on your side. If the job ends up taking significantly longer than expected, or requires additional resources that weren’t originally accounted for, it can rapidly turn unprofitable. And, as this is a complex and potentially long-running project, this could be a thorn in your side for some time to come.
2. Inaccurate costing as a result of human error
If your job costing process is mostly ad hoc, it’s reasonable to assume you rely on multiple sources of data that aren’t really integrated with one another. Timesheets, supplier invoices and forecasting all belong to different silos that you need to bring together in order to calculate margins and carry out profitable jobs.
In this kind of scenario, it’s common to end up rekeying data from one system to another. This is both time-consuming and, worse, can lead to inaccuracies as a result of human error that are near-impossible to identify and fix before it’s too late.
3. Field staff unable to access job costing resources
In sectors like field services, workers ought to be able to cost jobs on the go. A lot of the time, however, they simply don’t have access to the right software and resources from customers’ sites – they may have a lot of great service apps on their smartphone or tablet, but that’s cold comfort if vital job costing information is contained within an inaccessible spreadsheet back at base.
As such, costing in the field is often either inaccurate or inefficient.
4. Costing struggles as a result of unintuitive solutions
Of course, even when an organisation invests in dedicated job costing software, there’s no guarantee the workforce will use it correctly.
Whether it’s down to a lack of training or because the solution itself is unintuitive, another common nightmare is for end users on the ground floor to fail to uphold their duties on the job costing front. You end up with incomplete – and sometimes non-existent – timesheets, work done but not charged for, and boring data entry tasks pushed to the back of the queue.
5. Forecasting and cash-flow suffer due to siloing
Finally, it’s important to remember that job costing is a business-critical function and the basis of how you turn a profit. If all your costing data is siloed across different sources, it’s inevitable that your forecasting and cash-flow management will suffer. As such, you could be looking at a much longer-term problem than simply getting the right quote out at the right time.
For these reasons, we think it’s vital that service organisations put an emphasis on integration in their job costing efforts, and only use technology that ensures the greatest possible accuracy and efficiency.