Not Sure Where to Start Job Costing? Try Starting With Labor

Successful job costing starts simple and develops as you put it into practice. Once you begin coding your timecards by job, the next step is to begin using cost codes (sometimes called “tracking codes”) to break your costs down into the next level of detail. The idea is this: If tracking labor to each job allows you to report progress and monitor overruns per project, using cost codes can let you track each project’s component parts. So where do you begin? Look at your labor.

You can begin by breaking a typical project down into the tasks your time and materials go to. If you bid on building a new residence, for example, you might have hours you’re going to be allocating to the foundation, framing, flooring and so forth. The most important consideration, however, is making sure that you’ll have the data that’s most important for you to see. If painting and floor finishing are effectively the same to you and your crew, then consolidating them into one finishing cost code can save you time.

By tracking the timecard hours that go into each of these project activities, you set yourself up to be able to:

• gather more precise data for better estimating and scheduling
• track estimated vs. actual hours and costs in real-time
• manage jobs as you go and see where you’re falling short
• identify your true costs—including payroll burden like FUTA and SUTA
• and make future bidding and scheduling decisions

However you begin implementing cost codes, remember that the goal is to be useful for your business and user-friendly for your employees. Start simple, and gradually increase your level of detail as you learn more from your experience.