Job Costing is For Everyone

As owners we are always seeking ways to understand our business, improve our profit margins, and grow. Job costing is a critical first step in this process. Simply, job costing is the ability to measure profit and loss at the activity level. Commonly used in construction, contracting, and trades, almost any business can benefit from job costing. 

What differs from company to company are the definitions of activities but the principles of job costing and the benefits remain the same. For example, construction companies job cost by project and construction activity while restaurants focus on shift and position. However, the benefit is the same: understanding your costs in real time at the activity level allows you to identify areas of improvement and recognize and respond quickly to problems as they arise.

Commonly, there are three components to the cost of a job: labor,  materials, and subcontractors or trade partners. Let’s focus on labor costs. 

Accounting for labor costs requires three applications to work together: accounting, time tracking, and payroll processing. The process begins with the creation of the “job” in accounting. The name of the job (or job number) along with other tracking information is then synchronized with time tracking. Employees then track their time to the job. This is the work activity. 

The time tracked is then used to calculate pay for payroll. Hours become $$$s. This is the labor cost of the work performed. 

The last step in the process is to create job cost accounting entries. Think of this as closing the loop. In step one we created the job in our accounting system. After payroll we have the labor cost for the work performed. So the job cost accounting entries combine the time tracking data (what was done and on which project) with the results of the payroll (how much the labor cost) to allow accurate reporting of the costs by job. 

Dapt makes this process easy by intelligently connecting accounting, time tracking, and payroll. Dapt’s orchestration of the flow of data through the process simplifies job costing. Job costing becomes a normal part of payroll processing ensuring accurate and up-to-date data. Dapt can do this with most combinations of different services (accounting, time tracking, and payroll) for example QuickBooks, QuickBooks Time and ADP (see our whitepaper on the Dapt solution for QuickBooks, QuickBooks Time, and ADP).