It is not enough to look at the bottom line of your profit and loss statement to determine how profitable your company is, but to also examine each job for profitability. You could conceivably being making a company wide profit but losing money on some jobs.
What costs should be included in your job costs reports? Materials, Labor and Subcontractor costs are the obvious. However, there are other costs to consider such as labor and overhead burden and equipment costs for example. Labor burden consists of payroll tax expenses (FICA, SUTA, and FUTA) and other payroll related costs such as workman’s compensation insurance and general liability insurance. By estimating a yearly budget for overhead costs and defining an estimated rate to charge a job for overhead you will have a way to apply overhead burden to your job costs (estimated yearly overhead expenses divided by estimated yearly sales = estimated overhead rate).
Should you own heavy equipment then the cost of running that equipment for each job should also be considered as part of that’s job’s cost. Fuel, annualized repairs costs, purchase price and insurance should all be considered in assigning a per hour cost of using a piece of equipment.
The goal is to consider all costs that might affect a job’s profitability. By seeing whether you are obtaining your estimated profit or perhaps not reaching your estimated profit as you proceed into the job, it will help you see areas where you will be able to make up the short falls. Should that not be possible, than you will have good information for estimating the next job that is similar. Without profit we cannot continue to stay in business.
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