Make Sure Your Accounting Software Has Job Cost Functionality

May.04, 2009 in Computers

Most companies do not place it at the top of their list, but the “Job Cost Report” feature is a feature that, when used to its fullest potential, can increase profits and the bottom-line. Job cost reports take a more focused micro-level view of your company.

All accounting software will provide you with big picture reports that summarize your net income, however it is not always easy to see how and where your profits break down, epecially in companies that complete multiple jobs or projects, such as contractors. This is what a job cost module in financial software does - provides reports of the profitability of each job, in real time, instead of the entire organization.

Wondering how this works? At the most basic level, accounting software with job cost tracking will track the to-date cost of a job or project by tracking the man-hours spent on the job. You can think of these loggers as similar to an hourly employees time clock, although the data is not necessarily treated in the same manner as payroll data.

The software then takes this data and calculates several things for you. It uses the cost-per-hour of the project (for example, the cost-per-hour of payroll for the employees who work on the project) and the revenue earned per hour of the project to provide a summary of the net profit per hour spent on the project.

This kind of information becomes very beneficial as it allows you to see how profitable each project is and enables you to make informed decisions. If you can see that a certain project has a cost per hour that is too high, changes can be made to lower the cost per hour of the project moving forward so that the project results profitably. These calculated decisions are easy to make with simple reports, require less time to make, and reduce the need for reactive or seat of the pants decision making. Further, these reports can be beneficial for improving processes for projects that will be repeated in the future.

If you are in the market for new software and are looking at financial software reviews, pay attention to the job cost feature. You will find that a lot of reviews pay too much attention to the number of features and the overall “flashiness” of the package, which generally is not helpful information. Instead, look for things like:

a) Level of detail in the program as a whole

b) Ability of the software to track time spent on projects in real time

c) Options to manually add and edit job data after the project time is tracked.

Remember that there is a wide variety in accounting software. Since job cost reporting is not used as often as things like accounts payable tracking and payroll reporting, you will likely have to do a bit more digging to answer these questions.

To conclude, job cost tracking is one of the best ways to analyze the profitability of an organization and make adjustments.