In the construction industry, precise financial management is vital for profitability and growth. Job costing emerges as a key tool in this context, providing accurate information to help companies make strategic decisions that enhance operations and maximize potential.
Dan Murch, founder and owner of Blue Collar Back Office, highlights the importance of job costing. "There is a difference between being profitable and reaching a company’s true potential," he notes. Many builders equate larger bank accounts with success, but maximizing potential involves focusing on areas that drive business growth.
Job costing aids in identifying profitable areas within a company and eliminating unprofitable ones. It helps break down overhead expenses like rent, insurance, advertising, internet, and cell phones. Including salaries in these calculations ensures comprehensive coverage when setting prices and calculating job costs.
Regular client-by-client job cost calculations enable businesses to run profit and loss statements per client. This analysis helps identify the best clients contributing to business success. "Having this information allows for informed and strategic decisions," emphasizes Murch.
Implementing best practices in job costing includes creating summary sheets comparing current performance with previous years. These comparisons can reveal insights such as increased net profits despite decreased sales due to better project management.
Sharing financial information with project managers also fosters responsibility by helping them understand goals and manage expectations effectively. This approach can lead to more efficient project execution.
Murch advises construction companies looking to refine financial management to consider consulting accounting experts familiar with industry intricacies since 2005.
