by Mark Porter
In any business knowing your costs is important. After all isn't Profit = Sales - Costs. If you don't know your costs how do you know your profits. Sure at the end of the year you can say I made money or I lost money but if you control your costs and use your cost data to make better business decisions you may not lose money and you may be able to say I made MORE money.
There are many benefits to a Job Costing System.
1. Capturing all costs incurred by a job for billing purposes
2. Analysis of Jobs to identify process or employee problems
3. Compare Estimate to Actual Values to ensure they are in sync
4. Production & Employee Analysis to ensure standards are met
5. Work In Process
6. Analyze time spent by all Employees and Machines
7. Payroll Benefits
Last and certainly not least ACCOUNTABILITY
I don't think it matters if you are the person sweeping the plant floors or the president of the company - if you have to account for every minute of your day and every material you use you will become more productive and less wasteful.
This can add up to tremendous savings. Lets say we get even a modest 5% increase in productivity and 5% decrease in waste. Extend that to the money that flows through your plant each year. On $2,000,000 dollars that is a $100,000 savings.
There are several methods to record time and materials in the plant and each method has different levels of accountability.
1. Employees simply writing their time on the back of the Job Bag provides little value either in costing the job or in accountability. The employee can simply place the time and materials he thinks you want to see. You have no way of knowng if the time he wrote down reflects the true time spent.
2. Employees manually writing out time sheets is a step closer because at least the employee has to account for his time within the structure of his day. But again if he knows he took way too long on a process he can factor it in over the course of a day.
3. Real Time Tracking is the most accurate and therefore profitable method. The employee simply enters that he is starting or finishing a process. the system keeps track of start and stop times in real time. The employee knows he can be held accountable for every minute of the day.
Real time tracking means that you can see the location of a job, the activity of a machine or the process an employee is doing at any time from any pc. Not only is the employee accountable for his time - it can be viewed at any time.
And accurate time collection leads to other benefits such as accurate analysis of employee and machine time. Job Costing provides many benefits, which we will look at in future articles, but accountability is a huge benefit that leads to greater profits which good for you and the employees.