What’s job costing and why is it important?
Project or job costing helps service and project-based businesses price better and increase profitability. Accurate job costing allows a business to carefully monitor the costs associated with various parts of a project. More critically, it ensures that a business doesn’t miss any hidden costs and has charged for all billable items.
However, many small and medium-sized businesses that have grown significantly over the years, continue to rely on outdated and less reliable methods of job costing. Talking to businesses that still use spreadsheets for project and job costing, it’s clear that they struggle with a number of challenges on a daily basis that include:
Not being able to see how budget versus actuals are tracking until it’s too late
Workflows that break down without alerts for outstanding tasks and approvals
Errors introduced when project data has to be manually updated in other systems
Losing manually calculated WIPs and costings because they're not backed up on secure servers
5 reasons to use ERPs to cost projects and jobs
Increasingly, job-based businesses across Australia are overcoming some of these challenges by using cloud ERPs to cost projects and jobs. Here are 5 reasons why you should too.
1. Manage your project costs your way
When your ERP has strong project planning capabilities, you're in control of the project structure. You can set up important milestones and easily see what inventory, expenses, purchase orders and resources sit within each planning line. When you manage projects in Wiise, for instance, purchase orders for various planning lines can be linked back to the project. And because each planning line contains a price component as well as a cost component, you can use these planning lines to easily calculate work in progress (WIPs) as well as invoice customers progressively.
2. See how everything is tracking, at a glance
Details are important, but having an overview, especially when managing multiple projects, can be really beneficial for project managers. Managing projects in the same system as your accounting, inventory and payroll makes it possible to see a dashboard view of your day-to-day tasks right on the home page. With just one glance, you'll see everything that you need to action:
- Upcoming invoices or invoices that are due
- Workflows or timesheets that need approvals
- Status of jobs and any pending tasks
3. Accurate project costing, without the stress
Costing projects on an ERP not only allows you to easily toggle between the big picture and the fine details, a systemised view of all your project costs means you can track invoices back to customers where project-specific purchases have been made, forecast with ease, calculate WIPs with a single click, and stay on top of your project costs with real-time graphical views of budget versus actuals and job profitability.
4. Avoid surprises with better project visibility
Use the job costing feature in your ERP to track any outstanding orders, know what goods are received against what's been invoiced and what your estimated amount will be at completion and see the goods and purchases that haven't been delivered yet so the costs owed don't creep up on you.
5. Let your employees fill timesheets anytime, anywhere
Payroll costs often make up the biggest share of a project's cost. When projects involve staff working out of different locations and time zones, it's crucial that your solution allows your employees to log their start and stop times and break times from wherever they may be. Managing job costs within your ERP system offers the additional benefit of employee timesheets being fully integrated with payroll. This means a lot less manual admin business-wide and ensures that hours worked by employees are not only always up to date, but also accurate.
Why choose ERPs over job-costing software
Whether it’s Not for Profits tracking how grants are utilised, construction businesses looking to generate quotes for large projects, or consulting firms working on projects with several moving parts—the ability to job-cost accurately is crucial to delivering projects on time, while remaining profitable.
This may lead business owners to believe that investing in a standalone job-costing solution is the answer. But there are two reasons why that can only add to the day-to-day complexity.
Calculating work in progress (WIPs) for projects spread over multiple accounting periods can be an administrative nightmare if your job-costing software doesn’t talk to your accounting or finance system. You're looking at hours of manual data entry, which could introduce errors and derail your whole project.
Considered every cost, including payroll and availability of resources, is crucial when deciding on pricing for products, projects or services. Managing different parts of your project on different systems can cause you to underquote prices or overcommit to delivery timelines, ultimately damaging your reputation as a business.
Costing projects in ERPs: the final word
Job costing is at the crux of good project management and profitable pricing decisions. It can help reduce inefficiencies and play a key role in timely financial reporting. And managing projects costs in the same system as your finances, payroll, inventory is how project-based businesses can get better visibility into every aspect of their various projects. Modern cloud-based ERPs like Wiise have the ability to bring together data from key business processes and give project managers the ability to:
- See detailed cost breakdown across projects
- Track budgeted costs versus actuals in real time
- Save time with automated WIP calculations
- Easily manage employees on multiple projects
- Reduce manual data entry and human error
Watch our demo below on Detailed Project Costing in Wiise
Outdated methods of project costing and using standalone job costing software cannot compare to the benefits of job costing on your cloud-based ERP system.