Running a small business sometimes involve a little guesswork. You’re not always going to have all the answers. Leaps into the unknown are unavoidable. What separates long-standing entrepreneurs from the herd is their ability to minimize these situations, putting the odds in their favour through preparation and attention to detail.
Job costing is one of the ways these individuals prepare and it’s something I’d consider a mystery to a lot of entrepreneurs.
What Exactly is Job Costing?
At a basic level, job costing is the process of tracking and categorizing every cost incurred in running a business. It’s often broken down into jobs or projects, allowing the business owner to understand whether a job or project is worth the time and effort to undertake. The goal is to zero in on how and why costs are incurred. The benefits of this approach are many:
- Allows the tracking of jobs in progress, instead of after completion;
- More refined approach to estimating and scheduling by establishing where estimated costs and final costs vary
- Following detailed trends in spending allow for efficient control of materials and manpower
- Accurate overview of what parts of your business are profitable and merit expansion
Best Practices in Job Costing
The good news is that job costing is easier to implement than you think. It’s cost effective and will improve the long-term health of your business. Here are some common-sense tips to help you get your job costing efforts off the ground.
Factor in the Small Costs
The easiest part of job costing is accounting for your big, headline costs. However, the little costs pile up just as quickly and you need to be equally meticulous in labelling them. Many a project has spiralled over budget because of a dollar here, a dollar there. It will leave you having to eat the cost or return to the client looking for more money. The more meticulous you are in recording costs, the more effective you’ll be at job costing.
It Doesn’t Need to be Manual
If your vision of job costing involves writing figures down on a notepad, you’re doing it all wrong. Like so many facets of life, there are apps and software available to help. An app we love to use is Harvest. This powerful software is offered on a freemium model, with the free plan good enough for a lot of small businesses. It can be used to track time, expenses, create invoices and keep your clients happy with minimum fuss. The Harvest software is so powerful, it’s used by over 50,000 businesses around the world.
Adopt an Agile Approach
Even our best-laid plans can go sideways sometimes. Checking in on costs at regular project milestones will allow you to keep an eye on the overall health of the project and prevent any nasty shocks at completion. This can be especially useful with demanding clients who ask for regular changes, or ones prone to requesting additional features. Feature creep is a phenomenon you need to account for and it’s ok to request more money if a client is asking for additional work.
Find Out More
Interested in hearing more about how project costing can unlock the potential of your business? Here at GD Commerce, we’ll be happy to meet and discuss your unique situation and how you can start bringing your spending under control.