Why Job Costing Software is Essential in Construction
Job costing is one of the most complicated areas of construction finances. Contractors must be able to accurately predict, record, and control the cost of each one of their jobs. Materials, labor, subcontractors, equipment, & vehicles need to be tracked and monitored closely on each job.
How do you estimate how much a construction project will cost and how much profit you will make? Have you ever gotten those numbers wrong? Construction projects can have unpredictable profit margins because of the numerous unforeseen factors that can come into play, such as volatile costs of materials, labor over-runs, and outside forces such as weather, changing regulations, and reworks.
No matter how carefully you estimate the cost of a job, there is always room for human error. However, job costing software can help your business maximize profits by accurately monitoring your construction job costs throughout the entire project, this allows project managers to be proactive and adjust project plans and budgets as the job progresses.
In some industries, predicting job costs is fairly straightforward. Owners usually have a good idea of what a project will cost based on how much materials will cost, what they pay their employees, and standard overhead costs, such as insurance, and taxes. But in the construction industry, it’s not so simple. A job that usually takes a week could be set back by unexpected circumstances. If fuel prices suddenly rise, the cost of materials and deliveries could increase as well. A job may even seem routine, but once your crew gets onsite they encounter complications. These situations increase the amount of time and materials required to complete the job, increasing the costs of labor and materials. Without having an accurate projection of project costs, the project that you thought was going to be a cash cow, could quickly go sideways.
Adopting construction job costing software, like TRUE, can help you more accurately predict costs, keep them under control as a job progresses, and turn out a significant profit. During a job, you can use software like TRUE to access information that shows you where you are in the process. Reports can be prepared to show estimated costs, actual costs, and favorable or unfavorable variances as you progress through a job.
Implementing job costing requires time, understanding, the right software, patience and persistence. Even though implementing a new system can be tough, the benefits far outweigh the drawbacks. Why should your company invest the time and resources to implement job costing software? Here are four benefits:
- Proactively respond to changes – Effective and timely job cost reports comparing the actual costs to the budgeted cost allows project teams to identify trends and potential issues on the job. The sooner that adjustments are identified, the better equipped the team is to correct them.
- Improve profitability – This is always a favorite benefit from an effective job costing system. As management is reviewing the reports, it will become clear where savings may be obtained; resulting in increased profits.
- Manage the team and progress of the job – When performance can be measured, it can be improved. As owners and managers monitor jobs more closely, teams will improve their performance. This lets the owner assist the team as required.
- Enhance estimating for future projects – When costs are identified by job, it enables companies to understand what it really costs to complete a project. This information is valuable in managing current jobs but also when evaluating and estimating upcoming projects.
DocuWrx offers construction project management software with job costing built in so you can take your project from conception to completion in one secure solution. For more information about how TRUE Enterprise, please visit our website.