There is a huge risk in any project manufacturing business that doesn't have good Job Costing. It all comes down to one question:
"Are you losing money or making money on that job?"
It's a question that a lot of businesses might ask ... and many organizations have a hard time answering it.
Understanding Job Costing
There are a number of things you should be doing to understand your Job Costing and manage your business better. Here are a few of them:
- Collect real-time data for accurate
- Labor should be collected and entered daily - before it's paid
- Purchase costs (committed costs) should be visible
- Forecast costs (what the estimator or sales rep came up with) should be visible and used for comparison
- Committed costs should automatically become actuals when purchases are received
- The costs should be easily broken into the stages, tasks, or cost codes you can analyze
- At any point in time, you should be able to see actuals, estimated, and forecasts and compare them
- At the beginning, during, and at the end of a project, you should do a review of the Job Costing of each project
- Estimators should have direct feedback of where their estimates might be wrong or where there is high variability (statistical uncertainty) in their process
Many businesses today are not in control of their Job Costing, and doing these simple things can really help. Being able to compare real costs (actuals) to the estimated costs during the project can help you prevent a huge train wreck.
Products like Dynamics NAV including Job Costing modules and are designed to make this process easier.