Does it feel like your job costing keeps going sideways?
If your costs are wrong, your prices and margins are likely the wrong way up too.
It can be a task and a half sniffing out costing trouble areas, including service variations that continue to get uglier and uglier.
And the part we’re worried about? Profits.
Don’t worry, we’ve seen it all.
Job costing is pretty easy if you’re doing the same type of job every day, probably to the same type of client and your tools never need replacements.
But that often isn’t the case in the trade space, let’s look at 6 possible things you could doing wrong in your job costing.
We've also put together 'The Tradies Guide to Reducing Job Costing Errors
1. Delayed Inputs
Currently the Trade industry is a super busy industry, there’s more work out there than there is time to manage the projects and delayed inputs can be a regular occurrence.
Maybe your admin waits a couple of hours, days, hopefully not weeks to gather up paperwork that needs to be updated into the system. Maybe you’re on site all day and then returning home to burn the midnight oil and catch up on the paperwork yet by the end of the day you might forget a few items here and there due to being tired or it being such a long day (This one is pretty common in the Trades space).
Humans tend to forget details. Whether it’s details about the job or acronyms, your inputs are better off recalled as they happen. This will help you to maximize your profits.
2. Sloppy Estimates
When you don’t have the exact amount at hand, it’s tempting to take the easier, faster way out and guesstimate a number instead of correctly calculating it.
Of course, if you’re very confident in your guestimates and if used from time to time you may get away with it in the short term but if it turns into a habit, it can plummet your profits and will be difficult to trace back. Especially right now, when there are timber shortages, tighter margins and increasing prices on almost every material in the trade industry.
3. Confusing Abbreviations
Abbreviations and acronyms are a great way to save time IF you and your team are on the same page. But what if a new employee is left to manage data entries? Or an old employee who has no idea what these abbreviations mean?
If you must use shortcuts make sure that there are notes or a key of what the abbreviations mean. Your new employees and job costing will thank you for it.
4. Correct information, wrong field
Your fields may be labelled clearly but one of your team members could still enter information in the wrong field. We also have to mention hand writing, when you’re in a rush, is your handwriting suffering and then later on even you struggle to make out what you’ve written?
To best lower the risk of this happening, review your fields, is there a way you can make them more clearly defined? Is there a way to make input easier so less writing is needed? Or perhaps a check box or a tick and cross system might work better?
5. Paper Forms
Unless your workplace is a paperless environment you likely have to go through zillions of paper forms regularly.
That means you’re no stranger to scrawny handwriting, faulty forms and good ol’ double entries that allow more errors to creep in. Now may be a great time to look into a software system that can help reduce this paper load, you can get a review done here to see what software systems would best suit your trade business.
6. Terribly Designed Forms
Whether you’ve moved over to digital forms or you’re still sticking to paper ones, they need to be designed to collect data correctly. User friendliness is super important with paper and online forms.
Use drop-down menus if the field only takes a couple of values. This gives the user the option to choose “not applicable”, thereby making sure that the data is crystal clear and understandable.
Stripping off human error in data entry is near impossible, however it can be improved.
If you suspect that your data errors are because of badly designed forms, consider dealing with a different accounting system. If you’re in the construction industry, you’re in luck! We’ve been talking about your options for a while now. Read this or snack on this article instead. Or both! And if you’re a plumber trying to sort out your job costing we’ve created a personalized solution for you here.
The Tradies Accountant team provide services in bookkeeping, taxation and business building. We specialize in Tradies only, and are experts at all the inner workings and trade specific needs of your business.
We’re currently on a mission to spread our message and make sure Tradies don’t lose money due to faulty job costing. Need a hand? Give us a ring!