The Tradies Guide to Reducing Job Costing Errors

Do you know that there are over 360,000 businesses in the construction industry in Australia? 

We haven’t spoken to all of them; however, the tradies we do speak to all say one of their biggest issues when they were starting out and during their growth phases was Job costing.  

How did they reduce their job costing errors?

Their job costing tips are consistent across the board. It all comes down to using a tradie specific job costing software. When we go on-site with our bigger clients turning over multiple million-dollar builds are all very eager to show us the software for job costing they prefer and how they couldn’t survive or grow without it. 

A job costing system ensures that you have answers to questions like:

• Where does your business money mainly come from?

• Are you on track with the business financial goals you’ve set? (If you have the answer to this, you’re closer to a correct estimate)

• How much of the money you’ve made can you actually use?

We’re hoping to share some trade secrets that have helped our list of tradie clients reduce job costing errors.

Job costing for Tradies Tips

However, let’s establish the four key tips on better job costing in your trade business and reduce the chance of error.

1. Be clear on what your goals are

You probably didn’t get into your own trade business to be a bookkeeper and accountant, so how is your financial literacy?

An important step to take in the trade industry is to pin down your business goals both financially and growth-wise and run them through stakeholders (if you have those.)

Without defined goals, it’s going to be almost impossible to track your progress, so establish a baseline to track from.

Get a deep understanding on the issues in your business and how to tackle them, prepare for them and contingency plans for worse case scenarios (like a lockdown).

Spend time with the team on-site too. They have direct contact with the in’s-and outs of job costing plus other details like how much materials to have on-site.

It’s best to cost according to your goals but make sure you’re not stressing out your team on-site whilst you’re at it.

2. Unpack ALL the details

The magic of job costing is always in total transparency.

Resist the urge to ignore or look over any of the fine points.

Being brutally honest about how much taking up a job will cost will clear things up with the client.

In the meantime, keep improving how you give your clients job information (also the amount of info) and the channels you’ll use.

To chop it up, this could be:

  •  How much time you expect to invest in the job
  •  Resources used
  • technicality involved

3. Keep an eye on your labour

One in four companies shut down for errors made in estimating the cost of labour.

So it’s a big one to watch and actively manage.

Chances are you pay more for labour in your business than anything else.

If you’ve been in the trade business for a while, you know costing labour correctly isn’t like eating cake.

Remember that how much money you’re making can only be seen IF the hours your team is actually working are clear.

Don’t forget to calculate your contractor’s hours here too!

Get the correct insights from your team, and express to them why it’s vital for these labour hours to be accurate.

4. Take advantage of software

Save yourself time and stress by switching to job costing software.

It’s like having a proactive error-free person on the team who works faster and understands everybody else on the team.

A job costing software such as Xero will integrate seamlessly with the tools that you are likely already using such as QuickBooks, so you won’t have to worry about migrating complicated information.

The quicker you switch to job costing software, the sooner you’ll see a change in the performance of your trade business.

So there you have it.

Your job costing is cleared of errors faster if you have a direct understanding of how it’s done.

If you’re not sure which job costing software is perfect for your growing trade business, we are currently offering job costing software reviews here.

When you’re ready to eliminate errors, grow your business or get a bit of specific trade industry advice, don’t hold back from giving us a call.

We not only ensure that you’re compliant, but we also offer consultancy services and provide effective support on difficult bookkeeping matters.

Tradies Accountant