Too many small businesses have lots of income but no profits. A common reason is that they are not controlling costs. In order to do this you need the proper tools. At Exigo Business Solutions we strongly suggest using the best bookkeeping and accounting software for small businesses, QuickBooks. As an example, here we cover how to keep track of individual job costs using QuickBooks Desktop.
To correctly cost a job you need to track all expenses and then compare them to the revenue created by that job. With the right tools for job-costing from QuickBooks Desktop, you will be able to easily see how much you are spending in relation to how much you are earning from every job.
The devil is in the details so be sure to keep accurate records and use the tools that QuickBooks provides. More detailed records will give you more precise cost reports as you add and edit items, or delete them, in QuickBooks Desktop.
First step: each job gets a Customer - Job designation.
With the very first job for a given customer create a job in QuickBooks Desktop. Doing this allows you to track expenses and income job by job. When you do the next job for this same customer you will be happy that you started out correctly! (Otherwise, when you create a job, any previous work is automatically moved into this job which makes the issue confusing.)
Second Step: List the items that you wish to optimize when costing the job
Make sure to set up each item with enough information. The level of detail in your Item list will determine the accuracy of your job cost reports. Learn how to add, edit, or delete items.
Third Step: Make sure all expenses are correctly assigned to specific jobs
Time and material costs need to be correctly allocated to one or more jobs as is appropriate. Choose the correct job in the Customer:Job listing as you enter each bill, time sheet, or check.
Use a weekly time sheet or an entry for single activity, but record all hours spent on each and every job. When you assign hours to the job or customer QuickBooks Desktop will automatically check this entry as Billable within its column.
NOTE: Because timesheets are not a posting entry the time needs to be imported to the invoice or bill in order to be included in Company Financial or Job Profitability Reports.
Purchases That Are Job Related
Be sure to use a credit card charge, check, or bill when recording items purchased for a job or subcontracted services. At the Items tab enter every item and service purchased. And be sure to allocate each service or item purchased to the job or customer within the Customer:Job column.
Every business has expenses that are not related to any specific job. These include office supplies, rent, and more. These should not be assigned to a specific job. Rather you should make a Customer:Job entry for Overhead and put all overhead expenses there. This allows you to see these expenses in your reports without incorrectly inflating any specific job costs.
Use the Enter Vehicle Mileage “window” to record mileage. In order to charge for this item you will need to charge for it on invoices.
There are always “other” expenses such as postage, shipping charges, and more. Record these with a check, bill, or credit card charge on the Expenses tab and make sure the expense is properly assigned in the Customer:Job column.
Fourth Step: Estimates are entered in QuickBooks Desktop
Some folks prefer to work on a spreadsheet outside of QuickBooks for doing job estimates. If this is your preference simply import the summary into QuickBooks. Likewise, you can import your estimate information into QuickBooks using the Create Estimates window to turn them into invoices.
While it is possible to do reports for job-costing without using estimates, using estimates allows you to take advantage of the full range of Job Cost reports that QuickBooks Desktop offers. And, when you record your estimates, you can see how accurate they were and learn to adjust them for future jobs.
Note: QuickBooks does not automatically take the time estimated for a job and correlate that with time sheet info. You need to do this manually to create invoices.
First and foremost, make sure than when you are doing invoices you choose the correct Customer:Job.
If you choose to create your invoices without using QuickBooks Desktop at least make sure to import an invoice summary to correctly track revenue in Job Profitability reports. For help creating invoices in QuickBooks Desktop, contact us at Exigo Business Solutions.
Sixth Step: Run your job costing reports
The point of this exercise is to see where your profit lies and where there is room for improvement. When doing this task becomes routine you will learn to create better and more accurate estimates. You will be able to create the sort of business intelligence that identifies how to increase profits and decrease losses. Specifically, you will be able to track active jobs and prevent the sorts of huge cost overruns that could drive you out of business!
Find you job reports by navigating to Reports and then to Jobs, Time, & Mileage. The Accountant and Premier Contractor editions offer you a more substantial range of reports for job costing. You will access these through Reports, Industry Specific, and Contractor Reports. Talk to our QuickBooks ProAdvisors if you need help. We will be pleased to set up a QuickBooks Training session to help you with any specific issues you have with QuickBooks.