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Make Sure Your Accounting Software Has Job Cost Functionality
By admin | May 2, 2009
Although it may not be at the top of the average accounting software review, the “Job Cost Report” feature is a feature that, when used to its fullest potential, can increase profits and the bottom-line. Job cost reports take a more focused micro-level view of your company.
All financial software will provide you with big picture reports that summarize your net income, however it is not always easy to see how and where your profits break down, epecially in companies that complete multiple jobs or projects, such as contractors. This is what a job cost module in financial software does – provides reports of the profitability of each job, in real time, instead of the entire organization.
Wondering how this works? At the most basic level, accounting software with job cost tracking will track the to-date cost of a job or project by tracking the man-hours spent on the job. These time loggers are somewhat similar to a time clock that would be used for an hourly employee, although the data is not necessarily treated in the same manner as payroll data.
The software then takes this data and calculates several things for you. It uses the cost-per-hour of the project (for example, the cost-per-hour of payroll for the employees who work on the project) and the revenue earned per hour of the project to provide a summary of the net profit per hour spent on the project.
When you can see the profitability of each project as it progresses, decision making becomes much easier. If you can see that a certain project has a cost per hour that is too high, changes can be made to lower the cost per hour of the project moving forward so that the project results profitably. These calculated decisions are easy to make with simple reports, require less time to make, and reduce the need for reactive or seat of the pants decision making. Further, these reports can be beneficial for improving processes for projects that will be repeated in the future.
If you are in the market for new software and are looking at accounting software reviews, pay attention to the job cost feature. Many reviews focus on the number of features and the overall “flashiness” of the package, which generally is not helpful information. Instead, look for things like:
a) Level of detail in the program as a whole
b) Ability of the software to track time spent on projects in real time
c) Options to manually add and edit job data after the project time is tracked.
Remember that there is a wide variety in accounting software. Since job cost reporting is not used as often as things like accounts payable tracking and payroll reporting, you will likely have to do a bit more digging to answer these questions.
To conclude, job cost tracking is one of the best ways to analyze the profitability of an organization and make adjustments.
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