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As a contractor, sub-contractor, or manager, you know that keeping track of your numbers is crucial to your success. After all, your profit is only as good as your last job. To be profitable, you need to track your costs carefully and know exactly where every penny is going.
In this blog post, we’ll explore the importance of knowing your numbers and how real-time job cost calculations can help you stay on top of your project costs. We’ll also provide some tips on how to make sure you’re constantly tracking the right numbers.
What are Real-Time Job Cost Calculations?
Real-time job cost accounting is the process of tracking and accounting for the costs associated with a particular job or project in real-time.
Real-time job cost calculation methods are automated and often integrated with other software systems such as accounting and project management software. This allows for a higher degree of accuracy and transparency compared to manual methods of tracking job costs.
It gives you a complete picture of your job costs and helps to correct issues early on before they become too costly.
Key Numbers That Contractors Must Track
Job Cost:
Job Cost includes the total cost of materials, labor, and overhead for a specific job. Knowing your job cost helps you determine whether you are making a profit on a project.
Company Overhead:
It covers the total amount of expenses that are not related to direct labor or materials. Overhead includes items such as rent, insurance, utilities, and office supplies.
The Selling Price of Materials, Equipment, and Services:
Keep track of the selling prices of the materials, equipment, and services you sell. This information is helpful when bidding on projects.
Gross Margin or Profit Percentage:
This is the percentage of your selling price that is profit. For example, if you sell a product for $100 and your cost is $60, your gross margin is 40%.
Cash Flow:
Cash Flow is the movement of money in and out of your business. Get a report of your cash position every week. Keeping check of your cash flow will help you manage your business finances better.
Accounts Receivable Turnover:
The measure of how quickly customers pay their invoices totals to Accounts Receivable Turnover. To calculate, divide your total receivables by the number of days in your billing period.
Inventory Turnover:
Inventory turnover measures how quickly you sell the inventory you have on hand. To calculate, divide your cost of goods sold by the average value of your inventory.
Days to Pay Contractors:
It is the number of days it takes you to pay your contractors after they have completed a job. To calculate, divide the number of days in your billing period by the number of contractor invoices you paid during that time.
Quick Ratio or Acid-Test Ratio:
A quick ratio or acid-test ratio is a measure of your company’s ability to pay its short-term obligations. To calculate, divide your total assets by your total liabilities.
Return On Equity (ROE) or Return On Assets (ROA):
These are measures of your profitability. Higher ROE or ROA ratios mean that you are more profitable. Lower ROE or ROA ratios mean that you are less profitable.
Expecting your business to skyrocket without knowing these numbers is like going on a road trip without a map. You might end up somewhere you wanted to be, but the chances are slim. By contrast, tracking these numbers gives you a much better chance of steering your business in the right direction.
Increase profits by being more efficient with your finances
How Real-Time Job Cost Calculations Can Help You Stay On Top of Your Project Costs?
If you’re not tracking your job costs in real-time, you could miss out on important financial insights that could help you improve your bottom line. Real-time job cost calculations give you a more accurate picture of your project costs, so you can make informed decisions about where to allocate your resources.
This information can help you:
– Avoid overspending on materials or labor
– Make changes to your project schedule to improve efficiency
– Negotiate better prices with suppliers
– Improve your estimating accuracy for future projects
How to Calculate Job Costs in Real-Time?
There are a few different ways to calculate job costs in real-time.
Manual Accounting Methods
The traditional way of keeping records in journals or ledgers is time-consuming as it requires a lot of paperwork. Also, it is prone to error because human beings are involved in the process. Many have moved on to use computerized accounting on spreadsheets and basic accounting software. While this is a step up from manual accounting, it still requires regular data entry and can be subject to error.
Software-Based Accounting Methods
With the advent of cloud computing, mobile apps, and other digital tools, accounting has become much easier. Software-based accounting methods offer a number of advantages over paper-based systems. These offer the ability to accurately track expenses in real-time, automate invoicing and payments, generate reports on demand, and share information with team members seamlessly. With this, businesses can reduce their overall operating costs and increase accuracy tremendously. This all leads to better decision-making, improved project cost control, and, most importantly, time and money savings.
Contractor Accounting Software: What Should You Look for?
The best contractor accounting software for your business will have all of the features you need to manage your finances, including:
– Job cost tracking
– Invoice management
– Expense tracking
– Time tracking
– Reporting
– Integration with other business software
Now that you know the basics of contractor accounting, it’s time to choose the right software for your business. If you’re looking for a comprehensive online accounting solution for your contracting business, consider WERX.
Werx is an all-in-one software that includes everything you need to manage your finances, from job cost tracking to invoicing and payments. With WERX, you can get a real-time view of your business’s financial health, so you can make informed decisions about your projects.
Contractors, take your business to the next level with WERX!
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Benefits of Using Werx Accounting Software for Job Costing
When it comes to job costing, Werx project accounting software is a great option for businesses of all sizes. Its user-friendly interface makes it easy to break down labor expenditures and create estimates for large and complicated projects. Features like job costing templates, time tracking, and progress billing help businesses keep track of every aspect of their projects, ensuring that no detail is overlooked.
Speed Up The Process
From viewing historical costs of similar jobs to prices of materials you’ve ordered, the software helps you quickly and easily estimate the costs of a new job. This is especially helpful if you’re bidding on a project with a tight deadline.
Get a Real-Time View of Your Job Costs
As you incur costs on a job, they’re automatically tracked in the software. This gives you a real-time view of your job costs so you can see how close you are to your estimate.
Reduce Customer Conflict
Companies that accurately account for expenses may provide better pricing forecasts and establish realistic consumer expectations. Costs can also be updated on the go so you can communicate expense information with clients as they come in and projects develop.
Enhanced Report Functionality
Insightful reports on job costing help you make better decisions about your business. With WERX, you can generate reports on job profitability, material usage, and more. This information can be used to improve your estimating process and make your business more efficient.
Generate Accurate Invoices
When the job is done, you can generate an accurate invoice in seconds. The software will automatically calculate your billable hours and expenses, so you can get paid quickly and without any errors.
Save Time on Bookkeeping
Werx accounting software is integrated with your bank account, so all of your transactions are automatically imported and categorized. This saves you hours of bookkeeping each month, so you can focus on running your business.
Accurate Job Pricing
Project costs are automatically assigned to individual projects based on precise, predetermined business rules, ensuring consistency and accuracy in their breakdown. This allows firms to have a clear picture of their project expenditures so they can make informed pricing decisions.
Integrates with QuickBooks Online
Werx integrates with QuickBooks Online, so you can manage your finances in one place. This makes it easy to keep track of your revenue and expenses and generate financial reports.
Accurate job costing is essential for any business, but it can be especially helpful for contracting businesses. By accurately tracking expenses and revenue, you can ensure that your projects are profitable and that customers are happy with the prices you’ve quoted them. Werx accounting software makes it easy to keep track of every aspect of your job costs, so you can focus on running your business efficiently and profitably.
