Job Costing for Contractors: Why Manual Tracking Is Costing You Money
You’re putting together final numbers for a project but you feel like you’re missing something. Thinking back, there’s a similar project you did not too long ago. Of course, that means you have to pull the files and review everything.
How much time do you think it will take to pour over all that data? What happens if you’re missing any records?
Manually reviewing records takes time that you could be spending elsewhere. Plus, if anything is missing, you’ll end up with holes in your data, meaning your numbers will be unreliable.
If you rely on manual job costing methods for any aspect of your project, you’re wasting time and missing out on opportunities to maximize profits.
There’s a more efficient approach to job costing for contractors these days. Switching to construction cost tracking software can streamline your processes leaving less room for error.
Drawbacks of Manual Job Cost Tracking
Job costing for contractors is a make-or-break issue for many small construction companies, as it directly impacts the bottom line of every project. You rely on accurate and timely information to create bids and make informed decisions about unexpected incidents on a project.
Even if the manual approach feels cost-effective, there are hidden drawbacks that could be draining your profits.
Inaccurate Cost Tracking
Over 80% of construction companies claim they’re experiencing higher-than-anticipated construction costs. That means only a small percentage of business owners regularly stay on track with cost tracking.
Do you wonder what they are doing differently? Maybe it’s easier to ask what you could do differently.
From labor to material costs, manual job cost tracking can create gaps in information, leading to inaccuracies that compound into unprofitable projects.
Miscalculations on one project can create a ripple effect. If you rely on inaccurate numbers from your historical data, you are apt to make poor bidding decisions on subsequent projects.
Investing in software that automates data collection and integrates with your accounting software will save time and money. Your accounting team will appreciate the efficiencies and your bottom line will reap the profits.
Time-consuming Data Entry
Someone has to enter information from financial reports manually. A world record-setting typist entering that data will delay final figures, and there’s always the chance of human error. You could have somebody running quality checks on the data entry, but that takes even more time.
Even if you’re attempting a hybrid approach with a combination of digital and manual job cost tracking, you’re likely feeling the pinch of manual data entry.
Embracing more digital, automated options means more efficient reporting and frees up your team to handle more complex tasks. Wouldn’t you rather have your teams focus on growing profits than entering data?
No Real-time Visibility
How many times have you been surprised by overruns on a project? The fallout from a lack of real-time data is extensive.
- You can’t fix it if you don’t know it’s happening. It can be something as simple as a change order falling through the cracks.
- There’s a disconnect between your field team and office team when you rely too heavily on manual tracking.
- Lagging reports create interpersonal issues and even resentment between field and office teams.
Big data and digitization are the future of construction, offering contractors an opportunity to get ahead of the game and nip all these issues in the bud.
Leveraging software that manages individual project information in one place allows you to see the bigger picture for more accurate cost monitoring.
Consider the benefits of identifying potential pitfalls early enough to limit the damage to profits. If you can access current, reliable data on a project, you can make better decisions. It could change how you handle those costly change orders that inevitably come through.
Difficulty Tracking Costs Across Multiple Markers
Do you ever feel the pressure of not being able to be in two places at once?
Imagine this. You’re checking in at one job site when the lead from another site calls with an issue, like a lumber shortage that threatens to delay everything. With the right tools, you could check the budget status and place an order without having to drive across town.
The right construction management software enables you to oversee your entire firm. You can monitor and manage multiple jobs and cost codes simultaneously to make the best possible decisions for each project.
3 Steps to Efficient Job Costing for Contractors
If there were a tool that could make your life easier and boost your bottom line, wouldn’t you try it?
The truth is that digital job costing is the future for contractors. It can transform their ability to bid accurately, control costs, and maximize profits on every project.
Establish Accurate Cost Tracking
Contractor bookkeeping tools have come a long way since the early days of simple analog spreadsheets. In all fairness, modern spreadsheets can’t hold a candle to the new software options available to contractors.
How convenient would it be to have access to breakdowns of all labor, material, and equipment costs for a project? What if you could easily view the same breakdowns for every project you are working on at any given time?
Imagine you learn about a delay in receiving the necessary materials for a project. You could source the materials from another supplier and not lose a day on the job.
With the right construction cost tracking software, you could quickly access a breakdown to see what the change would mean for your timeline and profits.
Taking this concept a step further, you can access cost breakdowns for projects over time to identify trends. When you can accurately see the bigger picture, you can refine processes to boost profits.
Gain Real-time Visibility
What would you give for a clear window into every project’s profitability? Construction cost-tracking software with real-time capabilities offers you that power.
Imagine daily crew logs, updated field reports, and synced invoices that you can track from a single platform. What would that mean for your day-to-day workload?
Having oversight and transparency about material and labor costs on your worksite means knowing what’s happening at the moment. You can make more informed decisions faster and adapt to changes or surprises. Shift workers, tasks, and materials to compensate for unexpected changes.
Improve Future Bidding Accuracy
Part of good job cost management in construction includes using historical data to improve future bids.
Bidding relies heavily on material costs, which are currently on the rise. Imagine you have a chance to bid on a project that’s similar to previous work.
You kept your notes for each project, so you pulled everything and got to work looking for trends. Can you see yourself poring over notebooks or printouts at a table? It’s not especially efficient and leaves you open to human error, like lost documents.
Instead, imagine you used job costing software to track your past projects. You can easily pull similar projects to view cost breakdowns. Make adjustments for changes in material costs to build a more accurate bid.
Tools like Contractor Foreman allow you to view past projects and analyze costs by category. It’s fast, efficient, and more accurate than trying to analyze costs manually.
Tips for Using Construction Management Software to Boost Project Profitability
Deciding to go digital is only the first step in streamlining your job costing processes. It’s a good idea to prepare your team and research your options before committing.
Seamless Integrations with Existing Accounting Software
Not all contractor bookkeeping tools are created equal. One of the first questions to ask any provider is whether or not their platform integrates with your existing software. The last thing you want to do is dedicate weeks to adding historical data to a new system.
Phased Implementation
Your team may be excited and ready to dive in feet first, but that can feel ambitious if you’re a primarily manual tracking firm.
For example, if you know that labor costs are killing your projects, consider starting with time-tracking features. Get your employees on board and take advantage of automatic labor cost calculations to make improvements.
Regular Reviews Boost Accuracy
There’s always room for improvement, even if you’re pleased with your current profit margin. It can be tempting to let things ride, but it’s not the best way to grow your business.
Harnessing the power of technology means it’s easier than ever to review historical data for inefficiencies.
Arrange for regular audits to identify gaps or areas where you can tighten things up to increase your profit margins. You should be able to run various cost breakdowns to view things from different angles to get a better picture. Don’t forget to check your estimates against the final numbers.
Ensure Adequate Training
Not everybody is tech-savvy, so even the most user-friendly software can feel overwhelming to some. You want your team to be as confident in your selection as you are, and that means giving them the tools to succeed.
Opting for a platform that’s easy to use is the first step. You might look for a platform that offers live demos. Bring a few members from each of your teams on board to test it with you and get feedback.
Construction Software Makes Job Costing for Contractors More Profitable
Isn’t it time to stop losing profits to errors and delays? There are multiple software options to support your job costing efforts and reduce the fallout from manual tracking options.
Leveraging technology opens you up to real-time data that can transform your workflow. Instead of guesstimates, you can deliver accurate data-driven estimates.
You can also use software to build accurate historical cost data to improve future bidding and project profitability. Technology makes it easier to use historical data to identify trends that you can use to refine future bids to maximize your profits.
You have everything you need to manage job costing manually. An old-school system may work for your team if you can accept the challenges.
However, Contractor Foreman eliminates the challenges associated with manual tracking. Access real-time tracking options, online invoicing and payments, and project tracking tools. Plus, you can arrange for online timecards to make payroll easier and more efficient.
Start your free trial of Contractor Foreman to upgrade your job costing and take control of your profits.
