CoatingsPro Magazine

NOV 2016

CoatingsPro offers an in-depth look at coatings based on case studies, successful business operation, new products, industry news, and the safe and profitable use of coatings and equipment.

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Page 16 of 68

16 NOVEMBER 2016 COATINGSPROMAG.COM Money Matters A part from the changes in technology and legisla- tion, what really makes the construction industry unique — and challenging — is that its companies operate multiple profit centers that continually open and close when new bids are won and completed. Most coatings contractors have learned that a solid general ledger isn't enough to see what's going on in a construc- tion company. Are you getting the full benefit from job costing your payroll? True Job Cost Numbers When each invoice that hits your accounts payable ties to a job, it's easy enough to add them all up and get a cost total — but, of course, that leaves a lot missing from your true job costs. Labor can be trickier to tie down to a job or job area, especially if on a single day you have Bill working six hours on one site and then doing on-site prep for another three hours on a different project. Where does that hour of overtime get assigned? Capturing your true job costs through payroll is an ongoing process, so, in addition to the aid of technology and industry-specific services, contrac- tors are also helped by beginning small and challenging themselves at a pace that makes sense for them. Begin With Broad Strokes A successful job costing system has to be usable. Any payroll costing system needs to be known, understood, and practiced at the ground level. Without a system in place where the job cost information on timecards can be verified and trusted, you should keep in mind another maxim: No job cost data is better than wrong job cost data. Additionally, a fully formed job cost system that attempts to anticipate every eventuality for breaking down costs might not leave you with the flexi- bility to revise, adapt, and grow your costing system as you learn. A success- ful start to job costing will give you both answers and questions. What You're Looking For Once you begin job costing, and then as you create more detailed systems to capture multiple levels of costs, you will create a lot of data. Raw data without any questions put to it, though, is a lot like having a book that contains the answers to all of life's questions but just sits on your coffee table unopened. ere are several varieties of reports available to contractors who job cost. Deciding which to use should be determined by the kinds of questions you have about your costs, profits, productivity, and labor force. • A job-to-date labor hours report will compare your estimated hours and cost amounts against the actual amounts incurred, both to date and over a specified reporting period. This will provide you with a variance for each cost category of a job. • A simple labor unit cost report will take hours estimates, labor cost estimates, and to-date labor hours and costs to produce several other sets of data for each cost area on a job. The first is a simple percentage of completion, based on the hours to date divided by the estimated hours. An "estimated unit cost" will be calculated from the estimated labor costs divided by the estimated labor hours. Likewise, an actual "to-date unit cost" will come from dividing the actual costs and hours. From here, you should consider separating out burden costs from regular labor costs — both in your Cost Code % Complete Estimated Unit Cost To-Date Unit Cost Estimated Labor Hrs. To-Date Labor Hrs. Estimated Labor Cost To-Date Labor Cost 100 64.76 16.47 13.96 850 550.5 14,000.00 7,685 200 86.08 11.33 11.59 750 645.6 8,500.00 7,483 Table 1. Labor Unit Cost Cost Code Estimated Labor Hrs. To-Date Labor Hrs. Est. Qty. To-Date Qty. U/M Estimated Production To-Date Production 100 850 550.5 9,000 6,350 SF 10.59 11.53 200 750 645.6 12,000 9,610 SF 16.00 14.88 Table 2. Labor Productivity Cost Code Estimated Labor Cost To-Date Labor Cost % Hours Complete Forecasted Cost at Completion Forecasted Cost (Over)/Under 100 14,000.00 7,685.00 64.76 11,866.89 2,133.11 200 8,500.00 7,783.00 86.08 9,041.59 (541.59) Table 3. Projected Cost Analysis By Fred J. Ode, CEO/Chairman of both Foundation Software and Is Your Payroll Getting the Most Out of Job Costing?

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