To run a profitable construction business, you need to have a good handle on costs – and that requires efficient and effective job costing. But you probably already know that – it’s not exactly news. But what you may not know is HOW to improve job costing. This article explains 7 ways that Sage 100 Contractor can get you there.
The Job Cost Tracking Challenge
Before we jump into the 7 ways to improve job cost tracking, it’s helpful to point out some of the most important challenges that most contractors face.
One of the most common challenges is trying to keep all your costs straight, up to date, and accurate using manual tracking methods (i.e. paper notebook) or spreadsheets. Not only do these unreliable methods make it difficult to figure out exact costs, the data is often out of date and lacks the detail needed for reliable decision making.
For those that are using some sort of basic accounting software like QuickBooks, you’ve probably discovered that they are great for tracking general ledger and accounting activity but not so great at job cost management and tracking construction-specific activity.
With that said, let’s get into the 7 ways Sage 100 Contractor improves job cost tracking.
#1 – Tracking Committed Costs
All too often, your reports only show the expenses paid on a project, which is just a portion of your true cost picture. It’s critical to understand your committed costs throughout the project so there are no last-minute surprise invoices or worse—bills that come in after a job has been closed out. These surprises lead to profit fade, which negatively affects your relationships with bonding companies.
Sage 100 Contractor issues and tracks all purchase orders and subcontracts including what’s actually been paid and what’s still outstanding. The software also accounts for workers’ hours entered into the system , but that have not yet been processed by accounting as an expense.
In short, Sage 100 Contractor shows you not only what has been spent, but also what you plan to spend.
#2 – Change Order Management
Change orders happen on every job. If handled properly, it can be a source of additional revenue for your business. If not, you wind up holding the bag and incurring additional costs, only to discover this fact well after it’s too late to do anything about it.
Sage 100 Contractor makes sure that nothing falls through the cracks by providing a complete, built-in change order process. Change orders can be tracked against the prime contract and/or against a subcontract. Once a change order is approved, Sage 100 Contractor automatically:
- Updates the prime contract to show the requested change in scope.
- Updates the schedule of values on bonded or fixed-price projects so the change order can be billed.
- Updates the job cost budget so contractors know why the budget has changed.
- Generates a commitment to a subcontractor to do the work.
What’s more, Sage 100 Contractor lets you create a placeholder for potential change orders the minute changes on the job have been reported from the field, and reminders tell you when to submit a formal change order request for approval.
#3 – Labor Time Tracking
Labor is the biggest risk to losing money on a construction job. Yet many contractors don’t accurately track labor costs because it’s too hard to get complete time card information in on a daily basis.
Sage 100 Contractor integrates with mobile time tracking software to capture, approve, and submit labor hours from the field on a daily basis. The software tracks all direct labor costs and calculates your true labor burden (not just a flat burden rate), so you have a complete account of all labor costs connected to a job.
#4 – Tracking Costs Against Contracts
Prime and subcontracts dictate the scope of a project and costs that fall within that scope. If the scope changes in a contract or agreed-upon items are incorrectly billed, you leave money on the table or pay more than what you planned.
Sage 100 Contractor tracks all costs against the prime contract, budget, and subcontracts. When an invoice comes in, the software automatically warns if it is for something that is not in the contract. It also raises a “red flag” if costs exceed what is outlined in the contract.
#5 – Alerts and Scheduled Reports
As more work comes in the door, it becomes difficult to stay on top of all the schedules, costs, and paperwork of various projects in different stages. If critical job cost issues are left unattended, it could spell disaster.
Sage 100 Contractor features automated construction alerts that function like a personal assistant (it’s actually called MyAssistant) to monitor job cost and keep the appropriate people informed of issues such as:
- Cost codes that are close to going over budget.
- Jobs under- and over-billed.
- Un-billed change orders.
- Job hours over budget.
- Important concerns including insurance expiration and other compliance-related issues.
- So much more …
Alerts can be emailed and you can also schedule reports to be automatically distributed to key team members. Because one of the keys to a successful project and job cost tracking is managing the multitude of tasks that occur during a project’s life cycle, while proactively heading off problems BEFORE they become a major drain on profit, efficiency, and your company’s reputation.
#6 – Tracking Work in Progress Costs
On a bonded or fixed-price job that spans several months, your true earned profit on the job is not necessarily determined by what you have actually billed less your incurred costs at that point in time. To get an accurate picture, billings and costs must be properly aligned based on the actual percent of work complete at that time.
Sage 100 Contractor makes it easy to see each job’s work in progress costs and how those costs compare to current billings. This allows you to proactively address any over- and under-billings and more accurately predict profits. Sureties also require this type of information from bonded contractors, so they can make sure projects are moving along as planned.
The software automatically calculates your actual earned revenue, giving you a clearer picture of your income, job profits, working capital, and bonding capacity.
#7 – More Accurate Estimates
Contractors who don’t have a good idea of their true job costs will, in turn, continue to bid with bad numbers. This can jeopardize your chance of winning bids. Even worse, you could win a job because your bid is too low—and wind up losing money on the project.
Sage 100 Contractor helps you determine true job costs so you feel more confident in estimates and win more profitable jobs. As a bonus, once an estimate is final and the job awarded, you can immediately create a proposal, job budget, purchase orders, and subcontracts directly from the estimate.
Better Job Cost Tracking
For contractors, tracking and reporting visibility is key to your success – you have to know your job costs in order to control them. Sage 100 Contractor provides easy, built-in access to critical job cost and project information to help you manage your business operations more effectively.
See It For Yourself
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After all, seeing is believing.