Question
I'm trying to find a money-friendly way of job costing. We have just moved into a new 18K square foot plant and it is needed now more than ever.
Forum Responses
From contributor B:
We've done several different things. When we were selling residential cabinets to dealers and contractors, we had a list price that we discounted just like big box does. We basically took materials, added margins, took labor, etc. After computers came along, we put it in a spreadsheet. After getting out of the residential game and going to commercial only, we came up with a spreadsheet to cover all this. Not perfect, but a lot easier and cheaper than going with conventional software that is available for pricing/bidding.
I just ordered True 32's Business Partner. I did a little beta testing with it in its spreadsheet format and it works beautifully. And the stand-alone package they are marketing is outstanding. I would strongly suggest you look into it. It works across all facets of cabinet building, whether you're doing frameless, frame, commercial, residential, etc. This is the simplest, most accurate method I have ever used.
For example, if you like to drive a $35,000 brand new pickup around town, you have to make $35,000 a year more than me because I drive a fully paid for 8 year old van. Is your house paid for? If not, then that's an expense to be business-supported.
What I'm getting at with pricing here is the same thing the True 32 folks are getting at with job flow. Identify your costs, then do something about it.
The parameters I track on every job are:
Material cost (every little thing)
Every item here, except materials, is tracked by the time involved using Quickbooks Pro activity timer. I track materials in Cabinet Vision Solid. Once I have identified my costs, I add on my profit (the only variable), and that is my client's price.
I try to make as many activities as possible go to a particular job so there is an accurate time rating on a per job basis. This is a bit of work to set up, but once running it is pretty easy to maintain. You just have to remember to start and stop the timer for every activity you do. I was able to do this, being a one-man shop. As for larger organizations, the employees may be an obstacle. When I use others, I just make sure to track their time myself.
I never give anything away, but sometimes I work for less profit if I think the situation warrants it. At least working for less profit for me is a business decision and not out of my control.
Some guys may think that what they do and how they do it are a big secret, but I assure you there are no secrets in this industry.
This starts with the estimate, which has to be done operationally, in whatever format you want to track. In my shop, we track cutting, banding, machining, assembly and finishing, in some detail, and that is how we estimate. Each operation gets a code. When we get the job, the budget estimate goes into our accounting software.
I estimate with a complex spreadsheet, and we used to enter budgets line by line by hand. Now the budget report can be copied and pasted directly into our accounting software, which is called Master Builder and is pretty good. Estimating programs like Takeoff have similar reports, which may be better than the ones I generate. I'll bet True32 Business Partner has something you can use.
Each operation is tracked on the employee timesheets and is entered against the budget. Materials purchased for the job or pulled from inventory are also entered against the budget. Our software allows us to do a cost to complete projection but this is easily done on a spreadsheet, too.
You can make it as simple or detailed as your world requires, but if you don't do it you will never know where you are. It's probably not necessary to get into the detail we get into if you're only doing one or two jobs at a time or if you finish jobs very quickly, but it's good to start the discipline when you are small so that it accompanies you when you grow. If you are doing multiple jobs over many months, you can't really do your financials without good job costing.
The normal job costing procedure on the plant floor is handled by job, by type of work performed and/or area of the plant, as well as who is performing the work. This is done by hand with fields on a sheet of paper for the employee to fill in.
Time in:
Time out:
Total:
Operation performed:
Type of Material:
Quantity or Sq. or Ln. Footage:
The same still holds true, though. Initially I set up a spreadsheet to do takeoffs and then to track actual job costs. I am using the T32 Business Partner to handle this now. While it's obviously more suited to cabinetwork, it works fine for architectural millwork as well. But if you're doing millwork exclusively with no cabinets, you might want something else.
Cabinet Vision gives me no accurate job costing info because the program doesn't know my expenses until I input. I have found, like you, that sticking with your investment in dollars and time in a software program is the way to go. Then devise work-arounds to tweak things so that everything meshes together.
I have seen some ads for a time-tracking package that includes small portable recorders that your employees hang on their belts, so they record their daily activities such as job #, operation, time, etc. At the end of the day these devices are inserted into a reader that updates the job costing program. I know it is out of my price range for what it does, but to a larger company I can see the benefit of streamlining the employee involvement in such an important aspect of the business.
