Job Costing Leads to the Survival of Construction Companies
With the demand for new buildings low, construction companies are seeing smaller profit margins. This comes as no surprise to anyone right? What this means is that contractors have had to stretch their budgets and allocate their funds wisely in order to stay out of the red. The recession has posed many challenges for the construction industry; one way construction companies can stay afloat in this economy is through improved job costing. The basic principle behind job costing is to know as accurately as possible how much money has been or will be spent in the different areas of a project.
How can job costing be the recipe to success for construction companies? All projects have direct materials, direct labor, and overhead. If these costs aren’t accounted for properly, your projects may not be as profitable as your job cost schedules lead you to believe. What better job costing can do for construction companies is give them a more realistic breakdown of a project’s costs, even the costs that may not be expected or otherwise included in the original bid. Improved historical data will allow contractors to better estimate how much a project will cost on the front end and give them a competitive advantage when submitting bids.
Some common overhead costs improperly allocated are:
- Equipment and the cost to keep it in use
- Computers and their software
- Interest charges
- Unforeseen events such as plan changes, increased material costs, or additional time requirements
- Salaries of those not directly working on the projects but overseeing them
Improved job costing ultimately leads to better bids and to more profitability. Anders has a team of professionals experienced in helping our construction clients implement comprehensive job costing strategies. Contact us if you need help increasing your bottom line!