Problem guide
Job costing arrives after the job is over
Job costs arrive after the job is over because hours, materials and subcontractor costs reach the job only when timesheets are processed and vendor invoices are coded, often weeks later. Get the biggest costs onto the job as they happen, even roughly, and review cost against budget while there is still time to act.
What it usually looks like
A project manager runs a six-week tenant improvement for a specialty contractor. Crews turn in paper timesheets every Friday, and payroll codes them to the job the following week. Material comes from three suppliers, and their invoices get coded when accounting gets to them. By week four the job cost report says the job is on budget. In week eight, after the job is done, the last invoices land and overtime from week three finally shows up. The job lost money, and the report that would have warned him arrived a month after he could use it.
Signs you have this problem
- Project managers find out a job lost money after it is finished
- The job cost report is weeks behind what is actually happening on site
- Material and equipment costs appear on the job only when the vendor invoice is coded
- Project managers keep their own side spreadsheet because the official numbers are too late
- Cost to complete estimates are guesses because the cost to date is incomplete
What usually causes it
- Labor hours and material use are recorded in the field and reach accounting days or weeks laterThe field-to-office split
- Timesheets, tickets and vendor invoices have to be retyped and coded to the job before they show upThe re-entry trap
- Costs committed on a purchase order or subcontract do not appear until the invoice arrivesThe invisible queue
What to try this week
- Measure the lag by cost typeOn one active job, check when recent labor, material, equipment and subcontract costs were incurred and when each one appeared on the job cost report. The slowest type is where to start.
- Track committed costs by hand for a whileHave the project manager keep a simple list of purchase orders and subcontract commitments on the job, with amounts, next to the job cost report. It shows what is coming before the invoices do.
- Get hours coded to the job dailyAsk foremen to report hours by job and cost code every day, not weekly. Even a rough daily number shows a labor overrun weeks sooner.
- Hold a short cost review mid-jobAt a set point on each job, sit the project manager and someone from accounting down with budget, cost to date, commitments and cost to complete. Write down any line that looks off and who will check it.
Where do-it-yourself stops
These steps get you a more current picture and a habit of reviewing it while the job is running. They do not move field hours, material use and vendor invoices into your job cost system without someone retyping and coding them, so the side spreadsheet and the lag both come back when the office is busy. A lasting fix is a tool built around your own field records, purchasing and accounting system, so costs land on the job as they happen. That is what a Workflow Spec designs.
Questions people ask
Why does job cost data come in so late?
Because most costs start in the field or with a vendor, and they reach the job only after timesheets are processed and invoices are coded, usually by hand.
Is the answer to close the books faster?
A faster close helps, but most of the lag happens before accounting ever sees the cost. The fix starts with how costs leave the field and the vendor.
What are committed costs and why do they matter?
They are costs you have agreed to pay, through purchase orders or subcontracts, but have not been invoiced for yet. Leaving them out makes a job look healthier than it is.
Should project managers keep their own cost spreadsheets?
It is a sign the official numbers are too late. It works for a while, but it creates a second set of numbers that rarely match.
What does late job costing cost us?
Overruns found after the chance to fix them has passed, and estimates that never learn. Measure your own lag before putting a number on it.
Next step
How we fix this
This guide is how to find it and work around it. If it keeps coming back, the fix is usually a tool built around how your crew already works.
Fox & Santiago, Genesee, Idaho. Home territory: the Inland Northwest, where we respond fastest. We fly anywhere in the United States for paid engagements.