Problem guide
Nobody can see margin by job
Margin by job stays hidden when labor, materials and subcontract costs reach the job record late, or land in general accounts instead of the job at all. Code every cost to a job when it happens, and compare each job's revenue and cost while the work is still going on, not months later.
What it usually looks like
The owner asks the controller which of last quarter's jobs made money. The controller can pull revenue by job easily. Labor is harder, because some timecards were coded to the wrong job and some to none. Materials are harder still, because many small purchases went on company cards and were booked to a general supplies account. After two days in a spreadsheet she has a rough answer for the five biggest jobs and a note saying the rest would take weeks. The owner goes back to bidding from memory.
Signs you have this problem
- The company knows its overall margin but cannot name its best and worst jobs
- Job profit reports are built by hand in a spreadsheet, and only for a few jobs
- Materials and small purchases sit in general expense accounts instead of on jobs
- Managers argue about whether a type of work makes money and nobody can settle it
- A job looks profitable at closeout and loses money once the late costs arrive
What usually causes it
- Costs are entered once in the field and again in accounting, and job codes get lost between themThe re-entry trap
- Hours, materials and vendor bills reach accounting weeks after the work, so the job looks better than it isThe field-to-office split
- Purchases without a job number are parked in general accounts and never reassignedThe exception swamp
What to try this week
- Rebuild margin for a few finished jobsPick a handful of recent jobs of different types. Pull every cost you can find for each, from payroll, vendor bills, card statements and the shop, and compare against what you billed.
- Write down where costs were missingNote which costs were hard to find, late or not coded to the job. That list shows where the job cost breaks down.
- Require a job number on every purchaseTell field and office staff that every receipt, bill and purchase order needs a job number or a clear reason it has none. Review the ones without a number weekly.
- Check open jobs mid-streamFor your largest open jobs, compare cost so far against the estimate at a set point each month, not only at closeout.
Where do-it-yourself stops
These steps show you margin on a few jobs and point to where costs go missing. They do not put costs on the job as they happen, because hours, materials and bills still travel through separate systems and people. A lasting fix is a tool built around your own field records and accounting system, so each cost lands on its job without retyping. That is what a Workflow Spec designs.
Questions people ask
Why can't we see margin by job?
Because costs reach the job late, arrive without a job code, or sit in general accounts, so the job record never has the full picture.
Does our accounting system already do job costing?
It may have the feature. The feature is only as good as the job codes on the costs that reach it, and how quickly they arrive.
Which costs go missing most often?
It varies. Rebuild a few jobs and see which costs were hardest to trace. That list is specific to your company.
How often should we look at job margin?
For large jobs, during the job, often enough to change course. For small jobs, a regular review of recently finished work is a good start.
What does hidden margin cost us?
Bids priced from guesses, losing work repeated and good work undersold. Rebuild a few jobs to see how far your assumptions are off.