When it comes to running a construction business, getting job costing right is crucial. Mistakes in job costing can lead to incorrect customer charges, cash flow struggles, and shrinking net profits. These are costly errors that can hinder your success. Fortunately, by mastering job cost accounting, you can take control of your financials and set your business on the path to profitability.
Here’s a closer look at some of the key aspects of job cost accounting and why they matter for your construction business:
One of the first steps in effective job costing is understanding the difference between the Completed Contract and Percentage of Completion accounting methods.
- Completed Contract records all revenue and expenses only when a project is finished.
- Percentage of Completion allows you to recognize revenue and expenses throughout the project's lifecycle.
Choosing the right method depends on the size and complexity of your projects, as well as tax implications. This knowledge helps you align your financial records with your work, giving you a clear view of your profitability at any point in time. Accurate job costing begins with properly setting up your books. To do this:
- Establish a clear chart of accounts tailored to your business.
- Use QuickBooks or similar accounting software to streamline your workflow.
- Develop strong month-end processes to ensure accurate data entry and reporting.
Having the right setup allows you to efficiently track costs and revenue for each job. You’ll save time by skipping complex spreadsheets and build confidence by triple-checking your work. This foundation enables you to make informed decisions without second-guessing the numbers.
Once your processes are in place, the next step is to dive into job cost reports. Tools like QuickBooks offer powerful insights, including:
- Estimate vs. Actual Report: See how your actual costs and revenues measure up against your estimates. This report can reveal areas where you’re overspending or undercharging.
- Profitability Reports: Understand which projects contribute the most to your bottom line.
When used effectively, these reports provide the financial clarity you need to improve bidding, manage cash flow, and maximize profitability.
If this feels overwhelming, don’t worry—help is available. Our Job Cost Accounting course is designed specifically for construction businesses like yours. We teach you how to:
- Choose the best accounting method for your business.
- Set up and streamline your processes in QuickBooks.
- Use job cost reports to manage your business with confidence.
Don’t let job costing mistakes hold you back. Get the tools and knowledge you need to take control of your accounting—and your business’s future.
Learn More About how to do bookkeeping for your construction company with our
Job Cost Accounting course.
