Your accounting software has the potential to do everything from improving the bidding process to simplifying purchasing decisions
Your accounting system can issue invoices and print checks at the touch of a button. But can it also produce an income-and-expense report for a particular project -- an advertising campaign, say, or a new fall-clothing line -- or give you a detailed picture of overall cash flow?
If you're using only the accounts-payable and accounts-receivable modules, you may have to calculate those figures yourself, laboriously sifting through the trial balance to find the relevant items. That was what Sharon Fullen, bookkeeper at Hoodoo Ski Area, in Sisters, Oreg., used to do to keep track of the 15 or so campgrounds that Hoodoo maintains every summer for the U.S. Forest Service. Last year, determined to find a more efficient way to produce accurate reports on each campground, Fullen added the job-costing module to her BusinessWorks accounting software (State of the Art; 800-854-3415; $995 for the basic four-module bundle, $495 additional for the job-costing module).
Job costing is typically used in the construction industry to track a job from the bidding stage through completion, enabling contractors to break down profits (or losses) on a per-job basis. But the term job can have a much wider application. According to the BusinessWorks manual, a job is "any project that creates a product or service." It can be a single task (proofreading a manuscript or telephoning conference participants, for example), multiple tasks (reporting and writing a magazine article or designing and distributing a direct-mail piece), or one phase of a larger project, the income and expenses associated with each task or phase making up the bottom-line profit or loss for the job.
By assigning income and expenses to specific jobs, you get a more detailed picture of overall cash flow. Job costing can also help you troubleshoot: projects that seem alike at first glance may encounter different problems as they proceed. Job-costing software can generate reports that pinpoint and present problems as tangible figures in your income and expense columns. You can then use the reports to prepare more-accurate bids in the future or to decide whether to bid at all.
Fullen realized that her campground reporting needs could be structured as a job-costing problem. By defining each campground as a job, she was able to track expenses for cleaning, maintenance, labor, and miscellaneous items against revenues for each campground. According to Fullen, the system was easy to set up, and the results have been excellent. Instead of having to remember to indicate on each check which campground a payment is for, she can rely on the data-entry screen to prompt her to identify the job she's working on. "Reporting is much easier now," she says.
Job-costing software can simplify purchasing, too. Jim Osmundson, owner of Sierra Information Services, a graphic-design company in Yacolt, Wash., uses the job-costing tools that come with Intuit's QuickBooks Pro accounting package (800-544-1356, $189) to track the time spent and the specific software used on his clients' projects. At the end of the year, he generates a report showing how many hours he billed for each graphics program used. Before upgrading any software, he checks the report: if he billed out fewer than 50 hours during the previous year using a particular package, he doesn't bother to upgrade it, saving himself money as well as the time he would have had to spend learning the upgraded software.
Two other popular accounting programs for small to midsize businesses also offer job-costing modules: Peachtree Accounting for Windows (800-247-3224, $129) provides job costing as part of its basic accounting program; and DacEasy Accounting for DOS (800-322-3279; $249.95 for the basic package, $399 additional for the DacEasy Job Manager module, which includes job costing) offers it as an add-on.
Mark Persitz, CPA and owner of Persitz and Co., in Farmington, Mich., turned to DacEasy when a new client, a church, asked him to track the rental use of its hall for weddings and other occasions. Persitz had used the job-costing module to track material and labor costs for contractor clients; he figured it could also be used to track the costs of caterers, bakers, cleaners, linen suppliers, and the like for functions held at the church.
The church's bookkeeper had been tracking those items through DacEasy's general ledger, which requires creating a new account to record income and expenses for each event. By year's end, the general ledger was cluttered with onetime-only accounts. With DacEasy's job-costing module, however, relevant information from every event can be posted to the same general-ledger accounts instead of to individual accounts.
Moreover, the module allows information to be broken out by event and by category, making it easier to analyze costs on a profit-and-loss basis. Making use of the new reporting capabilities, the church has been able to compare vendor costs to ensure that events stay within budget. And with a clear picture of costs, church officials are now considering revamping rental prices.
Though the essence of job costing is simply tracking income and expenses, the data generated can provide new perspectives for financial analyses.Oh, and by the way, job-costing programs are great for construction projects, too.* * *
Ellen DePasquale (email@example.com) is a consultant and writer specializing in personal and business finance.
FIVE USES FOR JOB-COSTING SOFTWARE
Tracking income and expenses
Analyzing the cost-effectiveness of equipment
Comparing vendors' prices to cut costs or stay within a budget
Identifying discrepancies between estimated costs and actual costs