Have you ever been working on a project or a job and feel like you are spending too much money or maybe you feel like your estimates for a potential job are way off and you aren’t making a good profit? Job costing will help you understand how much money you spent on a job and how much profit you made from a specific job. Read more information below to find out how job costing can help you.
What is Job Costing?:
Job costing is an accounting method that helps you track the cost of individual jobs, projects, programs, assignments, etc. (we will refer to them here as “jobs”) for your customers or clients so you know what the profitability of each job is which allows you to set your desired price for your job. Job costing consists of both direct costs (those that can be traced directly like labor and materials) and indirect costs (those that can cannot be readily assignable like administration costs). Knowing what your costs are for a specific job will help you to understand the profitability of the job and likewise, uncover any excess costs or inefficiencies, and plan for similar projects in the future where you will need to provide an estimate.
Why Bookkeeping is Important for Job Costing:
Bookkeeping involves recording and organizing all the financial transactions within a business. These financial transactions will contain expenses for all different types of purposes such as paying for salaries, utilities and insurance and for spending money on things like travel and advertising. Within the mix of all these financial transactions that are going on in a business are expenses that are directly related to the cost of producing a job for a customer or client. Such costs are related to purchasing a specific material, paying for travel costs, or hiring someone to only work on a specific job. In order to know which expenses are being used for a job, you need to have up-to-date and accurate bookkeeping in place. Once you have good books, you will be able to propel your business forward with knowing how profitable your jobs are.
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