Is Job Costing Related to Time and Attendance

Job Costing is the process of allocating the cost of labour and materials by a specific job. Many companies use job costing to measure the cost of client jobs to ensure that they come in on budget or, in other instances, to track the profitability of each job.Some companies use job costing for measuring broader labour costing such as departmental costing for example.

Companies who use job costing enjoy significant benefits . It is surprising how many companies blunder along without measuring the profitability of any of their jobs . Given that many of these jobs are quoted you would think that measuring the accuracy of the quote would be paramount. Not so apparently as many companies simply look at the profitability of the collective jobs which means that the unprofitable ones are carried by the profitable ones. Some would say that this is a swings and roundabouts approach and as such a fair strategy. It is certain that you can impact the unprofitable jobs if you measure them and job costing software is solution.

In many companies , particularly where the labour source is hourly paid employees, time and attendance software (award interpretation software) is a vital component of job costing. This is the case because labour component of a job can include normal hours, overtime hours and penalty rates.

If you are considering job costing software to more accurately track the labour component of your jobs it would be wise to take a very close look at a time and attendance system which incorporates a job costing module. Time and Attendance Software of this calibre will interpret the job costing hours correctly providing much more accurate calculations of the actual labor cost on each of your jobs. Less innovative systems simply apportion a total number of hours to a job which can be an understatement of the actual cost of the labour because it fails to calculate the overtime component.

Software for job costing should be capable of three basic functions. They should be able to track individual jobs and individual processes within the same job and they should be able to report on the progress to date against the budgeted cost for the job. Lets look at these three components in more detail.

Tracking individual jobs is obviously a underlying requirement but this needs to be extended to processes with that job such as design, procurement, assembly, testing and pre-delivery. There is no need to micro manage your jobs but individually measuring the processes can provide a valuable insight into the job and where the bottlenecks or inefficiencies may be. Finally, it is very useful to be able to measure the progress of the job over time and compare this to the budgeted labour for each of the processes. This allows you to manage the job and to influence the progress and profitability where possible. There is little value in knowing that the job made a loss when it was realized. However, if you have feedback through the progress of the job you can act accordingly.

To summarise… job costing is most effective if it includes award interpretation, can drill down to processes within each individual job and includes the ability to report progressively against budget.