Your job costing system is an invaluable part of your business, forming an integral part of the workflow process. You use it to set job costs, base employee pay, estimate completion time, and calculate your profit margins. Your job costing systems, like other essential parts of your business operation, need to be audited on a regular basis to avoid problems down the road.
1. Changes in material costs.
Material costs change over time due to a variety of factors. For example, changes in fuel costs can drastically increase your material cost, or a new technology can cut down the cost of manufacturing the material so you see a huge drop. Stay on top of material cost changes so you aren't overcharging your customer or under pricing your jobs. The frequency of auditing material cost depends on whether you make big changes in suppliers, the state of innovation in your industry, and your geographic location. For those in Alaska, for instance, fuel costs are a much bigger deal because you're far away from a supply chain. Watching your material costs also allows you to make changes in suppliers or move away from certain materials entirely if the cost spikes too high.
2. Not accounting for increased employee experience.
If you've been in business awhile, you cultivate employees who are good at what they do, have worked for your company for a long time, and have gained a wide array of experiences with the particular services you offer for clients. Look at job costing with respect to the increased value of your long-term employees to adjust the pricing accordingly.
3. Issues with scaling.
You have a great job costing system that works with standard jobs, but what happens when you need to scale it up and deal with complex projects? The job costing system itself needs to be examined from time to ensure it's still meeting your company's needs. If it can't handle the level of costing your business needs as it grows, it's time to make a list of must-have features and either redesign your existing job costing system or compare vendors for new solutions.