Skip to main content
Blog Home
Start Your Business
Grow Your Business
Protect Your Business
Celebrate Courage
Search

Small Business Insider

Sign up to get the latest small business tips delivered right to your inbox.
Close Close
Grow Your Business
June 14, 2013

The importance of job costing

Finances | Management
By: Hiscox Blog

Share Image

Embed Image

Copy

Share Article:

Don’t let hard earned dollars slip away. This technique can help you save thousands of dollars.

a
Gene Marks, columnist for The New York Times, author and small business owner shares why knowing how much money you made, or lost, on jobs shipped out is important.

So…want to make an extra $5,000 - $10,000 next year?

This is all about having someone in your office take about 30 minutes each day so that they can tell you how much money you made (or lost) on the jobs that shipped out the day before.

It’s easy.  It’s common sense.  So naturally, we rarely see small business owners doing this.  But if you’re in the service, manufacturing or distribution business, you’re really letting hard earned dollars slip away.

Here’s what you do:

1) Take out your payroll register from last year and add up all the hours spent last year by your production and service employees.

2) Next, take out last year’s tax returns and add up all the overhead expenses you incurred last year, like utilities, maintenance, office expenses, etc.

3) Now divide the overhead expenses by hours to come up with an overhead rate per hour.

4) Finally, create a little spreadsheet.

With the data in hand, have an administrator or number-cruncher in your office find out the cost of materials used and the time spent for each job that shipped the day before.  This task isn't difficult.  Have that person enter this information plus the selling price and shipping cost on a pre-designed spreadsheet that includes the overhead rate per hour.  Then, let the spreadsheet calculate profit.

Get a copy of that spreadsheet every single day!  Every….single….day!  And get ready to be surprised. Some jobs (or products, or classes, or services, or projects) that you thought were making money didn’t make as much.  Other jobs may have been more profitable than you estimated.  And many probably came in line with what you expected.

Now you can make your adjustments.  (And then stomp your feet, yell or pull out your hair). Go back to customers and re-quote future orders.  Find new customers who would take your more profitable jobs.

It’s not perfect science. The numbers probably aren't exact - some time incurred may be mischarged.  Some of the overhead expenses or hours may have changed a bit. 

But it’s going to be pretty close.  And it’s also not a six-figure job costing system that some consultants would recommend.  Plus, you’re going to find it pretty darn interesting. You may find yourself getting reacquainted with your production people and your customers. 

You may be relieved to get rid of those customers that you always suspected were unprofitable.  You may also find yourself in a position to negotiate a better deal with vendors.

How did I come up with a $5,000-$10,000 savings?  I figure if you bill out half a million or a million a year, and you increase your job profits by just 1%...well there’s your answer. A great cost manager starts with each job going out the door.  Time to warm up that spreadsheet!


Protect Your Business

Protect the business you’ve worked so hard to build. Get a fast, free quote and your business could be covered today.

Get a Quote
Get a Quote
Subscribe to our newsletter

Related Articles

4 Min Read
Brown package with strong. Red mouse on top of it. Last-minute holiday sales for small businesses.

5 Tips for last-minute holiday sales

Finances | Marketing

It’s important to pull out all the stops to get those year-end sales in. Try a few of these sales ideas and see if you can boost your sales before the new year. Read More

4 Min Read
Socially responsible small businesses.

Benefits of being a socially responsible small business

Management

Being a socially-minded company offers benefits to any business, big or small. Here is how to create a social mission for your business and reap benefits like customer loyalty and increased sales. Read More

7 Min Read
Woman's hands holding documents. Small business retirement plan.

Choosing a retirement plan for your business

Finances | Management

A good way to attract top talent is to offer a retirement plan as a benefit. Here’s what you need to know about choosing a retirement plan for your business.  Read More


We’re here to help.
We provide tailored insurance for the specific risks you face, so you can take the right risks to grow your business.
Get a Quote
Get a Quote
Blog, Footer menu links
  • About Hiscox
  • Careers
  • Investors
  • Accessibility
  • Site Map
  • Terms of Use
  • Privacy
  • Legal Notices
  • Hiscox Corporate
  • en Español
Blog, Footer, 2nd Row (new)
  • Affiliate Partner Program
  • Blog
  • Newsroom
  • Partners
  • Podcast
  • Foundation
  • Contact Us
  • Refer a Friend
  • COVID-19
  • We Stand Together

Feefo Reviews: Hiscox rated 4.8/5 with 2,143 reviews between September 30, 2019 – September 30, 2020

© 2021 Hiscox Inc. All rights reserved. Underwritten by Hiscox Insurance Company Inc., 104 South Michigan Avenue, Suite 600, Chicago, IL 60603. As of December 31, 2019, HICI had admitted assets of $778,266,779 and policyholders surplus of $215,333,986. Total liabilities were $562,932,793 (inclusive of $236,274,591 of lossreserves) and paid up capital stock was $4,242,000.

icon-facebook
icon-youtube
icon-twitter
icon-linkedin

Feefo Reviews: Hiscox rated 4.8/5 with 2,143 reviews between September 30, 2019 – September 30, 2020

© 2021 Hiscox Inc. All rights reserved. Underwritten by Hiscox Insurance Company Inc., 104 South Michigan Avenue, Suite 600, Chicago, IL 60603. As of December 31, 2019, HICI had admitted assets of $778,266,779 and policyholders surplus of $215,333,986. Total liabilities were $562,932,793 (inclusive of $236,274,591 of lossreserves) and paid up capital stock was $4,242,000.