Do you track your job costs in detail? If not, I bet it’s because you find it too hard and time consuming. Let me tell you why I think it’s so VITAL to actively track and manage your jobs in detail.
Know The Project Health
When you track the projects in real time you will know the health of that project as it progresses, not weeks after it has finished. Once you complete the job and invoice the client there is no way of changing the outcome of that project; it is what it is. If you have a handle on the job’s health in real time you can steer it towards a better outcome
When you know the progress and health of individual jobs you have a better understanding of when the money will come in. You will have a clearer picture of when you’ll hit those all-important milestones that allow you to make progress claims. A project that runs smoothly is also much more likely to be paid on time!
See The Issues And Change The Outcome Of A Project
When you keep a close eye on the resource and labour used on a job you are much more likely to see mistakes/issues quickly. This gives you time to implement damage control and bring the project back on track.
Gives You The Green Light To Be Generous
Most of us want to please our clients, do a good job and make them happy. If you know the financial and time status of the job then you are in a much better position to be generous. If the job is going well, then you can do that little change gratis, however if the job is going south you need to take the opportunity to recoup costs when they present themselves.
Improve Your Pricing
Tracking jobs will give you a deeper insight into where you make/lose money and help you improve your quoting. Try to track the labour and resource spend for individual tasks and then compare those to your quoted budget.
Now that I’ve convinced you it’s worth the effort to gather this information, let’s dive deeper into tracking:
Labour is the hardest element of an estimate to calculate. The more you track how long it takes to do a task the easier it will be to accurately price the next project. This information is GOLD once you have it!
Accurate timesheets are a start. The first step is to ask staff to consistently assign their time to a project. The next step (only applicable for larger projects, not needed for jobs that run only a few days) is to get them to allocate their time to a task on the project. Over time you will see averages for the bulk of your work and be able to adjust your pricing accordingly.
Staff need to fill out their timesheets daily, not weekly! People get fuzzy on what they did yesterday, and rather vague on their movements from last week, so you need to change the culture at work, and make it mandatory to complete timesheets before the workday ends.
It’s tough to implement, but the rewards are great!
There are literally hundreds of timesheet apps (many free) that will track this data for you, and many that will send a friendly reminder if time hasn’t been entered.
The best option is to combine the tracking of labour and resources to build up that complete, real-time picture of the project, but if you’re just starting out a timesheet app will have a big impact on your business.
As I just mentioned, it is best to track resources with labour in a job management app, but essentially you need to assign every cost to a job (or overheads). Once a task or job is complete you should be able to compare your original budget with your actual spend, a job management app should do this for you in real-time. If you don’t use a job management app you should still be able to see the data in your accounting package if you have allocated all the relevant costs to the job. There will always be a delay in the accounting side because it relies on invoices to come in and be lodged, whereas job management software tracks Purchase Orders and invoices together.
Reviewing The Data
Evaluate your margin. Has the project come in higher or lower than your target margin? If so, why? Investigate until you understand where.
Get in the habit of comparing the budget with the actual spend, take a close look at where you priced too high or low.
Did you blow out on labour or resources, or both? You don’t just want to see where you were too low, if you’re allowing too much for a resource you could be pricing yourself out of some plum jobs!
Using The Data To Make More Money
By focusing on tracking in the first place you will be more likely to bring your jobs in on time and on budget.
Now that you have detailed information on jobs and tasks it’s time to put that data to good use:
- Pricing – When you price new work with similar tasks look back at past tasks to see how accurate you were, adjust your pricing accordingly. The more data you have the more accurate your pricing will get
- Understanding downtime – You’ll be surprised at how much unproductive time is spent on site. Tracking that time allows you to see it and make allowances for it in your labour rate (billable hours) OR as allocated hours on site
- Look for the work that makes you money – Look at jobs in categories and work out which ones make you the most money. From experience, I can tell you that the answer may not be what you expect. The projects that make you the most money should be your bread and butter work for your ideal client, however reviewing the projects may uncover a client/project type that you should focus more on
- Profit margin – Review the projects and make sure you’re meeting that all-important profit margin you need. If not, you need to change how you’re pricing, increase your mark-ups to ensure you reach your profit goals.
By tracking your jobs, you will not only gain a deeper understanding on how to price future work, you will have much more control of the work you are doing right now. This control will help your cashflow, staff management and even make for happier clients!
Tracking projects may be hard work (the right job management app should make it easy), but the payoff is well worth it!