Job Costing Case Study: JMC Mechanical

Featured

The Problem

Before turning to ComputerEase construction accounting software, JMC Mechanical used Quickbooks for managing their business.

JMC Mechanical was growing and starting to work with larger clients. Their larger customers demanded more visibility and billing capability than Quickbooks offered.

Project Managers and Management at JMC Mechanical needed Job Cost reports, which Quickbooks couldn’t provide, to better manage costs and work. After purchasing Quickbooks and working with a consultant that specialized in Quickbooks, JMC Mechanical still didn’t have the visibility and functionality they needed.

Why Construction Companies Need Job Costing

Job costing is the key to managing construction budgets and identifying if a job will be profitable. It simplifies the complexity of managing a contracting job. This is especially true when a construction business works on larger and/or longer-duration jobs. There is simply more to manage and track. Or in other words, there is a higher likelihood that a business can lose money on a particular job.

According to Lisa at JMC, “Job costing is not something Quickbooks is capable of, even in their contractor version… it just wasn’t cutting it.”

The need for job costing was not going away. In fact, the need only grew as the company grew. Therefore, Lisa at JMC Mechanical was tasked to explore, vet, and select a new business management solution that met their specific needs. After several months of assessing construction-specific products, JMC Mechanical chose ComputerEase as their business management solution.

How ComputerEase Made a Difference

ComputerEase offers job costing software as part of the base system. When you invest in ComputerEase, you’re ensuring that you’ll always have an easy way to track your job costs, whether it’s through work-in-progress reporting, labor analysis, projected costs, unit production, or all of the above.

Since implementing ComputerEase, JMC Mechanical now had the ability to:

  • Estimate jobs accurately and quickly: Without job costing, estimates are a best guess. With other bidders competing for the same work, many contractors end up underbidding. Without quick and easy access to historical records, mistakes are made that end up hurting the job and business. Job costing puts the data at your fingertips, so you can estimate jobs accurately and quickly.
  • Manage profit for every job: Job costing gives you control of the money you make for every job. You see how much a job is costing. There’s no more stress, worry, or guesswork in managing a job, because expenses are broken down accurately. You can see how you need to manage work to maximize profit. “It’s been very helpful… for several reasons,” explained Lisa. “One is, being able to track costs and track where we are on a job. If it’s starting to go south, we know that by making changes we can save the job before things go to the point of no return.” Armed with critical information, the team could solve problems before it was too late.
  • Work better with customers and vendors: Over estimating and under estimating can lead to project delays, lost profit, and broken budgets. This causes stress between you, your customers, and vendors. Job costing eliminates that stress. You can better collaborate and deliver more value to customers. That means future work and business for your company.

Looking Ahead with ComputerEase

Job Costing reports and ComputerEase have helped support JMC Mechanicals rapid growth. It has been an instrumental tool in supporting large projects and customers. The system improves cash flow and gives managers the visibility they need to keep jobs on track and profitable.

If you are a company facing similar growing pains as JMC Mechanical, we recommend you consider learning more about ComputerEase and how you can more effectively and more comfortably run your business.

Get Control of Your Business with Committed Costs

As the owner of a construction company, the success of the company is on your shoulders.

You need to lead the construction team, work with clients, seek out new business, and manage money. With the right tools you can manage it all and succeed, but only if you have the information you need.

It’s the data you don’t have that can cause problems. How can you make the best decision for your business when you don’t have all the information?

Committed Costs is a construction accounting tool you should use to get a complete and accurate picture the health of your jobs, so you can make better decisions. Committed costs fill in a dangerous gap in your job costs – a gap that can lead to spending cash you don’t have or wasting money on unnecessary expenses.

With committed costs, you know the score and have the information you need to come in ahead of schedule and under budget.


What Are Committed Costs?

A committed cost is a payment obligation that you can’t recover. You are committed to paying that money no matter what.

Money that is obligated for an expense is a committed. Once that money is spent, and goes out, it becomes cash out.

Committed costs are a baseline in job costing. With job costing, you can see where you have money committed in a project. Using committed costs, you can see immediately cash that is obligated. You know, with certainty, the money you have available for future expenses and additional costs.

Let’s look at committed costs on the job:

  • An open contract or subcontractor agreement is a committed cost. You haven’t paid the contractor yet, and at first glance it might appear the money is still available, but it’s money already committed.
  • Purchase orders applied to a job are also committed costs. Even if you are waiting for delivery or the bill for the materials hasn’t been paid, they are a committed cost.
  • As time comes in from the field, it becomes a committed cost. Even if the payroll hasn’t gone out, that money is committed. For example, if you pay employees every two weeks, you need to track labor and hours during those two weeks even if the money hasn’t gone out yet. That’s unposted payroll – a committed cost that will impact your bottom line.
  • Expenses in the field are another committed cost. When you use a credit card for supplies or materials in the field, that money goes against the project budget.

When you aren’t tracking committed costs, you put your budget at risk. You aren’t getting the big picture on expenses, and you don’t really know the score for the job. Planning and finances become guesswork and estimates.

You need committed costs to get a real-time view of job costing – the money you’ve already spent and committed and the budget remaining for the job.

Start Using Committed Costs for Your Business

Many contractors still using manual accounting and bookkeeping methods struggle to track committed costs. This can lead to double billing and mistakes. Accounting that software that isn’t designed for construction or contracting work may not have the level of detail, control, and visibility you need to track committed costs. They aren’t designed for it.

Construction accounting systems are designed to provide the visibility you need into committed costs. They can automate the process, so you aren’t causing errors. Construction accounting system puts critical information on committed costs at your fingertips when you need it, so you can make better business decisions.

Have any questions regarding committed costs and how you can improve your business using them? Feel free to reach out to us at info@computerease.com and we’d be happy to talk with you.

WIP or Get Whipped: Turning a Report into Contractor Success

Featured

An accurate and timely Work in Progress (WIP) report is an essential tool for running a business.

A contractor will often create a WIP report out of an obligation to the bonding agent. Perhaps the bank requires one. When these contractors aren’t using that data to manage the business, they are throwing away money with every job.

A WIP report can be the difference between success and failure for a contractor’s business. It allows a savvy business owner or project manager to look into the future using forecasted projections.

Here’s how it works.

Importance of Accurate and Timely WIP Reporting

With a WIP report you can proactively manage work and profit using actual job data as opposed to being reactive. Rather than managing problems when you find them, you’re staying ahead of the game and optimizing profit with every job.

Accurate and timely WIP reporting starts with clear communication between accounting and project management. The project manager collects and uses real-time, accurate data from the field and the role of the accountant should be to question potential inconsistencies in the report.

With information from the project manager and guidance from the accountant, the company can make smarter decisions. They can deploy resources to maximize profits. This is the key to success in contracting.

WIP reports allow you to scale and grow your business. You can manage jobs accurately and create accurate financial statements that can be used to analyze your company’s stability and growth.

Understanding and Using WIP Reports

Not everyone will use a WIP report the same way as other contractors.

For example, consider the schedule for when a WIP report should be run. The frequency will be based on the specific parameters of your unique business. Keep in mind – the sooner you receive that information, the sooner you will have visibility of problems and can solve them.

There are also different ways to calculate WIP – units completed, percent completed, and cost to finish are the most common. There are advantages and disadvantages to each. Let’s look at each:

  • WIP Report with Units Completed. Units completed, in conjunction with the percent of budget spent, is the most accurate method of costing. With his report, you’ll look at how much of the project is completed versus budget spent. It’s an excellent way of identifying problems early in a project. For example, if you’ve installed 50 out of 100 standard light fixtures (50% completed), but you’ve already spent 80% of the budget on the installation – you have a problem.
  • WIP Report with Percent Completed. This method is often used when there isn’t a measurable unit for analyzing completion. Many times, this WIP report will be an educated guess from the PM on the work completed. That guess is better than an, “I don’t know,” and can still provide valuable insight. This will let you estimate the remaining project timeline and resources by calculating the units completed.
  • WIP Report with Cost to Finish. In this report, you need to calculate the cost to finish by listing what has already been spent to date, and the amount of labor and materials costs that have yet to be paid for. Your total project cost would be the cost to date plus the cost to finish. This becomes your revised estimate from which you can calculate expected profit.

The WIP reports provide much better insight into a project than comparing estimated cost to actual cost. The truth is, no contractor ever completes a job exactly on budget.

Leverage Accurate Reporting to Improve your Business

Your goal should be to not only have a company-wide WIP report, but a WIP report for each job. The more detail you can include in your WIP reports, the better you can see which activities deliver the highest profits. You’ll be able to identify where you are losing money.

Realistically, businesses need to keep contractors and project managers on target, but also in budget. That is where a WIP report can help. With a process in place for collecting this data and generating reports, everyone knows the jobs that make money and the ones that lose money.

Real time, accurate job costing is like keeping score in a game. If the project manager knows the score, then they can make better decisions about the next play.

If you would like to learn more about job costing or WIP reports, please contact us at info@computerease.com.

What is Job Costing for Contractors and Construction Companies?

Featured

The success or failure of any construction job is based on profit.

Profit margins are razor-thin in construction. Job costing helps you project job expenses to identify problems before they impact profit. Can work be completed with the money and budget available? What are the risk factors on the job? What do you need to do to be successful?

Job costing is the key to managing a construction budget and identifying if a job will be profitable. It simplifies the complexity of managing a contracting job. It gives you the power to focus on the work with the highest reward.

Job Costing and Construction Accounting

Precision and accuracy are required in construction.

You need to build with the right materials. You need to accurately follow blueprints. You need precision with every cut and measurement.

Job costing brings accuracy and precision to your construction accounting.

With job costing, you can accurately predict, record, and control the cost of each job. Your materials, labor, subcontractors, and equipment expenses are tracked and monitored during the job. You can see where the money is going as work is completed. You can more accurately predict future costs and build a precise record of expenses.

That record is data you can use. It’s the data you need to manage, and grow, the business.

The Benefits of Job Costing

Accurate job costing gives contractors the ability to grow the business. Here’s how it works:

  • Estimate jobs accurately and quickly: Without job costing, estimates are a best guess. With other bidders competing for the same work, many contractors end up underbidding. Without quick and easy access to historical records, mistakes are made that end up hurting the job and business. Job costing puts the data at your fingertips, so you can estimate jobs accurately and quickly.
  • Manage profit for every job: Job costing gives you control of the money you make for every job. You see how much a job is costing. There’s no more stress, worry, or guesswork in managing a job, because expenses are broken down accurately. You can see how you need to manage work to maximize profit.
  • Work better with customers and vendors: Over estimating and under estimating can lead to project delays, lost profit, and broken budgets. This causes stress between you, your customers, and vendors. Job costing eliminates that stress. You can better collaborate and deliver more value to customers. That means future work and business for your company.

Job Costing and your Growing Business

For many contractors and construction companies ready to take control of their business, job costing through construction accounting software is the key. It’s the tool that helps them leverage their ambition with the practical needs of the business.

To make money in construction, you need to stay on top of cost and expenses. That’s what job costing will do for you. You can accurately run labor analysis and measure productivity. It lets you select the most profitable jobs and find profit even when problems happen. It gives you the power to take control of your business.

For companies ready to stop losing money or breaking even with every project, job costing gives them control. It replaces guesswork with accuracy and precision for every job.

Have questions? Contact us at info@computerease.com.

ComputerEase Software Announces Integration with Procore

ComputerEase adds easy connection between its robust accounting system and Procore’s powerful project management features, creating a peerless, full-service suite.

CINCINNATI, Ohio, Feb. 6, 2018: ComputerEase Software, the leader in construction accounting software, today announced a new integration solution with Procore Technologies’ cloud-based project management suite. This new solution completely eliminates the need to manually enter data into multiple systems, seamlessly connecting the superior functions of the two programs.

Procore’s project management solution gives contractors an easy way to track and manage all of their jobs, boosting productivity through better documentation and constant communication. With a user-friendly interface and intuitive dashboards, Procore helps contractors keep apprised of all their relevant project information. ComputerEase does the same for a contractor’s accounting data, giving high level overviews of each job’s profitability that can be drilled down to the smallest detail. As a fully-integrated software solution, ComputerEase can give contractors all the solutions they need – now including ProCore’s shared data – in one simple location.

The new interface brings an unprecedented level of control to contractors’ fingertips. “This partnership is a no-brainer for us,” says John Meibers, President of ComputerEase Software. “As we move more and more toward a fully-integrated, mobile solution to give our users all the features they need and deserve, Procore’s cloud-based technology will provide a valuable edge.”

ComputerEase users who also use Procore’s system will now be able to seamlessly integrate their accounting and project management data. “The advantage is on both ends,” Meiber notes. “That high-level overview that our customers love is now transferable to Procore, and the same is true in reverse. It’s a simple solution on its face, but it’s going to save a lot of contractors a lot of time and money.

###

ComputerEase Launches New Expense Tracking App

CINCINNATI, OH, December 12th – ComputerEase, the leading provider of accounting software for the construction industry, announces the release of a new mobile app for tracking expenses from the field. The new app, called ExpenseEase, is available in Google Play and the Apple App Store.

ExpenseEase integrates seamlessly with the ComputerEase construction accounting software. Once submitted, expense records appear automatically in the flagship software; resulting in accurate and timely job cost reporting. This functionality makes using ExpenseEase with ComputerEase faster and more efficient than any third-party expense tracking apps.

ExpenseEase allows users to enter expenses from the field on any iOS or Android device, including tablets and smartphones. Once entered, the user can then attach a photo of the corresponding receipt, and submit expenses instantly where they are stored securely within their ComputerEase system to be reviewed for payment.

“Our clients drive our product development and over the past couple of years we’ve had a tremendous number of requests for a mobile expense tracking solution. We are very excited to announce this addition to our flagship product. ExpenseEase simplifies the expense recording process and, best of all, keeps job cost reporting more accurate and more up-to-date,” says ComputerEase president John Meibers. “That, combined with the compatibility and integration with ComputerEase will save our clients time and money.”

Founded in 1983, ComputerEase develops integrated construction accounting, project management and field-to-office solutions that help contractors solve problems and increase profits. The scalability of ComputerEase makes it the ideal fit for construction companies of all sizes and trades. More than 6,000 contractors nationwide trust ComputerEase to work for their business.

ComputerEase Software Expands Decades-Long Partnership with ProEst

ComputeProEst Estimating LogorEase expands integration with ProEst to include its new web-based estimation software, providing a more streamlined, user-friendly process to customers of both firms.

CINCINNATI, Ohio, August 21, 2017: ComputerEase Software, Inc., the leader in construction accounting software, today announced the expansion of their long-standing partnership with ProEst. The new integration solution from ComputerEase and ProEst will dramatically simplify the estimation and job creation process for customers of both companies.

ProEst, one of the leading providers of construction estimation software, has recently announced their newest estimation tool, ProEst Cloud. ProEst Cloud is a complete web-based estimating platform for the construction industry. Users can import leads, generate a detailed cost estimate, perform digital takeoffs and create professional sales proposals from anywhere. The new integration between ProEst and ComputerEase allows users to instantly import a job to ComputerEase once it has been awarded.

“We’re very excited to build on our 20+ year relationship with ProEst with this new product,” says John Meibers, President of ComputerEase. “Our new state-of-the-art seamless integration will significantly enhance the experience of both our customers and ProEst’s customers.”

The new integration is available now to current customers of ComputerEase and ProEst.

Since 1976, ProEst has helped over 8,000 of the world’s most prominent construction companies streamline and improve their estimating processes. They continue to live up to their reputation for reliable and expert innovations with the ongoing development of their ProEst estimating and on-screen takeoff software.

Year-End Tax Planning for Business

While the fate of several business-related tax extenders such as Research & Development tax credits, bonus depreciation, and Section 179 expensing that expired at the end of 2014 is uncertain, there are still a number of end of year tax planning strategies businesses can use to reduce their tax burden for 2015.

Deferring Income
Businesses using the cash method of accounting can defer income into 2016 by delaying end-of-year invoices so payment is not received until 2016. Businesses using the accrual method can defer income by postponing delivery of goods or services until January 2016.

Section 179 Expensing.
Business should still take advantage of Section 179 expensing this year for a couple of reasons.  In 2015 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $25,000 for the first $200,000 of property placed in service by December 31, 2015. Keep in mind that the Section 179 deduction cannot exceed net taxable business income. In addition, unless Congress reauthorizes it, the bonus depreciation expired at the end of 2014 and is not available for 2015.

While most businesses follow a calendar year, for those that don’t there is an exception to the $25,000 cap that allows those businesses to take advantage of the $500,000 Section 179 benefit. However, only businesses whose calendar year begins in 2014 and ends in 2015 can take advantage of this.

Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.

Note-blue-stickyNote: Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.

 

Small Business Health Care Tax Credit.
Small business employers with 25 or fewer full-time-equivalent employees (average annual wages of $51,600 in 2015) may qualify for a tax credit to help pay for employees’ health insurance. The credit is 50 percent (35 percent for non-profits).

Business Energy Investment Tax Credit.
Business energy investment tax credits are still available for eligible systems placed in service on or before December 31, 2016, and businesses that want to take advantage of these tax credits can still do so.

Business energy credits include solar energy systems (passive solar and solar pool-heating systems excluded), fuel cells and microturbines, and an increased credit amount for fuel cells. The extended tax provision also established new credits for small wind-energy systems, geothermal heat pumps, and combined heat and power (CHP) systems. Utilities are allowed to use the credits as well.

Repair Regulations.
Where possible, end of year repairs and expenses should be deducted immediately, rather than capitalized and depreciated. Small businesses lacking applicable financial statements (AFS) are able to take advantage of de minimis safe harbor by electing to deduct smaller purchases ($500 or less per purchase or per invoice). Businesses with applicable financial statements are able to deduct $5,000. Small business with gross receipts of $10 million or less can also take advantage of safe harbor for repairs, maintenance, and improvements to eligible buildings. Please call if you would like more information on this topic.

Section 199 Deduction.
Businesses with manufacturing activities could qualify for a Section 199 domestic production activities deduction. By accelerating salaries or bonuses attributable to domestic production gross receipts in the last quarter of 2015, businesses can increase the amount of this deduction.

WIP or Get Whipped

Why accurate, timely Work In Progress reporting is essential to contractors

By John Meibers, President of ComputerEase Software

Too many times a contractor creates a Work in Progress – (WIP) report because he feels he is obligated to do so, as the bonding agent or the bank requires it.  However, an accurate and timely WIP report should be seen as one of the essential tools for running a business.  A WIP report is a key component of enabling you to look into the future through forecasted projections.  So why are forecasted projections important? They enable you to be proactive with job data as opposed to reactive.  For Example, armed with the information that I have a job that is 50% completed at a cost of 75% of the budget, I still have time to make adjustments in an effort to reduce some of my potential cost overrun.

Reports ImageHow is an accurate and timely WIP report accomplished?  A successful company starts with clear communication between their accounting and project managers. The role of the accountant is to question potential inconsistencies in the report, whereas the project manager needs real-time, accurate data from the field. With that information, the company can make smarter decisions in deploying their resources in order to maximizing their profits. Ultimately if a company is not making money, everything else becomes irrelevant.

The importance of WIP reports in analyzing your business cannot be emphasized enough. Too often I have observed business owners utilizing a CPA as a bookkeeper, entering numbers and producing reports, instead of acting upon the numbers.  Conversely, companies that gather solid WIP reports add value by maximizing their CPA’s expertise as a business consultant as they strive to grow their bottom-line profits. WIP reports not only enable you to manage your jobs accurately, they are a key component in creating an accurate financial statement, which is required when analyzing of your company’s stability and growth.

I am often asked the question: “How often should I run a WIP Report”?  Some people only run a WIP report when they need too, others will run the report monthly or even weekly.    The frequency of your WIP reporting will be based on the specific parameters of your unique business. The bottom-line: the sooner you receive that information the sooner you will have visibility of the projected problems. Only then will you have an opportunity to fix the problems.

Another question I am often asked is: “How do I go about calculating a WIP report”? There are a number of methods one can use to calculate WIP. The three most common used methods are Units Completed, Percent Completed, and Cost to Finish.

In my years of experience working with project managers in construction companies I have learned that units completed in conjunction with the percent of budget spent, is the most accurate method of costing. For example, I have 100 standard light fixtures to install; I have installed 50 of them, therefore the task is 50% completed. Everything sounds good so far. However, if I have spent 80% of the budget on the installation of those 50 light fixtures then, “Houston, we have a problem”. This clearly demonstrates why analyzing only the estimated costs as opposed to the actual costs can prevent a company from seeing that a particular job is losing money.

The second method utilized to calculate WIP is the percent completed; it is used when I don’t have a measurable unit.  For example, perhaps I am doing the electrical work in a facility. As the PM, I walk the project with my superintendent so that I can give an estimate of the completion. A “units completed” would be more accurate, but the “my educated guess says we are 50% done” method is still going to be better than saying “I don’t know”. One of the worst assumptions that can be made is estimating the completion of a job based on how much money I have spent thus far.

Another very good method to calculate your WIP is Cost to Finish.  I ask my project manager: “What do I need to finish this task”? I already know how much we have spent to date. But to finish the task I am going to need 10 men for the next two weeks and I have $5,000 in miscellaneous materials that have yet to be ordered. With this information I can then calculate a cost to finish. The equation would be my cost to date plus my cost to finish which then becomes my revised estimate.

Any of these three methods work and all of them are better than just comparing the estimated cost to the actual cost. If you look at a $100,000 budgeted job and you can see that $50,000 has been spent thus far, the absolute worst assumption you can make would be that 50% of the job is completed. The odds are against you that you will spend exactly $100,000 on that specific job. The reality of contractors completing a job for exactly within budget, just never happens.

The question that then follows is: “Just how detailed do I need to be in my WIP report”? I will certainly want a companywide overview WIP report, but I will also want a job-by-job WIP report, and within the job I want to see the details of the specified activities or tasks. This in turn leads to the question: “How detailed do I need to be on tracking activities or tasks?” (the costs of which will feed into the WIP report).  Some companies track one task, others up to 100, and yet others track more than 100 tasks to complete a job. Optimally you need as many details as possible. You may have 100 task codes, but if it’s not probable that your field staff will ever break down the costs to the 100 activities, there is no point in having 100 activities. The result will be some activities that are way over budget and others that are way under budget because no-one is allocating their costs properly. There is certainly a fine line between “ I would like to have a lot of detail” and  “what is a realistic outcome when I gather the data in the field?”.

Contractors often start out as a smaller business with the owner walking around knowing everything about every job and its progress. He has his finger on the pulse of the business. However, the larger the company grows, the more visibility tends to become obscured. No one wants to do twice as much work to make the same amount of money. When a process is put in place, everyone knows the jobs that make money and the ones that lose money. Real time, accurate job costing is similar to keeping score in a game. If the PM knows the score then he/she can make better decisions about the next play.

Real-Time Labor Costs Improve Your Bottom Line

Real Time ReportingAny contractor knows that successful project management hinges on labor. That’s not to say that smart material purchases and inventory control don’t also play a role in job profitability. However, unproductive labor will always kill profit, which is why knowing your real-time labor costs can improve your bottom line.

Traditionally, labor costs have been notoriously difficult to track because of the time lapse between what was happening in the field versus what your office records reflected. It wasn’t that long ago when, if a project manager wanted to know the job progress, he had to look at the last payroll processed – which could be a week old or more. While this was good information for the time, it certainly wasn’t accurate.

Thankfully, technology has revolutionized how contractors manage labor – and the overall job. Today, project managers can get real-time labor costs that tie into their construction accounting software, like ComputerEase.

In the construction industry – where customer expectations are high, profit margins are slim and the pace is faster than ever – you need labor costs on a daily basis to make informed decisions. Today, you don’t have to wait until the paperwork is turned in; you have technology to help you.

Field-to-OfficeTimesheets, daily logs, change orders and job costs can all be captured from the field so you know what’s happening at all times. Mobile devices with internet access can transmit data from the field directly to your accounting system in the home office, eliminating the double-entry problem.

When a real-time field-to-office solution is set up, you can manage a job from anywhere. Imagine a workplace where your crew is out in the field during the day, and by night you know who worked on what job, what tasks they performed and even what equipment was used. It really is that simple when you have the right system in place.

Learn more about our real-time solution, FieldEase.