An ERP tracks all of the costs associated with a manufactured item including material, labor, equipment, outsourced operations, and any other resources that are directly required to manufacture the item. An ERP will also include detailed analysis and reporting tools that allow you to drill down and identify the true costs — and profit margins — of your operation.
Why Is Job Costing Important?
Knowing your true job costs is one of the most difficult things for a custom shop to figure out. Factoring in all of the resources used — and the complicated nature of custom manufacturing — makes it difficult for shops to figure exactly how much a job costs them. But without getting a good handle on job costs it’s difficult to know what to charge for a job and it can drastically eat into your profit margins.
Inaccurate job costing leads to a number of problems, including:
- Significant differences between actual costs and presumed costs
- Decreased margins and profits
- Tension within project teams and amongst management
- Poor customer relationships
- Limited knowledge of your company’s profitability
Precise job costing not only tells you how much each job you take on actually costs you — and if you are actually making money on a job — it also helps you to identify where you can become more efficient and save on costs.
Accurate job costing provides senior management with detailed and timely information which allows for more informed decisions about production, pricing, process efficiency, and more. This can help save you money, pass cost savings along to customers, and improve profit margins.
How To Know Your True Job Cost?
The best way for a custom manufacturer to better know and manage job costs is by using ERP software.
You’ve heard it before, and you will hear it again, but ERPs provide custom manufacturers with total visibility and connectivity, as well as give manufacturers real-time data that they can use to better manage their shops.
The data and connectivity that ERPs give allow custom manufacturers to figure out their job costs: ERPs let you track every aspect of every job that moves through your shop. With a more complete understanding of the time and resources that go into each job, you will be able to figure out how much a job actually costs you.
It’s easy to underestimate the amount of time and labor that actually goes into a job, but an ERP gives you accurate real-time data, so instead of guessing — you actually know these figures.
A fully-integrated ERP system lets you trace job costs throughout the production process and lets you gather information on costs such as the allocation of costs per employee wage rate/workcenter rate.
Having this information at your fingertips lets you drill down on costs, so you always know your exact job costs — and can make quicker, and better informed decisions about how to make your business more efficient and how to save money.
With an ERP you’ll be able to compare your initial estimate to final costs to gain a better understanding of costs, and increase your profitability, as well as target profit and/or loss centers.
An ERP lets you use accurate and real-time data and metrics to determine real job costs — including live job costing — which allows you to improve on the fly and better predict your profit so you always know where you stand.
The Benefits of Using an ERP for Job Costing
Using an ERP for job costing lets create an accurate and complete job cost for every job in your shop, which will allow you to make quicker, and better-informed decisions about what jobs to take on, what prices to charge your customers, and how to save money — all while being a more efficient shop.
Another great advantage of having an ERP solution as part of your manufacturing business is that you can view real-time progress and costs, and align them to your approved project plans. You’ll be able to take on jobs that you know will be profitable, and pass on ones that will eat into your margins.
Some of the other advantages of using an ERP system for job costing are:
- Increase profitability by accurately measuring job costs, comparing to your initial estimate to target profit/loss centers
- Track standard, average and actual product costs
- Use real-time job costing to improve on the fly and better predict your profit
- Quickly determine actual vs. standard cost variances
- Be able to analyze profitability by job, project, or contract
- Easily determine profit/loss down to the item number
- Create job cost budgets from estimates or work orders
Use Genius ERP for Job Costing
Genius ERP has great job costing tools that can help you improve your manufacturing business.
Learn how we helped Elemoose, a custom fabricator, get hyper-accurate job costs once they implemented Genius ERP. Curious about how we can improve your job costs? Book a free demo today.
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