View
14
Download
0
Category
Preview:
Citation preview
Estimating Bidding JobsJob Costing:
INFORMATION FOR ACCOUNTABILITY
Why Job Costing is Critical ?
• Provides the most current information about your company.
• Provides information for managers, not accountants.
• Provides information that can be used as a management tool, for change.
• Holds all employees accountable.
• Reconnects the project process.
EstimatingSystem
ProvidesProductionInformation
(LMES)
Field Collection
Of Production Info.
Job CostSystem
Job CostReports
Review with Production /
Sales
Review HistoryWith
Estimator
JOB COST CYCLE
• Man-hours:
– Sample Bid:
• 20 Companies
• Used cost based estimating method
• Same Material Cost.
• Difference Labor Hours and OH Recovery
– Paver Patio, Wall & Plants:
• Price High: $39,163.84
• Price Low: $15,358.00
• Man-hours High: 432 MH
• Man-hours Low: 145 MH
Job Costing
BidVs.
Actual
MaterialAP
OHRecovered
Profit
Subcontractor
Equipment
LaborPayroll
Warning:
• The more information not reported, the more profitable the job is.
• Labor hours are double checked against payroll hours – Your employees will let you know if they are short hours.
• Materials are double checked against invoices, delivery tickets, statements, and inventory sheets.
• Supervisors are key to double checking the work dailies and enforcement.
• The underperforming employees will resist.• Conduct JC and share both good and bad
projects.
Asphalt Crew Performance
• Non billable repair of poor quality installation.
• Installed 900 sq.ft of asphalt.
• 16 men.
• 8 Trucks
• Arrive @ 8:00am
• Depart @ 5:00pm (136 MH)
• Asphalt arrived @ 4:00pm (Prep: 120 MH)
• Production Rate: 6.6 sq.ft. / Man hour
Work daily completion.
Labor
• The only method I have found to ensure accurate and complete work daily information is to combine job costing and payroll information.
• The foremen would fill out the work daily for the entire crew.
• The information is then used both for payroll and job costing.
• If the crew is working on multiple projects, a different work daily is used for each project.
• If a crew visits multiple sites every day, such as a mowing crew, a different work daily format is used.
• Most work daily formats have a time card table. This is used to mark down the start and end times for each person on the crew.
• Any hours not paid, such as lunch, are deducted from the total.
• For example:
– An employee starting at 7 a.m. and finishing at 5 p.m. with a 30 minute lunch deduction would list 9 1/2 hours.
• The man hours are entered by operation code.
• Adding up each employee’s time for each operation code would be the number of man-hours worked for the day.
• These hours are exactly the same as payroll. Your employees become the best double check system for the accuracy of this information.
• The information listed for each employee is then compared to the timecard section on the work daily.
• These hours must match.
• The work daily must be completed each day.
• There is no way to know if the work daily is being completed each day unless it is handed in each day.
• Do not let the foreman keep the work dailies until the payroll period ends or the project is completed.
• The work daily should then be handed to a person with knowledge of the project for review.
• This is usually the salesman or supervisor.
• The work daily review should take place prior to the work daily being handed into the office.
• The data entry person would have no knowledge or ability to validate the information.
• I would recommend the foreman complete the morning's activity at lunchtime.
• The afternoon’s activities would be recorded while the crew is cleaning up.
• The completion of the work daily should take no more than 10 minutes.
• The work daily must be completed at the project site.
• The accuracy and completeness of the information will decline significantly if the work daily is completed at a later time off site.
Foreman WD System
InventorySheet
Work Daily
ReceiptsFor
Purchases
SuperviorVerification
DataEntry
Paperwork
InventoryAdjustment
Report
Job Costing
Payrol ReportPosting
Human Resource
Verification
Payrol Report
EmployeeVerification
Purchase OrderReport
Issue vendor
Payment
Physical Count
Verification
AccountsPayable
Department
InventoryDepartment
JobDetail
TransactionReport
Job Profit& LossReportIssue
Pay Check
Foreman Paper Trail
7:007:00
7:00 4:004:004:00
-30min-30min
-30min8.58.5
8.5
5 6 61 1 12 1 1
0.5 0.5 0.5
9516
11
Job Cost reports• Division.
• Non Billable versus Billable Field hours.
• Project Profit
• Bid vs Actual
– By Supervisor.
– By Estimator.
– By Salesperson.
– By Foreman.
• Residential versus Commercial.
• Work area type.
• Subcontract versus In-House.
• Actual Equipment use
Employee Hours Report
Job Costing Determines:• Most profitable job size range• Smallest / Largest project size• Crew size efficiency• Crew / Foreman strength & weakness• In-house vs. Subcontract• Project type by profit• Lead source by profit• Verify equipment efficiency• Customer type• Long-distance versus local projects• Information for T&M Billing• Your “Sweet Spot”
What is your “sweet spot”?
• High end residential:– Project size $50,000 - $100,000.
– 30 minutes from Shop
– Design / Build
– Referred lead
– Referral potential
– Hardscape and softscape
– 1 month lead time
– Uncompromised quality and material selection
– 20% profit
• Provides metrics for prequalification.
• Must meet 6 out of 9 Criteria.
Non Billable Hours
• What is your % of non billable hours
• Set up items as projects
• Track OH items to measure time for:– Equipment
– Facility
– Inventory
– Meetings, Training, & Education
– Punch-list & Repairs
– Warranty not estimated
Lead Qualification
Qualification approval score varies based on Sales pipeline and Project backlogFor example: Spring: > 70Summer: > 50Winter: >30
Bonus System
• Bonus pool should be based on corporate and divisional profits
• Bonus should include all key employees
• The method for determining the bonus should be communicated to all affected employees
• The bonus system should be consistent throughout the company
• A portion of the bonus should be issued based on projected profits, each quarter
• The majority of the bonus should be issued at the end of each fiscal year.
Measurement factors for the bonus• Project or divisional profit
• Customer satisfaction
• Customer retention
• Safety
• Attitude
• Tardiness
• Equipment
• Paperwork
• Specific job functions: AR collection days, Inventory loss, Sales volume, New leads etc.
• Improvement in certain areas of performance
• Personal improvement
• Additional Skills, Certifications, Education
Calculation of Bonus Amount
Item Grade Comments
Project Profit (x2) 8 Average Job 22%
Safety 10 No injuries this year. Attended all seminars
Tardiness 6 Late 7 times
Attitude 8 Overall better: Work on improving comm. With office
Equipment 6 Preventative maintenance behind schedule
Customer satisfaction 9 Excellent Rating on 78% of CS
Paperwork 7 WD info not accurate
Crew management 9 Improved performance
Obtain CLT Certification 10 Great Job
Total 81
Evaluation for Joe Jones Year:2004
Name Score
Joe Jones 81
Henry Dundee 66
Mark Grouser 58
Debbie Canter 88
Tom Smith 36
Juan Vessa 55
TOTAL: 384
Name % of Total
Joe Jones 21
Henry Dundee 17
Mark Grouser 15
Debbie Canter 23
Tom Smith 9
Juan Vessa 14
• Corporate Bonus Pool : $10,000
• Joe Jones receives 21%
=$2100.00
The corporate bonus pool is based on overall company profits.
This bonus pool may also be based on divisional profits
• Provides information to back up gut feeling.
• Allows for verification of improvement during changes.
• If you have employees you do not directly manage, job costing is critical.
• Provides accurate feedback on what you do not see.
• Analyze data over time to determine trends.
• Should be used to form the basis for performance based compensation.
• Job costing becomes your company’s scorecard.
•“It is not necessary to change. Survival is not mandatory.”
(W. Edwards Deming, Management Guru)
Recommended