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Job Costing is Critical for Construction Companies – Transcript

In this video, Diane Gilson is asked a series of questions about job costing, its importance for construction companies, and how to implement it.

Why this is important: Job costing is the foundation of effectiveD construction projects and company management. Without effective job costing systems that provide accurate and detailed job costing information, companies will invariably be less profitable.

About Diane Gilson and busybusy

Bracken (00:00):

I’m Bracken. I work on the Partnership team here at busybusy, and I’m super excited to have Diane joining us today. She is the job costing expert (to say it in a plain way), but she’s much more than that. She’s a published speaker – or author and speaker. She has over 30 years of experience in the accounting industry.

Wow. I need to finish my coffee this morning! We’re really excited to have her.

She’s a professional QuickBooks trainer, and she also won ProAdvisor of the Year last year. She’s won tons of different awards, so seeing her win the QuickBooks ProAdvisor of the Year for 2022 was super, super awesome for her.

Diane (00:43):

Yes, and you guys were there!

Bracken (00:44):

Yes, exactly. It was great to be able to see her do that. She’s viewed as a leader in her field of expertise, and we’re excited to have her here today to pick her brain about job costing and how it can benefit companies.

And if you are currently job costing, how you can improve. We always have room for improvement, right? We have been teamed up with Info Plus Accounting for quite a while now, but here’s a little blurb about them. Diane founded Info Plus Accounting and BuildYourNumbers.com in 1994. Her goal and what she set out to do – as it reads on the screen here – is to empower residential construction company owners and their support teams to be more effective and more profitable.

Bracken (01:33):
It really aligns with what busybusy’s set out to do as well. While she helps everybody get in-depth with their numbers and figure out what’s going on, busybusy helps you gather those numbers so that she can help you do that. So, our partnership and the reason why we’ve teamed up is pretty easy!

I could talk pleasantries about both companies all day. Instead, what we’ll do is hop into all the fun questions we have prepared for Diane. We’d love to have you guys chat in and also ask questions through the Q&A. We’d love to have some of your questions on there, and if not, we have some good ones prepared. So we will jump right into that.

Do you have anything else you want to hit on, Diane, before I start quizzing you with questions?

Diane (02:23):

No. I’m just here to try to answer questions that you might have or that other folks might have about job costing, accounting, and how to get the most out of your numbers.

Bracken (02:36):

Yes, definitely, definitely. Alright, so I have the chat turned on. Everybody should be able to chat in there.

We always love to hear where you guys are from as well. I’m from Utah if you’re just now joining, and Diane is over in Michigan. It’s fun that we’ve been able to find each other and partner up and all that good stuff. So chat about where you’re from, and if any questions pop up as we’re going, we’d love to hear them from you.

Actually, before we even do that – Diane, why don’t you tell us a little bit from your point of view about why you started Info Plus and why job costing is so important? That leads us right to our first questions.

Diane (03:16):

Well, my background is as a CPA, and from my CPA tenure, I went into banking for 13 years. I did internal auditing and also ended up in financial management, where we started doing product line costing for the bank.

Construction Company Accounting

When I decided to start my company, I knew that I wanted to focus somewhere. I wasn’t sure exactly where, but at a networking luncheon, one of the ladies came up to me, and she said, “You know what?” She said, “My husband’s a contractor, and I handle his books.” She had a background in accounting, but she said, “You need to go over that Home Builders Association because the builders – man – they really need help!”

Another associate that I knew from the bank also knew the Home Builders Association president and got me signed up. I did a tabletop within two days of starting my company (“tabletop” meaning standing there and telling people what you do.) So that’s how I got involved on the construction side and job costing because that was one of the first things that people started asking about.

What is Job Costing?

Bracken (04:26):

Very cool. Yes, it’s funny. I think the construction industry has so much room to improve, and we’re all so behind on growing into technology and stuff. So, it’s really fun to be in this industry right now. We know why you got into job costing, but for those who are joining and who don’t do job costing yet, what is job costing?

Diane (04:52):

At the most basic level, job costing means that you’re going to track the Income from the different Jobs that you do – each Job that you do – and the costs that are related to getting that work done. You can do it at a very, very, very simple level, or there are other layers that you can add in to also provide more information and – by using that knowledge – to increase your profitability.

Why Job Costing is Important

Bracken (05:23):

Yes, I think that’s super helpful. You answered this a little bit already: increasing your profitability is a goal for everyone. But can you go into a little bit more depth about why job costing is important for a business and its success?

Diane (05:40):

Job costing is going to help you see what kinds of work that you’re doing most profitably. So, [suppose] you can see that on Job A, you made a 40% Gross Profit margin. We can talk more about what Gross Profit is, but it’s basically the Income, less the cost to produce the Job. And on Job B, you made a 12% Gross Profit margin (and they are different kinds of Jobs.) Right there, that’s going to tell you something.

There are a lot of different things you could look at on both of those Jobs, including who was managing the Job, what were your estimates, how did the pricing occur, and so on.

Job Costing Identifies Profit Sources

But a very simple level would be that maybe on decks (I’m going to just use that as an example) – you made 40%, and on kitchens, you made 12%. Would you want to do more decks or more kitchens? That’s going to give you some really basic information right off the bat.

But you can also look inside even deeper to see what other elements are involved in the profitability of those Jobs.

Bracken (06:56):

Definitely, and what I was going to say is we’ve talked about that before, too, where figuring out who your “winner jobs” and your “loser jobs” are is so important. Do you want to do decks and make 6%, or do you want to do kitchens and make 12? So that makes total sense there.

Job Costing and Invoicing

With all of your experience in the industry, tell us some of the results that your clients have seen when either implementing job costing or taking job costing to another level.

Diane (07:25):

One example is when you can see the actual costs coming through on a Job. Let’s say you’re doing a Time and Materials Job where you’re passing the cost through and then having a markup on it. When you look at your Job costs, you can see all those costs coming through and then check and make sure that you’ve invoiced. If you see a Cost coming through and you haven’t Invoiced for it, then it’s time to Invoice. You know what? If you don’t Invoice for that (plus the markup), guess who gets to pay for that particular cost?

Bracken (08:03):

Not the Customer.

Diane (08:04):

Not the Customer. Yes. If you’re in business to give away free things, that’s lovely.

Bracken (08:15):

You can come over to my house if that’s the case.

Diane (08:16):

Exactly, exactly. On the other hand, if you have a system where you can track those particular costs as they come through and make sure that they’re Invoiced appropriately – that’s just one example, and that would be for Time and Materials Job.

The gap between not charging and charging is pretty big. And it means that if you don’t charge appropriately, it’s going to come out of the owner’s pocket or the company’s pocket. And of course, if a company isn’t successful, then what is it they say? “If Mama ain’t happy, ain’t nobody happy.” Well, if Mama (as the company) isn’t happy, then it’s not good for anybody. It’s not good for the company owner, for the employees, or for their customers.

So that would just be one example, but there are many other examples where you can use that information.

Job Costing Increases Gross Profits

Bracken (09:17):

I think it would be cool to be able to look back on all of the clients who you’ve helped and see where their business was when it started versus where it is now, even for those clients who have only been working with you for a year. It would be really cool to be able to see that.

Diane (09:34):

Let’s go back to that prior thing where I said that in one kind of work, you’re making this percentage, and in another [kind of] work, you’re making a different percentage. One of my clients found out that his residential [work] – when he broke things down by types of work – he found out that he was making 10% more Gross Profit. That means – not that he was getting 10% – but he was making 10% more Gross Profit than he was on his commercial Jobs. And you know what? He ended up changing the whole direction of his company. His marketing and his website changed. And he decided to go ahead and focus on that higher gross revenue type of work.

There were other subjective things that were involved in that. But the dollars and seeing that difference is what pointed out to him – some of what – he instinctually already knew. But then, he could move forward with confidence and go, “Yes, I’m doing the right thing. And knowing that I can make a higher percentage, I can spend a little bit of money to redo my website and change my operations and expand my business.”

Because at one point, he was going, “Well, I don’t know if I’m going to bring somebody else in to help me or not.” Just by being able to see the difference and then being able to make projections, having those numbers and the confidence helped him change the strategy of his company and his overall profitability.

Bracken (11:14):

That’s really, really cool to see. So, would you say that that’s one of your favorite client success stories? Seeing him change his entire business to match what is going to be most beneficial for him?

Increased Control Over Costs

Diane (11:26):

Yes, that’s a favorite one, but as I work with people, as people take my classes (I’ve got pre-done classes, and so on that a lot of people take.) But when I’m working with them one-to-one, I think it’s just that sense of control that people get when they can actually see their numbers. They know that all of their production costs have been assigned to a Job. They know which costs actually can’t be assigned to Jobs because sometimes there are production costs that go into what we call “Non-Job Specific.” Meaning, “Yes – I can’t assign the cost of a saw blade to a specific Job.”

And, of course, there are other things: shop supplies and the cost of vehicles and equipment and so on.

Diane (12:12):

So those go into what we call ‘Non-Job Specific’, but being able to see those and understand:

  • What am I making on individual Jobs?
  • What is it costing me for employees who work on different Jobs?
  • What is their fully burdened rate? (So that I know that the information I’m seeing is accurate.)

That gives people confidence. It gives them a sense of having things under control. And knowing what’s going on is better than having what I’d call free-floating anxiety of going, “Well, I wonder how are things going? What did I make when I did this Job? Man, it took us a lot of extra time, or we had to buy a lot of extra materials. Or – what was wrong?”

So, being able to look into the job costing information gives them the knowledge to be able to move forward. So yes, there are big success stories. But I think it’s more a matter of having that sense of control and really knowing what’s going on in different aspects of the company.

Bracken (13:29):

Yes. And I like what you said, too. We talk a lot about figuring out the winner Jobs versus the loser Jobs. But it’s also figuring out “What type of Jobs are each of my individual employees the most profitable on? Or the most productive on.” I liked that you pointed that out as well.

Job Costing for Small Construction Companies

I think it’s important to be able to distinguish as well – we have a lot of people joining us today, and I’m sure they all come from different-sized companies – how can job costing be helpful for both small and large construction companies?

We run into a lot of people because busybusy goes to a lot of trade shows. We’ll run into people who are like, “Oh, my company’s too small to need software or to need an app to track time.” Well, what’s small? What do you mean small? “Oh, we have 15 employees,” or, “Oh, we have ten employees.” That is when it is extremely important to know your numbers.

So tell us a little bit about how job costing and knowing your numbers can benefit companies of all sizes.

When to Add Job Costing and an Accounting System

Diane (14:34):

If you don’t have any employees – you might be here even if you don’t have employees – although I would imagine a lot of the people that busybusy reaches out to are folks with employees. But if:

  • You don’t have any employees and
  • You’re a standalone handyman, and
  • You’re the one that goes out and buys everything, and
  • You work on one Job at a time and
  • You can look in your checkbook –

You probably don’t need job costing because you’re going to carry it all in your head.

But as soon as you start getting two or three Jobs running at the same time, you can’t hold that all in your head. It’s not possible. If you’re focusing on getting the work done, meeting your client’s expectations, and doing all the other things that are required to keep your business running, why would you want to try to keep all that in your head?

Diane (15:27):

It’s just too much to take care of. And then, of course, sometimes people say, “Well, I just look at my checkbook.” That’s not really a good indicator either because money coming in and money going out don’t happen simultaneously on the same day. So, your checkbook is not a very good way to look at things either.

In fact, you need an accounting system, something that’s going to track the “cash in” and the “cash out” and what Jobs you’re working on. So I’d say as soon as you get to the point where you’ve got maybe two to three employees, and you’re running two or three Jobs simultaneously, you’re going to need an accounting system and job costing.

Now, if you’re a handyman, you’re still going to need an accounting system. You have to report to the government. But if you want the information to run your company effectively and you want objective information, you’ll probably need an accounting system and (at least) very basic job costing to know what you’re making on those Jobs.

The Job Costing Feedback Loop

Diane (16:31):

And you can use that as a feedback loop. One of the many benefits is looking at your results and saying:

  • “Oh gosh, how can I make this type of Job go better the next time?”
  • ”How do I get better at estimating?”
  • ”How do I get better at controlling what’s going on in the process?”

So, there are many, many benefits to having that information at hand.

Now, lots of times, I see people get to the point where they realize that they need job costing. It’s quite often in the $600,000 to $700,000 gross revenue range. But in reality, the longer you put it off, the bigger job it’s going to be to put it in place. So, the sooner you put it in place, the better.

The same is true when planting a tree. The sooner they do it, the better. You need to plant a tree today, right?

Bracken (17:27):

Yes, very true.

We have a couple of questions coming in regarding seeing systems that can help with job costing and if we were going to talk about busybusy today. Just to clarify – we’re not going to be showing the busybusy product today or any of the Info Plus resources today. We want to discuss with you guys the benefits of reviewing those and implementing them. If you’re already a user of either of the systems, then you can know how to further grow with each of our businesses and your business.

Getting Started with Job Costing

So I wanted to just let everybody know that because of the questions and chats that are coming in. But alongside that, somebody ‘chatted in’ a great question, and that’s, “What are the top three or more things that are very important when you’re starting with job costing?” And that ties into my next question, too. So it was perfect timing for that.

Diane (18:28):

One of the very first things – if you’re going to do job costing – is that you need to have a good accounting structure to use as the “recipient” of your information. Of course, one of the primary things in any accounting system is to have a good – what we accountants call “Chart of Accounts.” (Many of you are probably familiar with that term.)

Chart of Accounts

We want to make sure that your Chart of Accounts is set up in a way where “income” is easy – you’ve got a line item for your Income. Sometimes, you might want to break it out into different kinds of Income.

But then, also have your Production Costs organized and grouped. In QuickBooks, that’s easy because they use something called Cost of Goods Sold, but you might want to think of it as Production Costs. So you make sure that your Chart of Accounts has accounts for things like your direct labor compensation, Payroll, taxes, employee benefits, and so on.

Diane (19:28):

We could touch on Labor Burden a little bit later, but those are all those extra costs to have people out working in the field. Then, of course, materials and subcontractors and some of those other costs.

Production Costs

I also like us to put in the Production costs. Those – what we called earlier “Non-Job Specific” – such as fuel, insurance, vehicles, and some of those types of things [such as] shop supplies.

If you get all of those into your Production Costs, then you’re going to be able to see (within your reports) your Income minus the cost of producing your Income, which is what gives you a subtotal called Gross Profit.

So that’s the very first thing that needs to be put in place.

Payroll Costs by Job

Then, if you have employees, you need to track their time and convert their time into cost. We’re always fond of saying, “Time does not equal cost,” but it does. But you have to get that time converted into Payroll because Payroll is your cost, as well as all those other costs that go along with Payroll and having your employee on board.

Other Costs by Job

The third thing is to assign all the other costs assigned to Jobs – the materials, the subcontractors, permits, licenses, rented equipment, and things like that – assigned out to specific Jobs as well. Does that answer the question of the top three things?

Bracken (21:05):

Yes. Yes. I think for companies who want to get started with job costing, knowing where to start is really, really important.

Advanced Job Costing

So let’s pause on companies who want to start job costing just for a minute. Let’s talk a little bit about how a company that is already attributing time to a Job can take job costing to the next level, or what we call it in busybusy is “cost coding” and tracking time to a cost code.

So, what would you say to a company that is tracking time to a Job but wants to take it to another level and start tracking time to a task or a phase?

Job Costing by Phase or Stage

Diane (21:44):

Your basic job costing level – if you just put all your Labor cost into a Job – that’s certainly better than not doing that. However, in most cases, when you get into any complexity in a project:

  • If you’re building a home from scratch.
  • If you’re doing remodeling work.
  • If you’re even doing more complex handyman types of things.

There are phases to getting the work done. The more you know about what each phase is going to cost (or has cost in the past), the better you’re going to be at estimating and assuming what’s going to be coming at you in the future.

So, if you can split the phases of the Job, and I like to ask people to put those things in order of the way things happen. Now, there are a few things that happen up front that we like to call “general conditions” (the kinds of things that are going to occur throughout the life of the Job), but in general, there’s a progression to the way that people do work.

Diane (22:57):

Not every Job is going to have every stage in it, but we want to just say, “Well, on the most complex Jobs, what are all the stages?” And so those become your cost codes.

And then, if you’re going to ask your people to track time, you have to decide what level of detail you want them to track their time at. I think one of the biggest mistakes I see people make is they might estimate it at a really detailed level (step by step by step). But asking people who are on the job to assign their time at a really, really detailed level – it sometimes just isn’t possible. In other words, if somebody’s framing – for them to say, “Well, I’m framing the front bedroom, I’m framing the bathroom, now I’m framing the living room.” That wouldn’t be very practical.

Bracken (23:54):

Or realistic.

Diane (23:56):

But maybe recording that they’re working on framing would probably be good enough for you. The estimator may need to be more detailed, but for the person on the job who is recording their time, you probably want to look at a higher level as to how you would want them to track their time.

Bracken (24:18):

I want to touch on that as well because Diane brought up a great point. We have companies all the time who start using busybusy or are using busybusy and are like, “Hey, this is what we’re doing. We’ve really mastered having our guys or girls track time to a specific project,” like Diane said, “and we want to take it to the next level. Where do we start?”

And the same thing, we always recommend starting with a really broad overview. So, three to five very basic cost codes or tasks to start tracking time. And then, as you guys build that muscle memory and you start seeing the success of it, you can pick and choose where you want to go into more detail, as Diane said.

Diane and I may work in an office, but we’re not blind to the idea that it is hard to get off a ladder and now change and then go do this and then go change that – because you guys are on a job site. You’re busy.

With that being the case, busybusy also has an end-of-day job costing tool where, at the end of the day, you sit down for a minute and actually go into a little bit more detail on those five basic cost codes and get into it a little further.

So, as far as taking it to the next level, I think that those are both really great ways to go about it. We see companies on our side, and Diane sees them on her side who have huge success from that.

Diane (25:40):

Yes, and you brought up something interesting there. Recording your time within the day is extremely important. So – let’s see. This is Tuesday. What did you have for lunch on Friday, Bracken?

Bracken (26:00):

I would have to go back and look at our internal chat and see what they brought into lunch because I have no idea.

Paper Time Sheets

Diane (26:07):

So what happens when people have paper time sheets? Let’s say that they’re paid every two weeks. When do you think they turn those paper time sheets in?

Bracken (26:20):

Probably after they’re due.

Diane (26:23):

Yes, after they’re due. That’s true. Yes. The person in the office might say, “I’ve got to have those time sheets on Monday. I’ve got to do Payroll by Wednesday.” So then, they start straggling in. And most of those get prepared – do you think guys are filling those out? I say, “Guys.” Do you think people are filling those out every day as they go?

Bracken (26:47):

Nope. I mean, we know that they’re not. Right, exactly. I would say 95% of the time, they’re not.

Diane (26:52):

Exactly. Yes. So then, the whole concept of being out in the field and being able to record (even if it’s only once a day), but knowing that and getting it in and having somebody else take a look and make sure that they’re doing it. That is a thousand times more effective than having folks turn in a crumpled, dirty paper time sheet a day too late where somebody has to try to interpret it.

So I’m just talking about the value of busybusy there, but getting that information in and having it be accurate is another major piece of the puzzle. So, not just having it be guesstimates.

Bracken (27:35):

For sure. Well, I think those are great ways to start taking it to the next level. And for companies or for business owners who are like, “I don’t have time for job costing either – at all – or I don’t have time to start doing it.” Or for companies who are tracking time to a Job and want to take it to the next level, but they say they don’t have time. What is your response to that?

Diane (28:04):

Well, I think the first thing is if we don’t have time, we have to be really careful about where we spend our time. And let’s say we’re spending our time doing something that isn’t effective. That’s not a very good use of our time. So if we’re spending our time working on Jobs that give us a very low Gross Profit Margin, as well as Jobs that maybe have a higher Gross Profit margin, that’s not a very good use of our time.

So I think, as Brian Tracy has said, I’m not sure where he got the rates, but he said, “An hour spent in planning saves ten hours of work.” Maybe the ratio is only one hour of planning to five hours of work. But the issue is that job costing is going to let you know where to spend your time.

Learning Job Costing

So a relatively small amount of energy learning about job costing at a relatively low cost of implementing job costing (in relationship to the returns that you’re going to get) is really, I think, the biggest reason to say that the “reason” (or excuse,) however you want to put it, of not having enough time doesn’t hold a lot of water.

Diane (29:30):

The main thing is that you need to be spending your time where it can be most effectively used.

Lots of times, people say, “Well, how long is it going to take me to learn how to do job costing?” And I say, “If you’ve got some good courses to look at, 15 to 25 hours of some in-depth information gathering and understanding. And then, maybe the person in the office who’s doing it, it might take a little bit longer to get into more specifics.”

But that’s a pretty small expenditure of time in relationship to the big payoffs that you’re going to get in terms of expending your time more effectively and more profitably. Time is one of those relative things. We make time for the things that are important. Sometimes, we have to stop and figure out what’s important and what’s going to give the biggest return for the time investment.

Bracken (30:34):

I think when we chatted about this last (when we had the CEO of busybusy on here, Isaac), you and him were talking a bit about that. And really, what it boils down to is – you don’t have time not to.

I get it; we’re all busy. But I think it’s exactly what you said. You really don’t have time not to.

I see quite a few questions coming in about seeing the software again. So Ryan is actually going to throw a link in there that can schedule some time for you guys to see the busy software. Then, we’re also going to answer some of the other questions that have been coming through the chat.

But before we do that – actually, let’s do that one. So Vicky’s asking. Nope, sorry, Vicki, I’m not answering that one. I meant the one above, but I’ll get to you.

Salaried Employees and Job Costing

Jenny’s asking, “How do you handle salaried employees whose hours need to be recorded to a specific Project or Job for Payroll cost tracking?” So, Diane. We work with a lot of the same clients, and I’m sure there are plenty of your clients who use busybusy are on salary. Walk us through why you still recommend salaried employees doing that, and then I can hit on how they can do that in busybusy.

Diane (31:51):

Salaried employees – if you’re using a software like QuickBooks – when the salaried employee’s time gets assigned to Jobs, it gets prorated or split up across the Jobs that the person is working on.

Now, let’s say it’s somebody who spent 20 hours on Jobs and 25 hours in the office; we would want to account for all of their hours so that the costs get allocated or assigned appropriately or proportionally. So you wouldn’t want to just account for 20 hours of their time because then, that would be way too much cost loaded into just the Jobs that they worked on. So we have special jobs, lots of times, that we set up for admin, owners, salespeople, as well as non-job specific for vacation holiday time and so on.

We want to make sure that the salaried person’s time is assigned appropriately based on the number of hours that they’re being paid for. Now that said, if they worked a 60-hour week, the amount that would go out to each Job would be lower than if they worked a 40-hour week (keeping that in mind.) But the nice thing is the software will do all of those calculations in the background for you.

Bracken (33:21):

Diane hit it already. The busybusy software is going to do that for you. And when we work with salaried employees, it isn’t where they’re going for their main focus of time and getting paid because we know that they’re going to get paid 40 hours. But it’s giving them the opportunity to be more profitable and perform their skill in the trade.

And then, in turn, when they’re seeing those numbers, and they’re becoming more profitable for the company, that oftentimes (from what I’ve seen previous clients do) then turns into bonuses, which motivates those salaried employees to keep track of what they’re doing.

So, here’s another question. Vicky’s asking if we have slides or steps that will show the information you need to be able to start job costing with a software (or without a software.) I think that is what that is.

I think Diane will be able to hit on that really well. As far as the busybusy software, we are going to help you get started, and we’re more than happy to walk you through what that looks like.

But as far as not having a software in mind, how do you recommend getting started there?

Tracking Job Costs with Spreadsheets

Diane (34:41):

Technically, I suppose you could go out and design your own system inside a spreadsheet. I’ve got a blog article about the different layers of job costing out on our BuildYourNumbers site. It’s not really practical because you can’t slice it and dice it in six different directions when you want to find out more information.

The one thing I found out about company owners is they start out and say, “Ooh, I want something really simple. All I want to do is see this.” But then, when they see one layer of information, then, lots of times, they go, “Well, but what about this and what about that?” And if you start trying to do everything in your own home-developed spreadsheet system, things can go wrong. Spreadsheets are not infallible. You need to be building in all sorts –

Bracken (35:28):

You’re drinking from a fire hose.

Diane (35:30):

– All sorts of checks and balances and so on when you can go out and buy software for not very much. (Something like the QuickBooks products you can get for not all that much.) So, if you look at softFrom the QuickBooks desktop standpointware, I’d say, “Be sure that you look for something that will do job costing for you.” You’re going to get so much more out of it than trying to develop [your own]. It’s like: Do you really want to try to invent your own wheel? It’s been done. Take advantage of what other folks have done.

Now, did I miss part of the question? I just wanted to deal with the software part.

Bracken (36:07):

I think you hit it. You were asked about the different steps to do it, and I think we really hit on that and just to shorten an answer of how to get started with it.

Job Costing Training

Diane (36:18):

Well, we have lots of training. I will put in a plug for what we do. I have many hours of training, procedures, checklists, videos, and blog articles on our site. That’s why I do what I do. It is to make it easier for people.

Bracken (36:38):

We’ll be sharing Diane’s resources and links so that you can access those and check out what is going to be a good fit for you (on the last slide that I’ll pull up.) You guys can snap a picture of it, but I’m also going to send you a PDF at the end and a copy of the recording, and you’ll be able to click right from those.

And she lines it out really well. Obviously, we’re both going to plug for our products because they’re tried and true, but Diane’s stuff is really well put together.

Diane (37:05):

And they fit together: What busybusy does and what we do.

Bracken (37:10):

Exactly.

Diane (37:12):

They’re intertwined in terms of what it does for people.

Bracken (37:17):

And we have a couple more questions. We wanted to keep it around 45 minutes, so we’re getting there. And I’m going to hit on the other questions that we have in here, but I also want to plug busybusy with that and what Diane said and how well we work together.

The pricing with busybusy: it’s $10 a month per active employee. Coming from the webinar, you get a little deal there. So, if you’re interested in checking busybusy out and working with both of us, grab the links that we’ve put in the chat, and then I’ll email you Diane’s links to everything.

So yes, I mean, we’re going to help you guys do that.

Tracking Labor Separate From Materials

We have a really good and detailed question here. Rebecca is saying, “We work on Time and Materials and use job costing extensively for hours and receipts on our invoicing but do not apply cost codes to Payroll. We started doing that, and it was pretty complicated, so we stopped because our markups seemed to be covering it. But it sounds like I should advise the boss to start doing this again. Do you agree?”

Diane (38:19):

Yes, when I help people set up their job costing systems, I like to track Labor separately from Materials, Contractors, and Other Costs because having that information split out separately, particularly when you get into Estimate vs. Actual reports, you can see “Oh, I estimated this much cost for our labor on this particular phase, and then, now I see this is what we actually spent.” And that could be a differential in number of hours. It could be a differential in who you had working on the Job. It could be a differential in some things popped up that you didn’t anticipate. But keeping that Labor split out on its own, the labor cost is really useful. So yes, I would say, “Keep your labor costs split out, but just don’t make the tracking overly complicated.” Like I said, maybe Framing, maybe Roofing, some big chunks of the Job that people can say, “Yes, this is what I was working on.”

You can estimate at a much more detailed level and then say, “Here’s my detailed estimate. Here’s my actual on a bigger ‘chunk’ level.” And then, you can compare the two.

Bracken (39:51):

And one of our attendees actually made a really great point in the chat. Richard said, “Don’t start tracking lots of micro levels. Start small, go broad.” And so it’s cool to see the attendees and participants feel the same way. Yes, great points.

And Matt has asked us a couple of questions. He’s asked if we’d go into any detail about how info that you guys get in the field gets from busybusy and is translated into QuickBooks for proper tracking (in an accounting way.)

Job Costing Using QuickBooks

That’s something that Diane and I do together all the time. First thing, and I’m sure Diane will hit on this: “It depends on what QuickBooks you’re using.” Do you want to answer that from your point of view, Diane?

Diane (40:37):

Yes. From the QuickBooks Desktop standpoint – right now, I’m not deep into QBO because we can get more detail in Desktop. At any rate, the time tracking from busybusy comes into the timesheet inside QuickBooks.

If you set up your Payroll properly inside QuickBooks. (It doesn’t mean you have to use Intuit payroll, but we can use – at no extra charge – the Payroll module.) So if the time gets in there, and you get your background Payroll Items set up properly, it will automatically job cost.

So you go from time into the timesheet, and the timesheet converts into Payroll.

Bracken (41:25):

Agreed. Richard, QBO can be difficult.

Diane (41:29):

That’s why we’re not using it right now, so I’m not going to say, “Never.”

Bracken (41:35):

busybusy can still work with QBO, but I agree. They make it a little bit more difficult. So, if you’re using QBO, that’s OK. We’ll still help you.

Diane (41:45):

I agree with that. You won’t be able to get quite the same details.

Are we going to talk about labor burden, Bracken?

Bracken (41:55):

We kind of ran out of time. I was trying to hit on everyone’s questions.

Diane (42:00):

Let’s do questions first, and at the end, we can touch on it.

Bracken (42:05):

Let’s do this last question. Actually, there are two more questions I want to hit on really quickly. Then, if you guys are still available, we’ll touch on labor burden, and Diane will be able to give us some good insight on that.

Using QuickBooks and busybusy For Job Costing

So here’s a follow-up question from Matt: “What accounting/job costing software do you suggest that works well with busybusy?” So I’ll answer that quickly – first, busybusy inherently does job costing if you’re tracking time to the project, and we can pull a lot of great reports for you. So I would recommend just using the busybusy app for that portion of it because it will do both of those.

As far as accounting goes, Diane, we know QuickBooks Desktop is awesome, so if you want to go into a little bit more detail on that, that’d be really great.

Diane (42:52):

I think on the busybusy side; there are a few estimates that end up in the process. But if you pull all that information into QuickBooks, you’re dealing with the actual Payroll that comes through your company. And it is a full-blown accounting system. So you’re not only going to get your job costing reports, but you’re going to get your company-wide reports. You’ll be able to see Profit & Loss by Job based on accounts. You’ll be able to see your Estimate vs. Actuals. You’ll have the option to use Purchase Orders.

Job costing can become multi-layered, with lots of different pieces and parts fitting together. So you can move from very basic job costing inside QuickBooks up to a full-blown management system that QuickBooks can handle.

And then, the plugins (and I’m going to call it a plugin – an add-on – whatever.) There are several out there, like busybusy, that add huge functionality to people in the field. So you can see a lot of information without actually being inside QuickBooks itself.

But QuickBooks is the accounting system for your entire company as well as doing the job costing and providing other information.

Bracken (44:18):

Sure. For everybody who is available to stay on a little bit longer, we’d love to hit on some more of these questions. I would say we’ll maybe take another 10 to 15 minutes. If you’re not available to stay on, we have recorded this, and we will be sending you a copy. But let’s see if we can hit on a few of those other questions.

Before we dive right into that, for those of you who cannot stay, here is a copy of Diane’s slides. I’m going to send this out to you all in a PDF so you can actually access the links. But if you want to snap a picture of it so that you have it, I will be sending one out as well. I’ll give everybody 10 seconds to pull the phone out and hurry and snap a picture.

And then, we’re going to go ahead, and I’m going to stop sharing. So everybody hurry and get your phones. I’m going to end it, but I’ll send you a copy, I promise.

Labor Burden

Diane, let’s hit on labor burden really quickly. I know how important that is. And so I think that I’m glad that you brought it up. We had a list of questions set aside, but you guys have so many amazing questions. All of you are awesome participants!

Diane (45:34):

And I’m happy to stay.

So, really quickly: labor burden. When I first started helping people do job costing, we were doing a great job. We got the Gross Compensation in, and QuickBooks will automatically put your payroll taxes in for you if you set it up that way, and it can do certain benefits.

But after I’d worked with people for maybe the first (and I’m sorry it took me as long to figure this out) six months. And I’m looking at things and going, “Gosh, there’s a lot of this other cost out here sitting in Non-Job specific. It’s all Production costs, and it’s all related to Employees, but it’s not getting assigned out to Jobs.”

So we actually started doing journal entries and saying, “Well, let’s figure out how much this is, and then, we’ll split it out in a spreadsheet. And then, we’ll do a journal entry to assign it back to a Job.”

Diane (46:28):

In fact, there are many other costs that accompany your employees. I’m talking about, for instance, holiday vacation, sick time, maybe health benefits, maybe tools, and uniforms. I mean, there are many other costs – cell phones. If you just think about it. “What are all the costs that it takes for people to be out working in the field and doing what you hired them to do?” that are not showing up in those Job costs?

So I decided, “Gosh, QuickBooks can do so many cool things. I bet there’s a way we can ‘trick’ it. If we could give it the right percentage for each employee to add on, we could probably ‘trick’ it to put that Burden into the Payroll process without having to do manual journal entries.”

So that’s what we figured out how to do. And I do have a product that will help you figure out (for each employee) what their true burdened cost is. Let’s say somebody costs you $20 an hour. But in fact, they might actually be costing you $32 an hour when you think about all those other costs that you have to carry.

Figuring that out is critical, and we can get QuickBooks – ‘trick’ QuickBooks into posting that automatically for you. That’s the short answer.

Bracken (47:48):

Labor burden is very important, and it ties directly into everything that we’re talking about.

QBO vs QuickBooks Desktop

Bracken (47:58):Then start looking.

Yes – just a lot of questions. I think this is really cool to see all of these come through. We had one at the very beginning, so Scott, if you’re still on here, we’ll answer this as well. And I’m hoping that it’s something that you can possibly answer, Diane, because I know you’re an expert in QuickBooks Desktop. So if you can answer this – I know I can’t – so hopefully you can. “In QBO, do you ever use tags to track project costs?” Do you know?

Diane (48:29):

The answer is, “I don’t know.” I get certified in QB every year, and every time I do, I go, “QBO is not quite ready for prime time when it comes to job costing.” And there are a lot of very cool features, particularly in QBO Advanced now. So, I’m not the right expert on that at this point. You might want to go check out (on YouTube) a fellow by the name of Hector Garcia. He puts a lot of QBO information out there, so you might go out and see what you can find.

Bracken (49:06):

Yes. I put off answering that one because I’m like, “I have no idea.” I don’t get into that detail of it, and I know that you are “QuickBooks Desktop ride or die,” so I wanted to still throw it out there just in case.

Tracking Gross Profit By Worker or Crews

Lee is asking if we can compare Gross Profit in Jobs from individual workers or specific crews.

In busybusy, you can very easily coordinate different reports that will grab that. As long as the time’s being tracked there, then, yes, we can get you that by info pretty easily.

Diane (49:47):

Same thing in QuickBooks (in Desktop.) We can use certain fields, do filters, and so on. So, as long as we can figure out what kinds of things you want to track, we can use certain fields to attach to certain Jobs. Then, we can do filters and custom reports and things like that to let you know.

Bracken (50:11):

Yes. So all that stuff is available through both of us. Let’s see. You guys are cracking me up. I’ve never had this many people chatting back and forth with each other. I’m scrolling through here, trying to pull the questions. Let’s see.

QuickBooks Desktop With Remote Contractors

“How are you using QuickBooks desktop with remote contractors? I do not work out of the contractor’s office.” I’m assuming that’s from some type of admin position.

Diane (50:42):

Yes. So, for somebody who’s handling the bookkeeping, there are a couple of ways to do that. The one we most often recommend is to use a hosted service, where QuickBooks Desktop sits on the hosting service. We have an affiliate that we work with that we like for hosting purposes. So you can reach out to us and ask us about that. That’s one way.

Another option is that there are certain remote access processes that you can use. (This is why we have a tech team. I’m not really a techie on that, but there are a few services.) I think there’s one that’s like “LogMeIn” that lets you access somebody else’s computer. Of course, the computer’s got to be up and running, and so on.

So there’s also one other one. Right now, the name is escaping me, but if you reach out to us, I can give you a couple of options where you can access your client’s file via the Internet. But they have to be out while you’re in. And vice versa. Email us.

Bracken (51:54):

Yes, I wouldn’t have any idea. So yes – email – we’ve got a couple of names.

We’ll include all that contact info. If you didn’t snap a picture on the screen, I’ll include that in the email that we send out.

Job Costing Challenges

Here is another question, and we’ve hit on this a little bit since it was asked. “What are some challenges that you see in job costing?” It’s broad but just top of the head. What are you thinking?

Diane (52:23):

One of the challenges I see is that people do a little bit of job costing and then get misled by the information they’re seeing. So if not everything is assigned to a Job, like it should be, then you’re not going to get accurate results.

Another thing that can happen is that people are invoicing ahead. They’re invoicing their clients ahead of or behind their actual costs, so they can start having some really big swings in the way their Gross Profit is looking. There are ways to deal with that. We use ‘Percentage of Completion’ entries to help people understand what their true profitability is.

There are some wrinkles that you have to work your way through, but having some information on your job costing is certainly better than not having any at all. Having accurate information is superior to most anything. So there was a quote I heard once that said, “Having accurate bad information is far superior to having inaccurate good information.” Does that make sense?

Bracken (53:39):

Yes, it does.

Diane (53:40):

At least if it’s bad information, it is accurate. You can do something about it.

Bracken (53:44):

At least you can weed through it. And I think it’s the same with a lot of things as far as challenges with job costing go. You’re going to get out of it what you put into it.

And that’s something that, in the beginning, takes a decent amount of “sit down” to get everything set up, but once it’s set up, the management of it is really pretty slick. The same goes for anything. You’re going to get out of it what you put into it. It’s pretty logical.

Diane (54:15):

Yes. It’s a logical process once it’s set up. I have a lot of people say, “Oh, oh, now I get it. Oh!” It is a delight when everything’s going into the right buckets, and they can see how the pieces and parts fit together. It’s fun.

Bracken (54:34):

Yes. And you guys aren’t alone when you’re using busybusy or Info Plus or a combination of us. We’re here to help you out. We want you guys to succeed. Otherwise, it’s not really helpful for us either.

The Ultimate Construction Business Management Software Suite

Matt asked another question. He’s a current client of busybusy, so we love to have him on here as well. Oh gosh, I lost it. Where did it go? He was asking you, Diane, for your perfect suite of tech. Here it is. “Diane. In your perfect world, what software would you best pair with busybusy for the ultimate suite of Construction Business Management?”

Diane (55:16):

Yes, at this time. I would say busybusy, QuickBooks Desktop, and then there are several others. I’m really investigating one plugin, but I’m not going to necessarily name it until I’ve done a little bit more work with it.

But there are a couple of – if you guys go out and look, Co-Construct was out there. It’s been acquired by BuilderTrend. I’ve heard some people feel that it’s getting a little complex and not that easy to work with. I’d like you guys to come to our site and take a look at the JobTread webinar. JobTread has had a lot of really, really good reviews. I’m not an expert in it, but it’s looking pretty good to me. So I’d say, “You just have to sit down and think through what you want.”

Diane (56:15):

That’s the biggest thing to have in mind:

  • Do I need people in the field to see certain things?
  • Do I need my customers to be able to do certain things?
  • Do my customers need to be able to make selections?

There are a variety of different problems out there that QuickBooks in and of itself, or busybusy in and of itself, likely can’t totally solve. But you need to get that combination in your mind of where you are having sticky issues. Then start looking.

For anybody who works with us, we help them look at what the other options are to see what might be a good fit.

Bracken (56:59):

Yes, it’s hard to give a solid recommendation without seeing all of your needs.

Diane (57:04):

There are so many plugins out there right now.

Bracken (57:06):

Yes. Well, we have gone over. There are still a couple of questions that we haven’t had a chance to hit on, and we’ll reach out to you guys.

But overall, I really appreciate everybody’s participation. I am very happy with this webinar. I think it was extremely beneficial for everyone who was able to stay the entire time and even for those who had to hop off at the 45-minute mark. So, I’m grateful for everybody. Diane and I love an excuse to get together and chat about all things job costing and construction accounting.

Diane (57:44):

Exactly.

Bracken (57:45):

It’s always great to do that. And I’ll let Diane give her plug, but like I’ve said, 50 times, we’ll be handing out, or we’ll be sending out all the info to contact both of us and check out both of what we have to offer.

And really, the courses Diane has put together – they’re incredible. So please take some time to look over those emails that we send out and take advantage of some of the things we have to offer you guys.

Diane (58:13):

Come visit us at BuildYourNumbers.com, or you can email us at help@infoplusacct.com. Our actual company name is Info Plus Accounting, but our site is BuildYourNumbers.com. So, if you come over to BuildYourNumbers.com, you’ll find plenty of ways to reach out directly to us. We’re so happy to have you here with us today, and we hope we answered a few questions.

Bracken (58:39):

Yes, thanks, guys. We really appreciate it. Have a great week, and we’ll be in touch shortly.

Diane (58:44):

Thanks.

Bracken (58:44):

Thank you, Diane. Appreciate you.

Diane (58:46):

Bye. Take care.


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