How To Ensure Data Accuracy In Job Costing

ensure data accuracy in job costing

Many smaller and midsize businesses make the mistake of not using a job costing plan or building one that is vulnerable to incorrect data or data insufficiency. With a solid job costing plan, it is easier to analyze the progress of the overall project, look at each step and identify any areas that need improvement. Major time setbacks and derailments can easily be avoided with a good plan. Also, having a good job costing plan with measures for improving data accuracy gives a company the upper hand against competitors.

When implemented correctly, a job costing plan yields the following benefits:

  • Accurate reporting in a timely manner.
  • Knowing where and how costs are incurred.
  • The ability to track costs and compare them to job budgets and projections.
  • The ability to make changes immediately as they become necessary.
  • A database of information from past projects to use for increased accuracy in future projects.
  • A chance to monitor the status of tasks involved in the project and the overall project at a high level.

Actionable Planning For Job Costing

Although a budget is the financial backbone of any project, it does not always receive adequate planning and monitoring. Many smaller companies set just a dollar amount or a range for the total project. Tasks may not be researched properly to account for possible cost discrepancies in relation to estimates.

Also, budgets are typically neglected as the project progresses.

It is important to monitor the budget and make adjustments regularly. Plan on doing this, and have both an opening and closing budget.

When the budget it is set, it is time to take the necessary steps to ensure data accuracy. These are some best practices for implementing a solid job costing plan that will save mistakes and ensure correct data recording.

1. Track Costs Thoroughly

One of the biggest mistakes made by many smaller companies is not tracking data thoroughly. Add that to a plan that is not built solidly, and there is a recipe for disaster. Imagine closing on a job and then receiving a bill from a vendor with a steep late fee. The late fee comes with an additional penalty charge, and the total for the uncalculated mistake is enough to put a noticeable dent in the project's overall profitability.

Develop a system for logging projected expenses, and be sure to track them throughout the project's phases. There should be a system in place with data and cost checks for each phase of a big project. Always issue and track purchase orders for a clear picture of costs.

2. Develop A Change Order Process

When tasks start overlapping and time is limited, budget changes may take place but not be documented. This can affect the outcome of the project and its predicted profit. If there are any changes to the budget throughout the process, document them immediately.

This helps all parties involved understand the actual job costs, and it ensures payment for the company planning the project. Develop a system for documenting and monitoring change orders for all involved parties.

3. Use Daily Time Sheets

Work hours that are documented incorrectly, late or not at all can catch up to the budget when the project is done. Imagine reviewing work hours and noticing that a few workers signed off on tasks but did not log their hours for that day, and this pattern happens several times throughout the project.

People may get busy with a project immediately and forget to document their time. Make sure that each person uses a daily time sheet, and have a master list for a manager or supervisor to use for verifying time sheet submissions each day. It is much better to document time on a daily basis rather than on a weekly basis for the sake of accuracy and preventing financial losses later on.

4. Compare Estimates To Actual Costs

Many small companies make the mistake of obtaining estimates only at the beginning of a project.

As the project progresses, issues may arise that warrant the need for cost adjustments.

Supply costs for certain items may increase, and some projects may require more supplies than the original estimate. These changes result in a higher overall cost, and it can be a major detriment if it is a surprise at the end of the project. Have an estimator make several estimates throughout the life of the project to make sure that the projected costs are in line with the actual costs.

5. Monitor Expenses Throughout The Project

It is easy to overlook cost changes, extra expenses and errors as the project progresses. There are apps and software programs that issue alerts when certain jobs have not yet been billed or when cost projections start to fall below actual costs. Imagine finishing a project and then realizing that a major job was not billed. This is just one of many possible ways to lose money.

A tracking program is a valuable asset for any major project and can help professionals make adjustments to stay on budget and keep up with billing. If a program also has a mobile app, this makes it easy to track and update costs or send bills from anywhere. It is always better to complete tasks as they come to mind instead of putting them off until returning to the office.

6. Minimize Coding Error Risks

Many companies use accounting software for inputting all expenses. Using an outside accounting service to handle expense reports and all of the detailed tasks of accounting is a great benefit and the most accurate way to track finances. However, the professionals who run these services must have accurate data for optimal financial results.

In many instances, project workers input the wrong codes into internal reporting systems. When these incorrect codes are transferred to outside accounting departments, they are recorded wrong and can cause problems. The same is true with internal accounting departments but can also cost the company more time and money to find the errors.

If a coding system is causing problems, it is time to reevaluate it and come up with a simpler or clearer system. Alternately, use electronic coding with a verification prompt for any input code that details what the code signifies and makes the user acknowledge this information before submitting it.

7. Know Who Makes Changes

Every professional understands the importance of accountability. However, even professionals may not own up to their mistakes if there is an opportunity to do so. When several parties work on a project, it is important to document who completes tasks, who makes data changes, who alters financial projections and who makes purchases. This makes it easier for all parties to know who to contact for different issues and also identifies who may be making critical mistakes.

Although mistakes can still affect the outcome of the project, the people who make them must be identified to help them understand their mistakes and make necessary changes to prevent the same issues in the future. Using software programs that require users to log in to make any of these vital changes is a good start.

Data Accuracy And Job Costing Is A Team Effort

The most important advice to remember when using these action tips is to keep the project a team effort. Everyone must contribute to data accuracy for a project's optimal outcome. Define each department or work team's duties, and identify how those duties and data accuracy relate to the overall financial success of the project.

Make a presentation that outlines how each part of the team functions. Meet with everyone before the project starts to go over these points and to ensure that everyone understands their roles and the roles of others.

An important part of building a strong team and helping them commit to data accuracy in job costing is asking for their help. Simply telling the teams about their duties and financial projections only informs them. To feel valued, to better understand their roles and to actively want to participate, they must be involved.

When meeting with all team members, set up a brainstorming session. Ask for their input, and build a plan for action based on everyone's insight and suggestions. Since not all teams involved in a project fully understand the tasks or challenges of other teams, this exercise can go a long way for addressing possible obstacles, hidden costs and other issues.

All of these careful steps improve data accuracy, build a solid job costing plan and contribute to a successful overall project.