What Are The Keys To Job Costing Success?

An article on ForConstructionPros.com says field service organizations often ignore this crucial element of job costing. They consider their equipment as a tax write-off or store of wealth when in fact it should be a productivity tool that is costed to projects.

Though the article refers to construction equipment, the advice holds true for any field service organization. It’s so important to have a good understanding of how to correctly cost equipment. That means considering all of the components, including insurance and maintenance. People often forget to charge for supplies they use on-site to keep the equipment running.

The key is to have the right business intelligence around equipment utilization and profitability.Many field service organizations aren’t closely tracking equipment usage, so they don’t realize how often assets aren’t being used. That’s a wasted opportunity to rent equipment to other organizations and cover some of the costs associated with that particular asset.

Organizations with large fleets need an integrated field service system that provides visibility into usage. The system can track usage so that equipment isn’t unknowingly sitting on a job site unused for weeks at a time.

A well-designed job costing system charges projects for line-item costs of equipment use by the hour. Equipment costs should not be absorbed into overhead; they need to be tracked through motor meters, which the operator can record at the end of each day. Each piece of equipment also needs its own time tracking for entry into the job costing system.

A job costing system can also detail if you’re better off renting or owning equipment, and the article shares an equipment costing methodology. Equipment needs to be studied on a big-picture level, accounting for the purchase price, labor, parts, fuel, etc. An effective rental rate formula can be determined by putting all hourly costs into categories including cost of purchase, cost of annual ownership, cost of running the equipment and cost of maintaining the equipment.

Source: ForConstructionPros.com, June 2013.  Posted in Project & Job Costing on June 28, 2013