Job Costing and ERP

A DGG client has been struggling with Job Cost lately. Not Job Cost software, but the concept of getting a good cost for jobs. The problem they have is the same problem many companies have: accurate data for input into the accounting system.

In this paHands working on data collection (picture to illustrate data collection as a requirement for ERP)rticular situation, there are three components of the job’s cost:

  • Materials (which are usually a small but significant component)
  • Labor (significant, and a place for significant profit fade)
  • Travel, Lodging, and Per Diem (significant)

Each of these cost components has unique challenges that affect the company’s ability to collect the data needed. I won’t go into that.

The interesting thing has been to watch the company struggle to come up with good job cost numbers without having these key pieces of data. Crew chiefs don’t report hours per job accurately. They don’t use the automated time card system the  client put in. They don’t tag expenses and per diem charges to jobs. They won’t inventory materials after every job to determine what they have used.

And that’s not even counting the maintenance cost of machines and vehicles, etc.

The answer to getting a job cost number given this data is very simple: YOU CAN’T! No matter how many spreadsheets you build, you can’t get an accurate job cost accounting without the basic data needed.

So what are the alternatives? Several. We’ll consider those in the next posts.