Three reasons to audit your current job costing system
How do you decide when it’s time to change something? When it’s letting you down.
If the topic is your job costing system, there are three factors that companies typically think of when assessing it:
1. Are you serving it, or is it serving you?
It’s ironic. The way you handle job costing is supposed to be a big contributor to your business. But sometimes it's such a poor fit that it becomes a drag on the business. The very opposite of what you wanted.
How can this happen? Sometimes a system can be so difficult to use and keep up to date that it feels like you’re working for it rather than it’s working for you. It’s like having a garden that’s so time-consuming to maintain that you never have time to even look at it, let alone sit in it.
The MD of Europe Economics told us of the frustration with their old ways:
“There was a lot of chasing that had to be done to update the files. A lot of time was spent trying to maintain the files and cleansing the data.”
So, is your system saving you time or slowing everybody down?
Another clue that things are going wrong is regarding levels of engagement. Are all your people fully engaged with the system? Or do they see it as a chore they’re forced to do with no perceived benefits to them? It’s supposed to help everybody, not be a bugbear.
2. Does it give you information you can do something useful with?
Have you ever been given a report at the end of the month only to discover that a project is sinking and you didn’t know? But by then the damage has been done. Whereas if you’d been notified as soon as it started to wobble, you might have been able to get it back on track. The MD of environmental consultancy REC puts it like this:
“We used to get data only after the event and so at our March board meeting for example we would still be discussing our January figures”.
And can you drill down with your current system? It’s all very well being given project summaries showing the overall stats, but what is exactly happening to each project to explain where it’s at? You need to dig below the surface and follow the threads of the timelines. Who did what? What resources were switched to other projects? What’s the current project cost? What client approvals were given? How do a project’s current numbers compare with the project budget? What communications have been made to the client? What alerts have been received?
If you can’t find these answers fast, you’re only viewing your business from a distance.
Of course such gaps can be costly. The Finance Director of ECUS told us:
“The old system didn’t give accurate utilisation rates, so we made assumptions. Some of those turned out to be wrong.”
And then there’s the drag on time. The Finance Director of branding agency Tayburn explained:
“In the old days we used a clunky, horrible job management system. I used to have to sit down with the account managers every month and ask questions like ‘Why is this job over?’ and ‘Why have we not billed this one?’ and it took an enormous amount of time to sort out each month. We only found out what was really happening after the event, when of course it was too late.”
3. Does it do everything you need?
Does your system go far enough? If you and your team are still relying on other applications and spreadsheets, there’s a problem, according to the MD of Maleon:
“We used a lot of spreadsheets. But we were constantly moving data about, often 3 or 4 times. It wasted time and introduced errors.”
“The spreadsheets were problematical because everyone created theirs in different ways.” [Webb Yates]
And how many spreadsheets do you use? An MD recounts theirs:
“On the consultancy side we had a spreadsheet for each job, and several for sales planning, and one for tracking forward actions, and one for costings, and then there were the spreadsheets for monthly reporting and financial analysis. And then those on the training side too.”
Any of those familiar to you? Remember, just because you're experiencing such problems today, it doesn't have to be this way.