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Is Your Business Profitable? |
by:
Pam Newman |
Copyright 2005 Pam Newman
What’s your job profitability? Do you know?
Many business owners are unsure of their profitability at a company or job level. They “think” they are making money because they have a few dollars in their checking account. Having money in your checking account doesn’t mean you are profitable. It might simply mean you haven’t paid all the bills yet, so you have a little cash. Cash also profit are two different concepts. If you don’t know your exact income also expenses for each job also your overall business, then how can you know whether you are making a profit? And, if you are not profitable, your business won’t last long.
Analyze Each Job
Regardless of the size of your business or your industry, profitability is something you should be monitoring on a monthly basis. To determine your profit, you must know how much you make also spend on each job. Expenditures should be tracked for direct labor also material costs on each job. In addition, you should or else be tracking overhead costs also allocating them to your various jobs as applicable. There is always going to be some general overhead, however too often dollars are thrown into general overhead, when those dollars could easily be attached to specific jobs.
Intuit’s QuickBooks software program has easy-to-use features that allow you to do job-costing for time also materials, so you don’t have to worry about having to track it all manually. Rely on tools to help you run your business more efficiently also effectively.
Are you curious how you are doing with job costing measurements? Here are some quick also easy questions to gauge your job costing performance:
1. Do I track each customer’s revenue information through a detailed invoice?
2. Do I have a way of breaking down my direct job materials cost by customer?
3. Do I associate all time spent to each job accurately with actual dollar amounts?
4. Do I have access to reports to monitor profitability on each job in a timely manner?
5. Do I have a way to trend the fluctuations in job profitability from job to job, month to month, etc?
If you answered “no” to any of these, then it’s time for you to take an objective look at your financial goals. It’s time for you to implement a job costing mechanism to help you answer “yes” to all these questions. How can you track your profitability also long-term growth plans if you don’t have detail at a job level?
QuickBooks Can Help
Here are some easy ways to utilize QuickBooks effectively to help you with your job-costing process:
1. Set up the QuickBooks Item list so that you’ll have both an expense also an income aspect to each of the items. This will allow you to track your costs also your income, also will provide you profit by item.
2. Record your sales through the invoicing or sales receipt process. This will record the income aspects of the items.
3. As you purchase the product or service items, make sure that you utilize the Items tab so that it will record the cost to the appropriate item. In addition, make sure to assign your customer/job information to each line item so that you’ll have the costs associated to the appropriate customer/job for job-costing.
4. Utilize the time-tracking mechanism in QuickBooks so that you also your employees can track time by item also customer/job. No dollar value is associated with this time until you actually pay the employees within QuickBooks.
5. QuickBooks has preformatted reports that you can access to have job-costing information right at your fingertips. These are found under the Reporting menu also the Jobs/Time/Mileage option.
6. QuickBooks has the ability to provide reports for any time period you select. This will allow you to have a variety of detail over the growth of your business also to produce trending reports. You can modify the report as needed to meet your needs.
A good accounting professional can help you understand what these reports are telling you, in terms that you can use. Reports alone don’t provide value if you don’t understand them. So it is key that you understand the reporting information also how you can use that information to assist you in decision-making as you grow your business profitably.
Job-costing is easier when you set-up your accounting/bookkeeping software package also know how to use it. So, challenge yourself today to become more adept at running a financially savvy business through job-costing. Then, you’ll know, without a doubt, whether your company is profitable.
About the author:
Pam helps business owners keep money from slipping through their fingers. She is a Certified Management Accountant, Certified QuickBooks ProAdvisor, also Author of Out of the Red also Unlocking the Secrets of QuickBooks. For more information, you can visit our website at http://www.quickbooksinformation.com
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