Does Your Business Have Accounting Profit?

What’s your average accounting profit for each job? Do you know?

Many business owners are unsure of their accounting profit at a company or job level. They think they are making money because they have a few dollars in their bank account. Having money in your checking account doesn’t mean you are profitable. It might simply mean you haven’t paid all your bills yet, so you have a little cash. Cash and profit are two different concepts. If you don’t know your exact income and expenses for each job and your overall business, you are missing potential profit.

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 accounting profit, you must know how much you make and spend on each job. Expenditures should be tracked by direct labor plus material costs. In addition, you should also be tracking overhead costs and allocating them to your specific jobs. There will always be some general overhead, but too often dollars are thrown into general overhead, when those dollars could easily be attached to specific jobs. Doing this, paints a specific picture of where your business can be more efficient and profitable.

Intuit’s QuickBooks software program has easy-to-use features that allow you to do job-costing for time and 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 and effectively.

Are you curious how you are doing with job costing measurements? Here are some quick and easy questions to gauge your job costing performance:

•  Do you track each customer’s revenue information through a detailed invoice?
•  Do you break down direct job material costs by customer?
•  Do you allocate all time spent to each job using actual dollar amounts?
•  Do you have access to reports to monitor accounting profit on each job?
•  Do you trend the fluctuations in job profitability from job to job and month to month?

If you answered “No” to any of these, then it’s time for you to take a closer 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. You will not effectively track your accounting profit and business growth if you don’t have details at the job level.

Search the QuickBooks Solutions For Your Industry to find your business field.
Here are 6 easy ways to utilize QuickBooks to assist with your job-costing:

1. Set up the QuickBooks Item list. You’ll have both an expense and an income aspect to each item. This will allow you to track your costs and your income, and 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 and your employees can track time by item and customer/job. No dollar value is associated with this time until you actually pay the employees within QuickBooks.

5. QuickBooks has pre-formatted reports that you can access to have job-costing information right at your fingertips. These are found under the Reporting menu and 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 and 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 and how you can use that information to assist you in decision-making as you grow your business accounting profit.

Job-costing is easier when you set-up your accounting software package and 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, how much accounting profit your company has. After the profit is determined, increasing accounting sales will increase the accounting profit.


About the author:
Pam Newman is a Certified Management Accountant, Certified QuickBooks ProAdvisor, and author of Out of the Red and Unlocking the Secrets of QuickBooks. Pam's goal is to help business owners keep money from slipping through their fingers.