Posts tagged job costing
Construction Specific Payroll Reporting

office workerFor many types of businesses, outsourcing payroll is considered a “no brainer”. The benefits from eliminating the recurring, time consuming activities related to payroll processing are typically well worth the cost, to say nothing of the burden of tax reporting responsibilities. Payroll for construction companies on the other hand is very different from other typical business payroll. Processing construction payroll typically includes such challenges as:

  • Employees working in different locations and/or tax jurisdictions
  • Shifting pay rates depending on the type of work and/or number of hours worked
  • Special external reporting for unions, workers’ compensation, certified payroll, etc.
  • Internal reporting requirements such as job costing

Even collecting time cards is more difficult for a contractor than other typical businesses.

Construction-Specific Reporting

If you are a contractor, it may still make sense for you to outsource your payroll processing, as long as you can find the right service partner. Many traditional payroll service companies do not provide many of the reports that construction companies need to run their business and comply with various reporting requirements. When evaluating a service or solution, make sure they can provide the following reports:

Job cost reporting –If your payroll solution cannot break payroll data down by job, you will spend a lot of time manually entering labor hours into spreadsheets in order to calculate each job’s labor component. Look for a solution that will track labor hours, dollars and burden (FICA, FUTA, SUTA, workers' compensation, etc.) by job. A comprehensive service or software package will offer more sophisticated reports, such as tracking by cost code, estimate vs. actual, percent complete, production, unit pricing, projected costs to complete and more.

Compliance Reporting – Including new hire, EEO minority compliance, and workers' compensation reporting.   Trying to manually track employees who routinely change jobs and workers' compensation classifications, for example, can be a time-consuming job. Make sure to select a payroll solution track changes automatically and create accurate reports.

Union reporting -Unions require detailed reporting for their members. If you work with multiple unions, your reporting requirements can quickly become overwhelming. A good construction-specific payroll service or software solution should be able to handle all of these complex requirements.

Certified payroll reports – If you work on federally-funded prevailing wage jobs (and similar state jobs), you will need to be able to create certified payroll reports. Certified payroll reports can be complex and time consuming to prepare without the help of an automated system. A construction-specific payroll service should be able to produce these reports in accordance with the rules of the U.S. Department of Labor's form WH-347, as well as specialized forms for individual states and municipalities.

You may not need all of these reports and there may be other types of reports that are essential to your business. Use this list as a starting point and modify it to meet your needs before you begin searching for a solution.

5 Questions To Ask Before Buying Job Costing Software

questionSuccessful contractors understand that job costing can mean the difference between a profitable business and one that struggles. But installing a job costing system isn’t a silver bullet; it takes planning and work to see the benefits from job costing. Here are 5 questions you should ask before buying (or upgrading) your job costing software.

1. What Information is Needed?

As Steven Covey says, you want to “Begin with the end in mind”. It is important to determine the specific needs of your business. In order to get useful reports out of a job costing system, you have to collect and enter the data you need for those reports. Companies that don’t take the time to define their needs often:

  • Struggle to make a decision about which job costing system to purchase because they are overwhelmed with all of the available features. Some of them end up making decisions based on the favorite bells and whistles of the salesperson even though they don’t end up using those features.
  • Waste a lot of time collecting data they never need
  • Don’t set up the system to collect the information they need to make informed decisions about their jobs..

2. Who Needs Job Cost Information?

You will also want to determine who needs what information to do their job. While initially it may be quicker to create one master report that has the information that everyone needs, having reports that are tailored to deliver the information needed by different management roles (i.e. job foreman, supervisor, C.F.O., C.E.O, etc.) will make it easier to find the actionable data needed to make better decisions.

Don’t forget to consider the reporting needs for individuals outside of your company, like you banker or your bonding agent.

3. How Will Labor be Coded for Job Costing

Since labor is a large component of the overall cost of a job, one of the first issues you need to address is how that labor will be coded to the particular job and/or category. For example, will timecards come in from the field with correct job costing information? If so, who will code them – will the foreman code all of them or will each person code their own? Will your time keeping system need to be updated to handle job costing? If they will not be coded in the field, who will code the timecards (and when)?

Try to add job costing information to the time keeping records as quickly as possible. The longer the delay, the greater chance for error and the greater chance your people are making decisions with incomplete data.

4. Is There a Standard Budgeting Process for All Jobs?

Do you create budgets/estimates for all of your jobs? Many construction companies set up their job cost tracking system to mirror the budgeting system in order to easily compare budgeted vs. actual costs. If you don’t create budgets for all of your jobs, which costs will you track for those jobs? If your job cost tracking categories do not match your budgeting categories, how will make sure that all costs are being reported and nothing is falling through the cracks?

5. Do You have a Standard Process for Material Requisition and Purchase?

Just like labor, it is important to make sure you are recording and coding all material purchases to the correct jobs. Before you implement  a job costing system (or as part of that process), you should have processes and procedures in place for requisitioning and purchasing materials. In addition to defining who can approve material purchases you will also want to define who has the authority/responsibility for coding accounts payable invoices and when they should be coded.

There are many other questions to consider, but these should give you a good start. If you have any questions or need help evaluating your needs, contact us for a free consultation.