How do construction companies manage job costing?

Job costing is accounting by “job” to track progress and spending throughout the job’s lifecycle.  This involves compiling all of the labor expenses (wages and benefits) and non-labor expenses (equipment, material, etc.) to compare against the budget for the job.  For an accounting system to support job costing, it must allow job numbers to be assigned to individual items of expenses and revenues.

For construction companies, Job Costing is how you measure the true, overall cost of current projects to determine profitability and to make informed decisions when bidding on new contracts.  

Job Costing is typically managed in your Enterprise Resource Planning (ERP) system.   The ERP is the system of record that most construction companies use to manage job costing and overall company financials (general ledger, invoicing, accounts payable, etc.).  Most ERP systems include a payroll module as well, however it puts the burden on you to manage all aspects of payroll compliance (taxes, withholdings, etc.).  

If you are using the ERP system's payroll to feed into the Job Costing module, as you begin to outsource human capital management (HCM) functions --Time and Attendance, Payroll, and HR-- you need the ability to have all of the labor costs associated with a given job uploaded to the ERP to see the impact of the last pay period on your job costing.  

For companies that invoice on a daily basis, you will still need to use the ERP system's payroll to generate daily invoices as outsourced payroll systems (e.g. ADP, Paychex, Ultimate) do not run daily payrolls to get the information back to the ERP each day.

Because of these complexities, many construction companies with multiple systems are relying on time-consuming, manual efforts to get all of the detail you need back into your ERP.

Most Time and Attendance and Payroll Systems cannot handle the complexity of calculating benefit/burden costs (e.g. payroll taxes, pension costs, health insurance, and dental insurance) and mapping logic. 


How can IDI help?

IDI can eliminate your time-consuming processes!  Our Time Bank™ Job Cost Link solution allows us to extract post-payroll information from an outsourced payroll vendor and provide the necessary detail for job costing and GL entries to be imported into the ERP.  

Our FLSA solution then calculates the proper overtime earnings, or FLSA rate, to determine the average weekly rate for compliance with FLSA guidelines. 

When Time Bank is run at the end of the pay period, it retrieves the time and labor information from the time system and associates the specific rates of pay, including any premiums and benefit earnings, with the contract, job, and worker classification, and calculates the weekly average rate of pay, or FLSA rate, used for all overtime hours.

With the click of a button, Time Bank reads the rates from a stored user-maintained table or from a client-provided comma-delimited file, the calculation is made, and the results are passed to payroll and the job costing information to the ERP’s General Ledger.

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ADDITIONAL RESOURCES:

Department of Labor

IDI Job Costing for Construction Clients Blog

IDI Construction Solutions Video 

IDI Construction Solutions Blogs