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Is Your Business Profitable?
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Author: Pam Newman
Topic: Business
Viewed: 40 time(s)
[ Not Rated Yet ]
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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 and profit are two
different concepts. If you don?t know your exact income and
expenses for each job and your overall business, then how can
you know whether you are making a profit? And, if you aren?t
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
and spend on each job. Expenditures should be tracked for direct
labor and material costs on each job. In addition, you should
also be tracking overhead costs and allocating them to your
various jobs as applicable. There is always going to be some
general overhead, but 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
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: 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 and
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 and an income aspect to each of the items. 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 preformatted 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 profitably.
Job-costing is easier when you set-up your
accounting/bookkeeping 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, 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, and Author of Out of the Red and
Unlocking the Secrets of QuickBooks. For more information, you
can visit our website at http://www.quickbooksinformation.com
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