Is Your Business Profitable?
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.
Copyright 2005 Pam Newman
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
Starting An E-Commerce Business: Baby Steps
Starting your own e-commerce business can be quite the adventure. There is nothing wrong with falling head over heels in love with your ideas and plans and becoming overly excited, but always remember, feet first. Creating a business from scratch is like a child learning to walk. You need to grab on to something solid, feel around, get a sense of balance, and take baby steps.
Excuses Franchisees Make; When They Violate Exclusive Territory Agreements
One of the biggest excuses franchisees of home based and serviced based franchises make when violating their exclusive franchise agreement with their franchisor and fellow franchisees is: My Family Works There. As a franchisor, I cannot believe how many times neighboring franchisees steal each others clientele or work outside their exclusive franchise area. This jeopardizes trust within the franchise system between franchisees and franchisors.
Small Business - Big Business...Whats the Diff?
Small Business, Big Business ? What's the Diff?
(P)Refer to Grow Your Business
(Although this article is geared towards small business owners, the information is just as applicable to a similar personal situation, only the action is slightly different.)
A Gift Basket Home Business is an Easy Way to Wrap up Profits
You want to know more about making money with your own gift basket home business. You are a creative person and want a career that you can control and find rewarding at the same time. What better way to do this then to start a gift basket business in your own home.
The Inside-Out Business Plan? -- Your Small Business Plan in 10 Easy Questions
Writing a business plan for your Solo Entrepreneur business doesn't have to be a daunting project. If you can answer 10 straightforward questions about your business, you can be ready to go.
Proper Care and Feeding of the Business Owner
That sizzling sound you're hearing may be a symptom of a major hidden cause of businesses closing their doors. It's called burnout. And you may be its next victim. Often the last thing a business owner considers is his or her health and sanity. The burnout that results from overwork and stress can deliver a death blow to the very enterprise you've been giving your all to create. Setting a course for your business that includes the proper care and feeding of the business owner is a critical success factor in every business.
How to Handle Rejection When You Start an Office Cleaning Business
"If at first you don't succeed, then skydiving definitely isn't for you."
Business Debt Collection Letter Writing Secrets
Debt collection letters--an overview
How the Crab Effect Obstructs Growth and How to Conquer It
Some of the greatest words of wisdom for any man or woman seeking change or growth are, "Surround yourself with people who will support and believe in you."
Creative Marketing Tips: Simple Things You Can Use In Your Business To Attract More Clients
The single most important activity you can do in your small business is create a unique marketing strategy and plan. When was the last time you saw a company marketing themselves in an outrageous way? In this day and age it looks like everyone has read the same book on marketing ? and sorry to say ? that book doesn't work!
Employee Email and Internet Use - A Small Business Guide
10 Best Practices to Consider as Your SBIR Negotations Approach Contract Signature
10 Best Practices to consider as your SBIR negotiations approach contract signature:
So What? How to Elicit Benefits from Features
"So what?" is a lovely question.
Be Prepared When Business Investors Look Beyond Your Business Plan
You have spent considerable time pulling your business plan together, contacting potential business investors, making management presentations and pitching your business plan to prospective business investors. Now you finally have a serious investor who wants to conduct "due diligence" before investing real cash into your business.
Common Sources of Financing for Small Business
The choice of financing is an important determinant of whether a product reaches the market, or whether an existing business can survive. The choice of financing is an important part of being an entrepreneur and business owner, and the ability to raise cash when you have no or limited history takes skill and creativity. There are a number of sources of financing. The suitability of the alternatives depends on what stage you are at, and will change as the company matures from stage to stage. The following outlines the most typical forms available.
Small Businesses You Can Start in Automotive
There are many choices when thinking about a small business involving your favorite hobby, cars. What about a Mobile detailing franchise? Yes they too are available. As a matter of fact there are many such choices and each is a little different let me explain.
Age Old Marketing Technique Improves Business Plan Executive Summaries
Every business plan book tells you how the Executive Summary is your opportunity to provide a brief overview of your business plan; capture your readers' attention and imagination; and, summarize the plan's highlights and key selling points.
Success Tips for Small Business Owners
Running a small business requires many skills. However, to do this successfully you need to organize yourself first. Avoid procrastination - read the following and take action.
Quality Controls for Franchising Companies Sample Outline
Quality control in franchising companies is paramount and all franchising companies must have strict guidelines to insure consistency. To insure this takes place throughout your franchise system you must make this a policy in your confidential operations manual. Your first step should be to make an outline of your policies and reasons behind them, since you might need help getting started please feel free to print this article and modify the outline below to best fit your specific business and vision for your company.
|© Athifea Distribution LLC - 2013|