Research indicates that the majority of successful London printing companies utilise job costing processes. These processes track the exact costs of producing jobs or orders and benchmark them against revenue. Job expenses can encompass equipment, labor, overheads, third-party services, materials, and other manufacturing expenses.
In any company, the key to success is having the ability to accurately monitor the expenses related to each task. Just knowing your overall income and outgoings is not sufficient. For every job/project, you have to know the amount you are spending, relative to the amount you are billing your customers. In all likelihood, if you do not know this information, you are leaving profit on the table.
Job costing offers many different advantages. It allows you to see which parts of your business need improving, and which parts are working well. This means that you can implement the necessary changes to your operation, to enhance efficiency. Also, you can increase the cost-effectiveness of individual products, jobs, production equipment, customers, staff, departments, and your business as a whole.
Using BHR (Budgeted Hourly Cost Rates) for Job Costing
BHR is a crucial factor in determining the cost of a job. For over a century, this practice has been adopted by the London printing and packaging sector. BHR is your company's out-of-pocket expenses related to each item of production equipment on your premises. It encompasses helper and operator salaries, rent, benefits, equipment depreciation, leases, utilities, supplies, admin expenses, insurance, overheads, and other costs.
The aim of BHR is to recoup all of your expenses associated with labor and production equipment. This equipment includes platemakers, prepress, digital copiers, presses, cutters, wide format printers, handwork, and folders. There is software available that helps London printing companies determine their hourly cost rate, in line with industry best practices and formulae.
Job costs can be tracked in several ways. The easiest and most affordable cost tracking method is to get staff members to write their times on production time cards, or job tickets. After each job is completed, multiply the hourly cost rate of the production equipment by the hours worked, to get the total cost of the job.
A more accurate and efficient way of monitoring job costs is to put computers on your shop floor so that the activities of staff members can be logged. More than fifty store data collection software suites are available on the market. This software varies in capability and ranges in price from £125.00 to over £30,000.00.
When making a business purchase, you should record which job it relates to. Do not simply put it into an "expenses pool". It only takes minimal effort to monitor your costs for each job, and your bottom line will improve significantly as a result.
You should regularly analyze project processes from both a production standpoint and from a monetary perspective. You need to be able to track data, on a computerised system, at various points in a project. This way, you can assess your profitability very accurately and control your expenditure when required, rather than trying to do this retrospectively.
To analyse job costs effectively, there are a few different types of reports you need to generate. The most vital job costing report is an "Estimate vs. Actual Report". This compares the estimated cost of a job with the actual cost and highlights any financial discrepancies throughout each project phase. Also, it calculates the profit made on every job and identifies inefficiencies in estimating production costs. This data allows you to give more profitable and accurate quotes for future projects, and streamline your production processes. Also, an Estimate vs. Actual Report helps to ensure that customers are correctly invoiced for every piece of work you performed.
Job costing summary reports that display the cost of different jobs, categorised by-product, is crucial. These reports allow you to determine your most successful products and the areas for improvement. Consequently, you will make better pricing decisions about similar products in the future.
Job costing summary reports that display different jobs, categorised by the customer, is important too. These reports will highlight your most profitable and least profitable customers. You can use this data to formulate mark-up and pricing strategies for specific customers.
It is best if you have an accountant in your workforce, because he or she will be skilled at interpreting the data from these reports, and relaying this information to you in layman's terms. Unless you fully understand what your reports are telling you, they are not of much use. An accountant can give you a greater insight into the trends highlighted by your reports. This will help you make better choices, as you expand your company profitably.
Successful London printing companies have benefited from job costing practices in other ways as well. Job costing has allowed them to better forecast the resources and costs of particular products and services. It has allowed them to devise advertising and sales strategies, and support future investments in equipment. Also, it has enabled them to identify defects and take corrective action, which has improved the overall performance of their operations.
There is no justifiable reason for a business not to track the income and expenses related to the performance of specific jobs. Essentially, if you choose not to monitor this data, you are making a conscious decision not to be a diligent business owner. The size of your business or industry is irrelevant. Your profit is something that you ought to be assessed each month, on a regular basis. As the saying goes, if you fail to plan, then plan to fail.
Job costing does not need to be a daunting process. The trick is to have a plan and use computerized accounting software. This makes everything much easier. By doing this, you will get the information you need to make your company more manageable and more profitable. When done correctly, job costing is what distinguishes the very profitable companies, from the companies that are struggling to survive.