Is Your Business Profitable?
by Pam Newman

Tracking and analyzing job expense data is key to determining your profitability.

Whats 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?

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.

Pam Newman, author of Out of the Red and Unlocking the Secrets of QuickBooks, is a Certified Management Accountant and a Certified QuickBooks ProAdvisor. She can be reached at (816) 304-4398 or www.quickbooksinformation.com. You can sign up for her FREE QuickBooks Newsletter at www.QuickBooksNewsletter.com.