To be successful and profitable consistently in the Autobody industry, you need your sales staff to write accurate estimates. In order to have accurate estimating, you need accurate job costing either by writing it all down in a spread sheet or a Management system to give you constant feedback on your estimator’s ability’s. As you are in the process of writing a estimate, you are continually monitoring the profitability of this estimate. Your focus on profit margins on parts, paint materials, and labor costs, and your goal is to be in line with the company’s profitability goals…….
Once you have sold the job and production begins, you keep records of your expenses for that job in each category of your estimate. How are you doing on meeting these goals? This collection of data is critical to your success because it sets the stage for accuracy in your future estimates. Only by gathering accurate and timely job cost information will you be able to gauge job performance, and keep your estimating information up-to-date.
Job costing has a second important benefit—as a big picture financial control. You are working hard to keep total job costs at the percentage of income you target with your markup. You watch your P & L to see how you are doing overall. You watch each individual job to ensure that the job is staying on target. If you need to lower job costs it is much easier, at the individual job level, to investigate the overrun problem and solve it.
Reviewing Profit and Loss statements shows clearly that job costs are usually a Autobody Shops single biggest area of expenditure—often running 65-70% (or more) of total company expenditures. If they run out of control, your business is out of control. If your job costs are 79% but were planned for 70%, you will lose 9% from the net profit line. Thus, job costs need careful analysis.
In Autobody where expenses are out of control, the greatest problem often lies with job costs that are overrunning estimates by a significant margin and bleeding the company of profitability. Accurate job costing data is needed for three reasons:
– to help tighten cost control on ongoing jobs
– to prevent overruns on future jobs
– to build a cost history for estimating
Collecting job cost data helps tighten your current job expenditures. Knowing that an ongoing job is beginning to overrun can help you tighten up on costs on that job. You may be able to recoup some of your costs through better Supplementing procedures