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Don't Know About Job Costing? It's Costing You Construction Customers!

Posted by Kit Dickinson on May 23, 2018 7:30:00 AM
Kit Dickinson
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construction manager on his laptop | job costing for construction companiesJob costing is a key concept for construction companies, with important implications for HCM sales reps. But few sales reps know what job costing is. As a result, you're struggling to gain access – and when you do get in the door, you're unable to convince them to see how your solutions can support the most critical part of their business. If you want to be taken seriously by construction companies, you need to know what job costing is and be able to talk about it. IDI can help you do that.

Here's a quick overview of job costing, and how you can use it to close more sales and win deals in this vertical.

What Is Job Costing?

Job costing is critical for construction companies, because they use it to determine how to bid out for a project. Once a contract has been signed, they manage against job costing to check their spending throughout the project to ultimately determine if a project was profitable or not.

Contractors use Enterprise Resource Planning (ERP) systems with a job costing module to manage all aspects of the job (job costing, financials, inventory management, budgeting, estimating, etc.). Some popular applications include Sage (300CRE/Timberline & 100/Master Builder), Viewpoint, Spectrum and Foundation.

The job costing module within the ERP determines the true overall cost of labor by calculating labor costs and fringe benefits to be charged to the job and paid out to employees who work on the job. It also factors in equipment, materials, and other expenses that occur throughout the life of a project. This gives a holistic, total cost of the job so that construction companies know exactly how much to quote in order to reach a certain profit. During the project, the job costing module helps companies monitor their spending so they can hit that target profit.

Contractors can manage job costing in their ERP systems, and most offer a payroll module, but ERPs are no HCM system. Since payroll is run "in-house" with an ERP, it puts the burden and liability on the client to ensure that taxes, deductions and benefits are correct – along with actually creating and distributing pay checks.

They also don't offer many employee self-service and other compliance features that are available with an outsourced HCM system. So construction companies are constantly looking for better solutions to stay compliant with labor laws and benefits – which an HCM system can provide – while also keeping their job costing on-track.

Most organizations either use the ERP for everything and deal with painful payroll inefficiencies and risks, or they try to get the two systems to work side-by-side – a messy workaround solution that has its own data reconciliation problems. Either way, they're stuck with a clunky, inefficient system.

Discover how to win more construction clients – download the Time Bank Overview.

Why Are Contractors Fed Up with Payroll Companies? 

Most HCM sales reps know very little about job costing, and they gloss over the topic. Instead, they offer discounts and discuss how their system can provide a post payroll general ledger file back to the ERP system – a "solution" that doesn't actually solve the problem.

But your prospects take this issue very seriously, and they're resentful that HCM companies aren't paying attention. Furthermore, many construction companies have been burned by a payroll vendor with claims they understand their business and can help improve their efficiencies – and fail when it's time to implement their solution.

As a result, your customers are fed up with payroll companies, because they don't actually solve the customer's problem.

Handpicked related content: 4 Reasons Construction Contractors Are Tired of Payday

How to Win Construction Deals

If you don't understand the components of job costing, you'll lose your customer. But if you show them that you get it, and how your HCM system can coexist with their ERP, you can win more customers – and without offering huge discounts. To help you win these projects you've got a partner with a deep understanding of the issues construction companies are dealing with and a new story to tell.

Not only does IDI understand contractors' frustrations, our Time Bank software can resolve the problem by fully integrating their ERP and HCM systems. IDI was recently accepted as a Sage300CRE (Timberline) Development Partner and can help get the necessary post payroll into both GL AND Job Costing. We can set your customer up to meet their most granular needs and preferences, so that they can calculate their unique costs and burdens.

IDI speaks their language – and with us as your partner, that means you do too.

Find out more about how Time Bank helps you solve payroll problems for your construction customers.



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