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Job Costing Could Be Costing You More Construction Sales

Posted by Kit Dickinson on Dec 13, 2019 7:00:00 AM
Kit Dickinson
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Job costing construction

Most payroll sales reps have encountered construction companies that are skeptical about outsourcing payroll. Contractors have a complicated relationship with human capital management (HCM) and enterprise resource planning (ERP) systems. The frustrations often lie in job costing — a critical part of building a strong, profitable construction business.

Whenever you begin a conversation with a construction company, you'll need to be prepared to answer questions about job costing and addressing objections that your HCM system can't meet their needs.

What Is Job Costing?

Job costing figures out a project's profitability by tracking its spending throughout the job's lifecycle. This involves calculating all of the costs — wages and benefits, equipment, materials, fuel, and any other operational costs — then comparing them to the budget for the job. Hopefully, the numbers come out in the black.

Job costing is used to predict profitability and to make informed bidding decisions on new construction contracts.

The problem is, outsourced HCM systems don't provide the functionality that job costing requires. And that puts construction companies in a tough situation. But if you understand the challenges your clients face, you can provide a solution that other payroll vendors don't offer.

Contractors' Frustrations with Job Costing

Job costing is usually managed in an ERP system. The ERP is ideal for job costing, because it's designed around projects/jobs and allows construction companies to assign numbers to individual expense/revenue items.

But ERPs that offer payroll modules are often limited, which means contractors are burdened with manually handling many aspects of payroll. Conversely, if a construction company outsources payroll, they need to make sure they can reliably get all of the labor and benefit costs at the project/job level instead of a General Ledger output. This allows them to see the impact of the last pay period on their job costing. Depending on the payroll system and how it was set up, they may not even be able to get the data they need to the project.

We've spoken with contractor after contractor who unsuccessfully tried outsourcing payroll. They got burned when a payroll sales rep treated the construction industry like any other business. The payroll solution couldn't handle complex construction pay policies or transfer job cost details back to the ERP, and it created more problems than it solved.

So your construction customers are in a quandary: their ERP's payroll creates more work for them every pay period, but outsourced payroll systems create more work to try get all of the detail they need back into their ERP.

They need a system that can dependably integrate data between your payroll solution and their ERP system. That's where IDI comes in.

Handpicked related content: Think HCM Can't Work for Construction Companies? Think Again!

Make Job Costing Easy for Construction Clients

IDI can provide a comprehensive and complete data flow back to your construction customer's ERP system — including the general ledger and critical job cost information. With IDI, your HCM system is fully capable of meeting their ERP integration needs and eliminating your customers' time-consuming processes.

We've been accepted as an independent software vendor (ISV) for Acumatica and a development partner for Sage 300CRE. Our Contractor Central software bridges the gap between your customer's ERP and your HCM in a way that has never been possible before. Contractor Central can:

  • Integrate your payroll solution with an ERP with both GL and job cost details
  • Accommodate the complexities of government and union contracts
  • Handle certified payroll reporting requirements
  • Eliminate compliance risk and costs of running payroll in-house
  • Customize for assigning the correct prevailing wage and union rules
  • Eliminate costly and error-prone manual entry in multiple systems

Win More Sales with IDI

Construction is a complex industry. Not many people understand all of a contractor's needs or speak the language. IDI has been an industry advisor for over three decades, and we can anticipate potential hangups before they happen.

IDI has been there, and we've earned a reputation among contractors as a trusted guide. We get it, and we partner with payroll companies to help them get it too.

Contact IDI to help you win more construction contracts in 2020.

Topics: Construction Industry Solutions

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