I’d bet that most manufacturers want to be absolutely crushing it in business. To that point, a manufacturing business can be a great way to build wealth, create jobs, stimulate the economy, and achieve just that. This is why it can be absolutely heartbreaking to speak with manufacturing business owners who are struggling to see the fruit of their labors. Rather than crushing it in business, the business is crushing their life. Nobody wants that. If you’ve been reading our blog for some time, you’ve likely picked up on some recurring themes about being a sales-driven organization, building a world-class team, and having stellar business processes. Why do we keep talking about this stuff? Because improving our clients’ businesses is a key part of our mission here at ProShop. Which brings us to our next topic on job costing. This is arguably the most important thing for manufacturing businesses of all shapes and sizes to get right. The work you are doing needs to be consistently profitable in order for the business to succeed. If you don’t know where the business is losing money, you won’t be able to patch the leak before the ship goes down.
Cash is the fuel that drives your business forward. If you run out of it, the business will fail. While we’ve already touched on the topic of cash flow in the past, this simple point alone underscores the importance of consistently achieving good margins on your jobs so that you have a steady flow of cash to keep the business functioning properly. Ultimately, you need more than a gut-feeling that you made money on a job. You need the data to back it up. So many shops that we speak with don’t have a mechanism in place to see this presented with accurate data. This is absolutely essential to drive better decision making.
Do less of the wrong stuff, and more of the right stuff That’s one heck of a new-year’s resolution, but let’s be honest, there’s lots of truth in that headline. If we’re going to achieve it, how will we know what the wrong stuff is so that we can do less of it? Well fundamentally, you need to be able to see which jobs and clients are profitable, and which ones aren’t so that you can focus your efforts on the work that wins.
The problem with many ERP systems today is that their job costing features are cumbersome to use, difficult to keep accurate, and hard to understand. The result? You don’t use them and ultimately have no idea about true job performance. The lack of clarity is frustrating and leads to inconsistent profitability. You have some good months which make you feel great, followed by bad ones and leave you in the dumps. It can be an emotional rollercoaster.
Now let’s pretend that there was an easy way to see and understand accurate job costing data. You’d have the ability to understand your exact cost of labor, materials, and outside services for each job. What would that allow you to do differently? Here’s some ideas:
1. Create better estimates: When reviewing job costing data, you’ll be able to compare what actually happened with what was estimated to happen. Based on that analysis, you’ll know if your estimated costs for materials and labor were accurate, or if you missed the mark and need to revisit the estimate in the future. Either way, the feedback loop will calibrate your estimating process to ensure more consistent profitability on quoted jobs.
2. Gain clarity on what type of work is best for your shop: With job costing data before you, there will be no secret about which jobs perform best, and which jobs perform poorly. As a sales-driven organization, this will allow you to double down your sales efforts in pursuit of more customers and jobs of this type so that you can drive revenue and profitability forward.
3. Understand which jobs perform poorly: If the above is true, so is the other side of that coin. You’ll now understand which jobs perform poorly. From here you can investigate why that might be so that you can turn those poor performing jobs into more profitable jobs, or you might move away from that type of work altogether to focus on what you’re already good at. Either way, this helps to focus your team’s efforts on the right activities while reducing waste.
4. Better decision making with actionable financial data: With this newfound clarity on job related costs and profitability, you’ll be better equipped to make better decisions for the organization. You no longer need to live in confusion about why your business isn’t performing as well as you’d like it to. No more struggling to distill the profit and loss statement or balance sheet to dig out key insights. You don’t need to be an experienced accountant to get to, read, and understand the information you are looking for with good job costing data in place.
Start crushing it with ProShop Here’s the best part. You don’t need to pretend! Shops that run on ProShop get to use these benefits every day to drive their business forward. Easily access work-order related job costing data just like in the example below. Since every work order is preserved as a historical record, it’s easy to pull up the data from the last run to see how well the job performed before quoting it again. Part-level cost and profit history displays this information as a trend so that you can study job performance over a period of time.
ProShop’s profit breakdown will allow you to further analyze profitability data allowing you to filter data by date range, customer, work order type, machine, and operator providing you with total visibility on where your profits are coming from. Our goal is to help you improve your business. Does your current system provide easy access to job performance data? If not, we’d love to speak with you. Get in touch today to start doing more of the right stuff!
