Companies encounter no shortage of challenges when determining job costing and project profitability. A survey commissioned by QuickBooks captured some of those pain points among seven industries: construction, landscaping, legal, consulting, creative services, remodeling, and engineering.
Two to five bad estimates could put nearly 50 percent of companies out of business
Twenty-four percent of businesses said two to three bad estimates could cost them their company, and another 23 percent said four to five bad estimates could do the same.
But one in five (20 percent) said just one bad estimate could tank their business entirely. And those respondents who don’t track their project costs at all? They’re even more subject to death by one bad estimate (38 percent).
46 percent track project costs by memory, on paper, or with a spreadsheet
In today’s world of digital ease and efficiency, relying on memory or scratch paper shouldn’t be an option. But the survey showed that almost half of businesses are still using what some might consider ancient tools to capture project costs.
But for those respondents who use a job costing app or accounting software that includes a job costing system, 76 percent said their cost estimates to the final project costs are either very close or accurate. Only 64 percent of those using memory, paper, on spreadsheets to track project costs could say the same.
And of those who are taking advantage of apps and software with job costing technology, nearly 66 percent said technology has increased their profitability.
Businesses that review costs daily are more likely to match final project costs
Nearly 41 percent of respondents said they track their project costs daily. And it’s working out. Almost 25 percent said their estimates are matching their final projects exactly. Conversely, of those who never review their expenditures or costs during a project, only 8 percent said their cost estimates match their final project costs — nearly one in five stated profit is usually less than expected.
24 percent of landscaping businesses say one bad estimate could put them out of business
Even though landscaping businesses tend to take on more projects in a year than the other six industries surveyed, one bad estimate could still put them at risk.
But nearly half of those landscapers (46 percent) are trying their best to avoid such a disaster by using either a job costing app or accounting software with job costing capabilities. Many (almost 40 percent) who are using that technology said they review costs daily, and 60 percent said their estimates are “very close” to the actual project cost. Meanwhile, 65 percent of that same group that uses job costing technology report it’s increased profitability.
72 percent of landscaping businesses say it’s difficult to correct when costs overrun
For 33 percent of landscapers surveyed, underestimating labor costs is usually what gets them in the hole. And when costs overrun, 72 percent said it’s either somewhat difficult or very difficult to get back on track.
As far as external factors that harm a project’s profitability, 56 percent said the availability of skilled laborers is at the top of that list. The next two in line? Tariffs (33 percent) and inflation (32 percent).
Majority of landscapers say job costing is important in overall profitability
Of the 64 percent of landscaping businesses that said job costing is very important to overall profitability, 68 percent said technology has helped increase profits, and 72 percent of the combined groups are optimistic for greater profits this year.
QuickBooks Online surveyed the largest available sample size from seven key industries throughout the U.S., in May 2019. Respondents (age 18+) were made up of 1,341 in-house accountants/bookkeepers, finance managers/directors, and business owners/partners. QuickBooks Online commissioned the survey. A statistically significant sample of survey respondents was independently provided by Pollfish.
To view the full survey report, visit https://quickbooks.intuit.com/accounting/job-costing/#benchmark-report
Article provided by Intuit QuickBooks. For more information, visit https://quickbooks.intuit.com