Introduction to the Job Costing module for companies in service industries

The Job Costing module in Standard ERP is designed primarily for companies in service industries, whose turnover is based mainly on the labour of their employees. Such companies often invoice their work by the hour, the day or the week. In many cases, goods and materials are also supplied and charged to Customers. Pricing arrangements can vary considerably from, for example, a set price for a complete Project to varying hourly charges per individual employee, per task and per Customer. A job costing and time billing system must be flexible enough to handle all possible combinations in an easy and helpful manner.

The need for a job costing and time billing system starts to become apparent even in small companies as soon as the task of project administration begins to gain in sophistication. It is often said that when small consulting companies grow beyond 20 to 30 consultants they have reached a threshold. From that moment, further expansion requires more than one full-time manager for sales and administration, and profitability is often affected. By simplifying project administration, Standard ERP allows this threshold to be pushed upwards.

In a business in a service industry, the utilisation of the employees' time is vital for the success of the company. A non-billed hour is lost and can never be recovered. The key to profitability is the constant and systematic administration of Projects, hours worked and billing: the aim of any time billing system must be to aid companies to be more efficient in these areas. But each business has its own ideas about charging and monitoring Projects and employees. Standard ERP therefore has a number of very flexible reports that can give managers the information they require.

Standard ERP's Job Costing module is designed to allow each employee to maintain their own Time Sheets, preferably filling them in on a daily basis. These Time Sheets are monitored by managers, and need to be approved before they can be invoiced, perhaps on a weekly basis. Errors can be corrected and reversals made before the Invoices are raised. There is full control over invoicing, and Time Sheets are fully editable until they have been approved. Employees can also use Activities to record time.

The main function of this module is to accumulate information about the time worked and the materials or services provided for a certain project, task, assignment, client or job. Once this information has been gathered, it can be compared to budget, monitored, adjusted and, in most cases, invoiced. The module thus focuses on income, not on costs. The cost side of each transaction is normally handled in the Nominal Ledger through the use of cost centre or Tag/Object accounting.

Standard ERP's Job Costing module is integrated with the rest of the system. Invoices for services and Projects are passed to the Sales Ledger module, where they are treated as normal Invoices. The Sales Ledger module is in turn integrated with the Nominal Ledger.

The Job Costing module interacts with several other modules in Standard ERP. The following diagram illustrates the registers in the module, together with the other registers involved in the project management process. To the left are the five main registers in the Job Costing module. At the bottom are the registers in other modules that interact with Job Costing, and that provide some of the information that is required for efficient project management. There are also a number of settings that can influence the behaviour of the module.

To use the Job Costing module, you will first define Projects and Budgets in their respective registers. You will then enter Time Sheets and/or Activities, to record the work that has been carried out. This information, together with that concerning chargeable items (expenses, goods and materials, internal resource uses and stock outtakes, recorded in the appropriate register), will be transferred to the Project Transaction register automatically. This register records each chargeable item separately, specifying in detail how quantities and prices are to be invoiced and charged to each Project.

This process is illustrated in the following diagram:

Project Transactions are fully editable before the invoicing process. Draft Invoices produced by this process can precisely reflect the work carried out in completion of a Project and so will be based on the edited Project Transactions. It may be that invoicing based on actual costs in this way will not be appropriate. Instead, you can choose to use a fixed cost invoicing method. This can be accommodated by entering the fixed costs in the Project Budget register. The invoicing routine will automatically detect whether an Invoice should contain actual or fixed costs. In both cases, Invoices will be saved in the Invoice register in the Sales Ledger module. You can edit them before marking them as OK.

Reports regarding employees and time records are available, as well as several reports showing the status of Projects. When printed to screen, the reports have some unique drill-down facilities that make analysis and control fast and easy.


The Job Costing module in Standard ERP:

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