Is Your Business Profitable?

What's your job profitability? Do you know?

Many business owners are unsure of their profitability at a company or job level. They "think" they are making money because they have a few dollars in their checking account. Having money in your checking account doesn't mean you are profitable. It might simply mean you haven't paid all the bills yet, so you have a little cash. Cash and profit are two different concepts. If you don't know your exact income and expenses for each job and your overall business, then how can you know whether you are making a profit? And, if you aren't profitable, your business won't last long.

Analyze Each Job

Regardless of the size of your business or your industry, profitability is something you should be monitoring on a monthly basis. To determine your profit, you must know how much you make and spend on each job. Expenditures should be tracked for direct labor and material costs on each job. In addition, you should also be tracking overhead costs and allocating them to your various jobs as applicable. There is always going to be some general overhead, but too often dollars are thrown into general overhead, when those dollars could easily be attached to specific jobs.

Intuit's QuickBooks software program has easy-to-use features that allow you to do job-costing for time and materials, so you don't have to worry about having to track it all manually. Rely on tools to help you run your business more efficiently and effectively.

Are you curious how you are doing with job costing measurements? Here are some quick and easy questions to gauge your job costing performance:

1. Do I track each customer's revenue information through a detailed invoice?

2. Do I have a way of breaking down my direct job materials cost by customer?

3. Do I associate all time spent to each job accurately with actual dollar amounts?

4. Do I have access to reports to monitor profitability on each job in a timely manner?

5. Do I have a way to trend the fluctuations in job profitability from job to job, month to month, etc?

If you answered "no" to any of these, then it's time for you to take an objective look at your financial goals. It's time for you to implement a job costing mechanism to help you answer "yes" to all these questions. How can you track your profitability and long-term growth plans if you don't have detail at a job level?

QuickBooks Can Help

Here are some easy ways to utilize QuickBooks effectively to help you with your job-costing process:

1. Set up the QuickBooks Item list so that you'll have both an expense and an income aspect to each of the items. This will allow you to track your costs and your income, and will provide you profit by item.

2. Record your sales through the invoicing or sales receipt process. This will record the income aspects of the items.

3. As you purchase the product or service items, make sure that you utilize the Items tab so that it will record the cost to the appropriate item. In addition, make sure to assign your customer/job information to each line item so that you'll have the costs associated to the appropriate customer/job for job-costing.

4. Utilize the time-tracking mechanism in QuickBooks so that you and your employees can track time by item and customer/job. No dollar value is associated with this time until you actually pay the employees within QuickBooks.

5. QuickBooks has preformatted reports that you can access to have job-costing information right at your fingertips. These are found under the Reporting menu and the Jobs/Time/Mileage option.

6. QuickBooks has the ability to provide reports for any time period you select. This will allow you to have a variety of detail over the growth of your business and to produce trending reports. You can modify the report as needed to meet your needs.

A good accounting professional can help you understand what these reports are telling you, in terms that you can use. Reports alone don't provide value if you don't understand them. So it is key that you understand the reporting information and how you can use that information to assist you in decision-making as you grow your business profitably.

Job-costing is easier when you set-up your accounting/bookkeeping software package and know how to use it. So, challenge yourself today to become more adept at running a financially savvy business through job-costing. Then, you'll know, without a doubt, whether your company is profitable.

Copyright 2005 Pam Newman

Pam helps business owners keep money from slipping through their fingers. She is a Certified Management Accountant, Certified QuickBooks ProAdvisor, and Author of Out of the Red and Unlocking the Secrets of QuickBooks. For more information, you can visit our website at http://www.quickbooksinformation.com

In The News:


pen paper and inkwell


cat break through


How To Make Sure Your Customers Still Trust Your Small Business

The stock market is still on a wild roller coaster... Read More

Business Valuation is Critical

What is Business Valuation? The term business valuation is the... Read More

WARNING to Home Based and Small Business Who Want to Buy Television Cable Advertising

Most small businesses will not even try to advertise on... Read More

Small Business Mistakes: Are You Making Enough of Them?

That's right ­ are you making enough mistakes in your... Read More

Increase Your Profits with a Point of Sale (POS) System

Whether you operate a chain of restaurants, a mom-and-pop convenience... Read More

Building A Business That Works For You

Before you want to build your business, you need to... Read More

Three Ways to Add Leverage to Your Small Business

Remember those drawings from science class of how a lever... Read More

Electronic Franchise Disclosure and E-Signature Future for Investors

It has been discussed allowing Franchising companies to electronically disclose... Read More

What are the COSTS Associated with joining Leads Groups?

When it comes to cost, how much can you afford... Read More

Are You a Small Business Lone Ranger? Take My 10-Question Quiz To Find Out!

So what exactly is a "Small Business Lone Ranger?" A... Read More

Window Cleaning Business Case Study

How do window cleaning franchise businesses start? It is a... Read More

We Know Who THEY Are

Am I the only one that does not have an... Read More

Business Owners - Do You Actually Own a Job?

How many hours do you work a week? When was... Read More

The Workers? Compensation Situation in this Country is Nuts, Arnold in CA Takes Action

The Workers' Compensation situation in this country is unbelievable. Why,... Read More

You Are Invited

Business card size works well for invitations to special events.What... Read More

Are You Making These Mistakes In Your Business?

You've probably heard the statistic that 95% of small businesses... Read More

Local Government Relations for Small Business

Most small businesses simply go about their daily business and... Read More

Avoiding the Small Business Cash Flow Roller Coaster

A solopreneur I know disappears from my radar screen for... Read More

Find Some Sample Payroll Check Stubs on the Net for Easy Reference

Starting a business? For many people, the bravery to venture... Read More

Why Does a Business Fail and What Can You Do to Stop It?

I believe the number one reason why a business will... Read More

9 Things You Must Do To Maximize Your Chances Of Obtaining A Small Business Loan

To get approval for your small business loan application, you... Read More

Gold Medal Delegation

When the recent Games of the XXVIII Olympiad came to... Read More

Small Home Business: Ad Copy Secrets

So it's time to invest some finances into advertising your... Read More

Boston Market; Mobile Auto Detailing

Boston itself covers 50 square miles of concrete and traffic,... Read More

Six Essential Skills to Business Success!

The following are six essential skills to business success. You... Read More

Lawyers Everywhere Telling Regulators What Laws to Make

The Federal Trade Commission decided to sit down and revamp... Read More

Keeping Business Alive

Who is responsible for maintaining the business relationship?Nurturing a business... Read More

Carwash Manual Sample Outline

Car wash businesses are unique to other businesses. In fact... Read More

The Wrap on Ag Plastic

While driving through Pennsylvania farmland, you have probably noticed an... Read More

Write An Effective Job Proposal

I am simply amazed at the problems some of my... Read More

Small Business Publicity -- Worth It?

You bet it's worth it. Publicity via news releases, along... Read More

Book Yourself Solid Key #5: Go Forward With Gusto & Articulate What You Do

Want your small business to flip instead of flop?! Statistically... Read More

A Small Business Must Have a Solid Foundation

We all know that a building has to have a... Read More