What is a Job Cost Code

by Perry on August 25, 2010

So often people confuse a Job Cost code with the accounting department’s General Ledger account code. They are not the same.  General Ledger account codes are codes for the whole company financial reporting mechanism, and are NOT separated specifically for an individual job.  As mentioned in an earlier post,  Job Cost codes are really a middle piece of information that company operations deals with from a Project Management perspective.  However, it is the accounting department that charges actual job costs to the Job Cost codes for operations to analyze.  Also, a great deal of people think that a Job Cost code is for instance Labor or Material or Equipment or Subcontractor or Other for that matter.  It is none of those either since any of those categories are way too general for operations to analyze.

For example:  A contractor that performs their own concrete work, demolition, masonry and carpentry. If they put all material costs into a Job Cost code 100 for all material, they have no way of reviewing if they are over/under budget for concrete, since all the material actual cost (concrete, demo, masonry, & carpentry)  is thrown into  one Job Cost Code.

So as you can see, Job Cost is a very gray area because it depends on the type of contractor you are. With that being a very important criteria, you have to figure out how you want to analyze job budget to actual job data from a management perspective. You definitely do not want to wait to the end of a project to see where you stand, because by that time, it may very well be too late.

Look for the next installment that gives you some ideas on what type of Job Cost Codes to start with.  Please remember that it all depends on the type of construction contractor that you are.  This type of discussion also applies to all facets of manufacturing as well.  Thanks again for visting AskTheEstimator.com

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