In our last post, “Job Cost Code Samples“, we spoke about a few ways to come up with manageable Job Cost codes. So many people often land up coming up with almost custom job cost codes per project or job. That is really not a good idea because it will limit your ability to compare past job performance; budget to actual. That is often a key ingredient in historical cost analysis.
Over the past 20 years, we have come up with a few manageable ranges on the quantity of standard job cost codes any company should employ. Now, we are speaking about any contractor in any trade. It is our experience that the quantity of job cost codes should range between 50 to 200 master job cost codes. That’s not saying you need that many per job, just that your master job cost list should not exceed 200 codes.
It also has a direct impact in company operations as it relates to labor management and specifically time cards. In the construction industries, often craft labor for a contractor performs maybe 1 activity per day, maybe even 2 activities per day, and almost never 3 activities per day. However, for a very small contractor, much of the field labor can perform more than 3 activities per day.
So with that being said, you absolutely must think about how you are going to capture this field hourly information. It is so hard for any company have their field labor fill out their name on a time card legibly, let alone fill out what activity they worked on and the associated hours. You do not want to impact field operations that is going to slow to a crawl because you want the field labor to fill out hours per job cost code worked for 1000 cost codes.
As we said in an earlier post, for self performing labor companies, you may want to look at a job cost code for a system. For example, a contractor that does concrete work like a slab on grade, footings, columns, beams, walls, etc. A load of material arrives at the site, often it is for a system like say a slab on grade. The concrete, formwork, rebar, vapor barrier, wiremesh, accessories, etc can be cost coded to Job Cost Code 100 (this is just an arbitrary number here) for example. Then craft labor folks can also code their time to the same cost code 100. That way everything is coded to the same cost code and therefore can be compared to the estimators estimate for that Slab on Grade. That is how the estimator thinks. Now you can say let’s compare our construction estimated cost versus the actual accounting cost and see if we made/lost money.