April 12, 2024 • 25 mins
Unlock the financial prowess of your painting business with expert insights from Daniel, the brains behind Bookkeeping for Painters, and Richard, your tax strategizing aficionado. Together, we dissect the critical concept of job costing and how it can catapult your gross profit margin to the coveted 50% mark. By dissecting direct costs and revenue streams project by project, you'll grasp how to fine-tune your expenditures, whether it's cutting back on ad spend or tightening overhead, to ensure your business doesn't just survive—it thrives.
As we journey through the number-crunching labyrinth, we shine a light on the power of QuickBooks Online and the perks it brings to the job costing table. Let's talk about syncing up time tracking, managing material purchases with ease, and the cherry on top—performance pay. Inspired by the legendary Charlie Munger, this strategy doesn't just motivate your team; it aligns their success with your bottom line.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to the profitable painter podcast.
The mission of this podcast issimple To help you navigate the
financial and tax aspects ofstarting, running and scaling a
professional painting business,from the brushes and ladders to
the spreadsheets and balancesheets.
We've got you covered.
But before we dive in, a quickword of caution.
While we strive to provideaccurate and up-to-date
financial and tax information,nothing you hear on this podcast
(00:22):
should be considered asfinancial advice specifically
for you or your business.
We're here to share generalknowledge and experiences, not
to replace the tailored adviceyou get from a professional
financial advisor or taxconsultant.
We strongly recommend youseeking individualized advice
before making any significantfinancial decisions.
This is Daniel, the founder ofBookkeeping for Painters.
Speaker 2 (00:44):
And this is Richard, tax director, with Bookkeeping
for Painters.
How's it going?
It's going pretty good.
Speaker 1 (00:51):
We're here in Chattanooga, tennessee we are.
We're still in Tennessee ForBrandon Lewis's APPC event,
which is we're excited to seefolks see a lot of familiar
faces and network and everything.
So in beautiful Chattanooga theweather isn't that great, but
(01:12):
it's a really awesome hotel thatwe're having the event at.
Speaker 2 (01:17):
Yeah, I love so.
People probably know I'moriginally from the South and so
I love being able to come downto the South anytime I can.
Southern Tennessee is abeautiful area.
We got the mountains in thebackground.
I got trying to find thatChattanooga Choo-choo that
they're always talking about.
I haven't seen that yet, butmaybe.
Speaker 1 (01:38):
Yeah, so for get on the train.
So today we're going to betalking about job costing and
we'll first cover you know whatis job costing.
Why might you want to do it?
What should you be kind ofshooting for?
What are some?
What is, what is a way you cando it.
(02:00):
You can do job costing manydifferent ways.
We're going to cover a way, notto say it's the only way, but
it's a way you might consider.
So first of all, let's coverwhat job costing is.
Job costing is simply the therecording, the revenue, your
(02:20):
money received from a project,and then the direct materials
and the direct labor to arriveat what the gross profit is on a
specific job.
So this is going to tell youyour gross profit for each
specific job.
That's all job costing is.
So it's just associating therevenue and the direct costs per
(02:44):
project, because when you lookat your profit and loss overall,
it's just going to tell youoverall.
You know you had your revenue,your direct costs, your cost of
goods sold and then your grossprofit overall, and so the job
costing gives you more detailedinformation on what specifically
happened on each particular job.
Speaker 2 (03:03):
When you talk about direct costs, you're kind of
talking about the things that wedon't really have a lot of
control over.
You know, the cost of the ofthe paint, the cost of the
supplies, the cost of labor toget the job done.
So those are the things thatare going to be directly tied to
earning that money and you havesome control, but probably not
(03:27):
as much as you do with othercosts like advertising and
overhead and things like that.
Speaker 1 (03:34):
Yeah, and the reason why job costing is super
important is because itbasically because a gross profit
is super important.
Gross profit is probably likethe key metric to if I wanna
know how well a paintingbusinesses run.
I can look at their grossprofit and kinda get a real
(03:57):
quick idea of how well they'regonna be doing.
And the average gross profitpercentage as a percentage of
revenue is 40%.
That's like the average.
If you look at the nationaldata.
That basically means that ifyou do a $10,000 project, the
(04:19):
direct cost would be 6,000,that's the labor and materials,
and then what's left over is$4,000, which is 40% of the
10,000.
Speaker 2 (04:27):
You're talking about gross profit here, which is a
little bit different than themoney that actually goes into
your pocket as the businessowner, right yeah.
Speaker 1 (04:36):
Yeah, because then after that you have your
overhead costs which are notthey're not associated with a
specific job, just what you needto do to advertise your
business.
General overhead costs likeinsurance, those things are not
cost of goods sold, they're notdirect costs, so those are not
included in job costing.
Speaker 2 (04:57):
Right, because you're gonna be paying for those,
whether you do 100 jobs or 10jobs, and so the more work you
can do, the lower your overheadbecomes as a percentage of your
total revenue, and I thinkthat's why it's so important to
track your direct cost, your jobcosting, so that you understand
(05:18):
where do I need to makeadjustments.
If my advertising is notgetting me enough work to
justify the cost, then do I needto make adjustments there?
Are we making enough revenue toafford having this extra admin
labor or an outside office orsomething like that?
(05:40):
Yeah, yeah.
Speaker 1 (05:43):
So that's why it's important what should you be
shooting for?
For gross profit, or your grossprofit on each job or overall?
Like I said before, average is40%.
We typically recommend startingout shooting for a 50% gross
profit, meaning that you'recharging your customer twice of
what it costs you to do the job.
(06:03):
So 100% markup is another one.
It's at 50% gross profit.
So if you have a $10,000project, the direct cost would
be 5,000, which would be labormaterials, and then you arrive
at your gross profit there at5,000.
Speaker 2 (06:21):
I've heard some people say like oh man, charge
the customer double the costthat it takes to do the job.
That seems high.
It's not high.
It's actually pretty standardfor most industries.
If you go to a restaurant, thecost of the food they serve you
is less than 50% of what they'recharging you for it.
(06:42):
If you go to the store to buyclothes, like a retailer, the
cost of those clothes to thestore itself is much less than
50% of what they're selling itfor.
So it may sound 50%, man.
That may sound high.
It's not.
It's actually pretty standardamong most industries.
Speaker 1 (07:02):
Yeah, and there's folks that we work with that
have gross profit of like 65%gross profit Granted.
They are a larger, moreestablished.
They've been around, they havea lot of social proof and
established processes, goodsales process, but they're
getting their gross profit isjust blowing 50% out of the
(07:26):
water.
So, yeah, 50% is not high, sodon't be afraid to.
If you can't charge that, youmight need to look at your sales
process and make that a littlebit stronger so you can command
a 50% gross profit.
But that is a separate podcast.
So today we're gonna talk aboutjob costing.
(07:46):
How do we actually do the trackthe cost per job in a stream
line of way?
Now you can keep this simple.
I mean you can have aspreadsheet.
I know there's a lot ofspreadsheets that folks use.
I know Nick Slavik'sspreadsheet's good, which can
work completely.
(08:07):
That works fine.
You basically have your revenuefor the job, how much you're
charging the client and then howmuch labor you paid out for
that job and then how much thematerials were for that job.
So you can keep track of thaton a spreadsheet.
It doesn't have to be anythingor a piece of paper, it doesn't
have to be anything fancy.
(08:28):
Now, as you grow your businessthis might become a little bit
arduous, a little bit difficultto keep track of just this on a
spreadsheet or on a piece ofpaper.
So you might wanna streamlineyour process.
So you're actually doing thistracking in your bookkeeping
(08:49):
software.
Quickbooks Online is what wetypically recommend.
So I'll go through a way youcan do this, set this up in
QuickBooks Online so that theprocess is done in your
bookkeeping records.
So the first thing that youwanna do to set this process up
(09:10):
so that your job costing isbeing tracked in your
bookkeeping records in yourQuickBooks Online, is you wanna
have a job naming convention, sothe job name.
Typically folks are usingsomething like the name of the
customer with the type ofproject, so like John Smith
Exterior, maybe with a year atthe end, like 2024.
(09:33):
And then that's a verydescriptive name, so it's not
like a number.
The problem with like jobnumber five, six, seven, six,
eight, four, three is that it'seasy to transpose the numbers
and when you're trying tocommunicate this to other people
the numbers might get mixed upand everything.
(09:54):
So just kinda keeping it simplewith your job naming convention
so that it uniquely identifiesthe project but is also very
descriptive, so it's easy.
If something is misspelled thepaint store clerk misspells John
Smith you might still be ableto determine what they try to
spell.
Not always the case, but a lotof times you can.
Speaker 2 (10:16):
Oh yeah, I completely agree.
We were at Home Depot the otherday buying some stuff for the
house and when you go to checkout they'll ask you do you want
an email receipt in addition tothe printed one?
And we hit yes and it would notallow me to check out until I
put in a name for that project.
(10:37):
Now I wasn't, I was a homeowner.
I'm just buying some stuff formy bathroom.
But if you've got an easy toremember job costing naming
convention you can put in, youknow, john Smith, dash 2024.
That's gonna be a lot easier toremember than what.
Was it?
8675309 or whatever the numberis, but I thought it was
(11:01):
interesting.
Like you know, like these, youknow suppliers like Home Depot
and Sherwin Williams.
They understand the importanceof this and they're making it
easier for people to matchreceipts with the jobs and that
all goes towards this goal ofjob costing.
Yeah.
Speaker 1 (11:18):
Yeah, so establishing your naming convention, that's
step number one.
And then from there and your inQuipwix Online, what you would
wanna do is either usesubcustomers or Quipwix projects
.
I'm not gonna go too deep intothis, but I'm gonna kind of just
go through the subcustomer way.
(11:38):
Which is a subcustomer is ifyou look at your customer list
in Quipwix Online, you'll seeyou know all your customers and
it should be more likely theirname or the company that you did
the painting project for Asubcustomer is just like an
indentation and there's asubcustomer or a job is what it
really is underneath thatcustomer, and so you might have
(12:03):
John Smith as the main customerand then underneath them you
know, john Smith, exterior 2024.
And then maybe you have JohnSmith, exterior 2022.
You know.
So you have those separatesubcustomers underneath the main
customer.
There's Quipwix projects aswell which you can use that and
it's a little bit more fancy ofa user interface, but it's the
(12:24):
same idea there.
And so that's you know.
You have your job namingconvention and then you have
that subcustomer created inQuipwix Online underneath your
main customer.
And then the next part is yourtime tracking.
Now, if you're this is for ifyou're using employees you'll
(12:44):
wanna have a time tracker,ideally, that syncs with Quipwix
Online and your payrollprovider, ideally, but for job
costing purposes, at least yourQuipwix Online.
So the time time trackers thatsync with Quipwix Online,
there's plenty of them out there.
Quipwix Time obviously syncswith Quipwix Online In most
(13:08):
cases it doesn't need to be setup correctly but it syncs with
that.
And then Clockshark is anotherone that syncs with Quipwix
Online that a lot of folks use.
That works great.
So these time trackers,basically they sync over the
customer names from QuipwixOnline, so those subcustomers
and the customer names.
That syncs it over into thetime tracker so your team can
(13:30):
see oh okay, here's John Smith,exterior 2024.
And this is the one that I needto log my time under.
And then, once the hours areapproved in the time tracker in
Clockshark or Quipwix Time orwhatever you're using, it will
sync the hours back over toQuipwix Online so that you can
(13:53):
have those hours in there.
Now an added bonus is if yourtime tracker can also sync over
the hours to your payrollprovider.
So this might be Quipwix Online.
If you're using Quipwix Onlinepayroll, then it'll make it easy
to run payroll.
Or if you're using GustoClockshark and Quipwix Time
(14:16):
Clockshark definitely integrateswith Gusto.
I think Quipwix Time does aswell.
But just finding that timetracker that kind of works well
with others that you can use tosync those hours and those
customers back and forth, tomake things streamlined and easy
for job costing purposes.
Speaker 2 (14:37):
Yeah, take a step out of the.
It'll reduce your admin costs,right Cause you're taking a step
out of your payroll processingby automatically syncing those
hours over, and then you canapprove them and get them paid.
Speaker 1 (14:51):
Yeah, absolutely All right, then from there.
So that's the time tracking foremployees, and these are
painters on the job site.
Now, if you're usingsubcontractors, this process,
this part, is a lot easierbecause your subcontractors are
probably not tracking their time, so you don't need a time
tracker for them.
And if you're paying them byproject, that makes it pretty
(15:13):
easy, pretty straightforward.
It's just a matter of you know.
If you're paying them by checkin the memo line writing, you
know what project that's for, soyou can go back in your check
register to know it's a matchup.
Okay, this check was for JohnSmith, exterior 2024, and that
can be coded to that subcustomerin QuipLux Online.
(15:35):
Or you could even make it alittle bit more streamlined by
using QuipLux Online's.
They have a contractor payfunctionality in QuipLux Online
where you can pay your yoursubcontractor subcontractors
with direct deposit inside ofQuipLux Online.
It's like an additional 10bucks a month or something like
that, and so you can justbasically, at the end of every
(15:59):
project, pay your subcontractorright within QuipLux Online and
code it to the project, thesubcustomer name and the amount,
and then it will pay them be adirect deposit.
And it also helps with W9tracking for your 1099s as well.
So that's that's a cool featureif you want to even streamline
(16:19):
your, your subcontractor paymentprocess a lot more as well.
So that's the labor piece.
That's how you might want toconsider setting up tracking of
time paying of labor for jobcosting purposes.
Then the next piece is thematerials, and so this is you
(16:41):
know, ordering from SherylWilliams or whoever your, your
paint store provider isBasically providing that.
That job name, you know maybeit's Home Depot, you know, just
putting in John Smith, exterior2024, and that should be put on
the receipt.
And if you're using SherylWilliams or Dunn Edwards, you
(17:04):
know they provide an onlineportal.
They'll have the history of allyour invoices that you paid on
credit there.
So you it will and it will showyou you know the job name, how
much it was and all that stuff.
And so from there you canactually download that as a CSV
(17:25):
and upload it into QuickBooksOnline and track those as
basically like a credit card inyour QuickBooks Online, and
it'll make it easy to track eachindividual material purchase
with the job name in QuickBooksOnline and so you can go in
there, upload it, code it basedoff of the, the PO number that
(17:47):
was on on that CSV and thenyou've now categorized all those
materials in QuickBooks Online.
So it's, it makes that processpretty.
You can do it pretty, prettyquick either on a weekly or
monthly basis.
Knock that out in a few minutesjust by downloading the CSV
from Sheryl Williams or frommaybe Dunn Edwards and then
(18:11):
uploading that into QuickBooksOnline and coding that,
categorizing that, and so thatwill get you you know it's coded
to materials, obviously withthe, the job name, the
sub-customer name in QuickBooksOnline, and then you have your
materials into QuickBooks Online.
Now, from there you know ifyou've tracked your hours and
(18:35):
it's the hours are in QuickBooksOnline and you also have the,
the materials in there.
From there you'll be able torun different reports for
job-classing purposes.
If you're using QuickBooksOnline projects, you can go into
the project and the good thingabout QuickBooks Online projects
(18:58):
is that you can actually haveif the hours are being pushed in
from your time tracker.
You can go in and assign anhourly rate for each of your
employees and it will calculatethe labor for you.
So that's kind of a benefit ofusing QuickBooks Projects.
It kind of takes a step out ofthe labor recording the labor
(19:20):
for job-casting purposes inthere.
So QuickBooks Projects isreally good for that, and then,
if you're not using QuickBooksProjects, you're just using
sub-customers in QuickBooksOnline.
You can still get the laborcaptured in your bookkeeping
software.
You'll just basically need todo a journal entry for your
(19:45):
wherever you're paying your,your payroll.
You run your payroll inwhatever platform you're doing,
and then you'll have to do anentry for your job, for job
costing purposes, and so thatcan get a little bit technical.
So if you need help with that,you might need to get with a
bookkeeping professional.
(20:05):
But if you're using QuickBooksprojects, that process can be
made pretty easy, just if youhave your time tracking sinking
over and then you're justassigning the hourly rate in
QuickBooks projects.
Speaker 2 (20:19):
So, once you have all this information and you have a
really good idea of what eachjob is costing you, what that is
as a percentage of your overallpay or your overall revenue,
what are some of the things thatwe can do with this information
?
Should we talk aboutperformance pay?
Daniel shaking his head?
No, I know, daniel and I bothare big believers in performance
(20:44):
pay and that's basicallyincentivizing your employees to
be more efficient and moreeffective and then rewarding
them monetarily when they'reable to do that.
And you really can't do a goodperformance pay if you don't
know what each job is costingyou.
(21:04):
You need to be able to quantifyhow much money did my employees
save me on this project and howmuch money is there for me to
give them as a bonus or a reward.
And that's where the jobcosting is gonna come in.
So you might set a goal.
You might say, hey, this jobneeds to come in at X amount of
(21:25):
hours, we need to keep ourmaterial costs to X amount of
dollars.
And you talk to your projectmanager or maybe the employees
directly, if you don't have aproject manager and you let them
know that if we're able to notwaste materials, if we're able
to be more efficient, then andwe hit these metrics that we're
(21:45):
looking for, then I wanna rewardyou by giving you a portion of
the savings.
Speaker 1 (21:52):
Yeah, performance pay system can be really powerful.
Actually, Charlie Munger, whojust passed away a little bit
ago, he was a big proponent ofincentives, like making sure you
get the incentives right inyour business, and so I can't
remember what he said exactly,but he was basically like if you
(22:12):
get the incentives right,that's like rock up fuel for
your business.
Speaker 2 (22:17):
Right because we want a lot.
So we have our employees and wehave the business owner, and the
incentives are not alwaysaligned, and we want to try to
align those right.
When you're an hourly employee,sometimes you start to think
like my incentive is to getthrough the day and clock out as
quickly and easily as possible.
(22:38):
The business owner's incentivesare to be as profitable as
possible, and so performance payis a good way to help align
those incentives, to help theemployees have a little skin in
the game, sort of speak.
It helps them feel ownership ofthe project and people will do
things.
When people feel like they haveownership, when they feel like
(23:04):
their contributions reallymatter, they will be motivated
to give you a level of work thatis higher than anything you
could pay them for.
We're human beings.
It's important for us to feellike what we do matters, and so
if they feel like, hey, I'm notgonna throw away that 20% paint
that's left in the can, I'm notgonna overuse tape, I might be a
(23:27):
little bit more efficient withmy brush strokes or whatnot,
that just kind of gets everyoneon the same page and everybody
benefits from it.
Speaker 1 (23:35):
So yeah, and so you'll need to have job costing
set up to do any kind ofperformance pay for your painter
.
So that's the key there, and sowhat we covered today is
basically what job costing iswhat you should kind of be
shooting for in terms of yourgoals.
You know, 40% is average, 50% isat least your target starting
(23:57):
out.
And then we went through a wayto streamline your process using
, you know, a simple to rememberjob naming convention and
QuickBooks projects inQuickBooks Online.
And then setting up your timetracker and ensuring that it
integrates with QuickBooksOnline like something like
(24:17):
QuickBooks Time or Clock Shark,and then making sure that you're
getting that PO number, whichis the job name, on to your when
over your ordering materialsfrom Sherwin-Williams or Home
Depot or wherever, and thenmaking sure you're then
categorizing the materials Ifthey're not, you know if you're
buying them on credit withSherwin-Williams makes you
(24:39):
upload that CSV spreadsheet intoQuickBooks Online and
categorizing all the materialtransactions you know based off
of the job name.
And so you get your time inyour labor.
And then oh yeah, we alsotalked about QuickBooks paying
your subcontractors usingQuickBooks contractor pay to
(25:03):
record those subcontractorpayments really easily and then
getting your subcontractors paidwith direct deposit.
So if you can get thosecomponents put together you can
come up with a really goodstreamlined job costing system
in your QuickBooks Online.
Speaker 2 (25:23):
Yeah, I think you covered that really well, daniel
.
If folks have questions ormaybe you just want to kind of
share with us the way you do jobcosting in your business, grow
your painting business Facebookgroup is where you're going to
want to go.
Let us know your questions orthe things that have worked well
for you.
We'd love to hear your feedback.
Welcome to the profitable painter podcast.
The mission of this podcast issimple To help you navigate the
financial and tax aspects ofstarting, running and scaling a
professional painting business,from the brushes and ladders to
the spreadsheets and balancesheets.
We've got you covered.
But before we dive in, a quickword of caution.
While we strive to provideaccurate and up-to-date
financial and tax information,nothing you hear on this podcast
(00:22):
should be considered asfinancial advice specifically
for you or your business.
We're here to share generalknowledge and experiences, not
to replace the tailored adviceyou get from a professional
financial advisor or taxconsultant.
We strongly recommend youseeking individualized advice
before making any significantfinancial decisions.
This is Daniel, the founder ofBookkeeping for Painters.
Speaker 2 (00:44):
And this is Richard, tax director, with Bookkeeping
for Painters.
How's it going?
It's going pretty good.
Speaker 1 (00:51):
We're here in Chattanooga, tennessee we are.
We're still in Tennessee ForBrandon Lewis's APPC event,
which is we're excited to seefolks see a lot of familiar
faces and network and everything.
So in beautiful Chattanooga theweather isn't that great, but
(01:12):
it's a really awesome hotel thatwe're having the event at.
Speaker 2 (01:17):
Yeah, I love so.
People probably know I'moriginally from the South and so
I love being able to come downto the South anytime I can.
Southern Tennessee is abeautiful area.
We got the mountains in thebackground.
I got trying to find thatChattanooga Choo-choo that
they're always talking about.
I haven't seen that yet, butmaybe.
Speaker 1 (01:38):
Yeah, so for get on the train.
So today we're going to betalking about job costing and
we'll first cover you know whatis job costing.
Why might you want to do it?
What should you be kind ofshooting for?
What are some?
What is, what is a way you cando it.
(02:00):
You can do job costing manydifferent ways.
We're going to cover a way, notto say it's the only way, but
it's a way you might consider.
So first of all, let's coverwhat job costing is.
Job costing is simply the therecording, the revenue, your
(02:20):
money received from a project,and then the direct materials
and the direct labor to arriveat what the gross profit is on a
specific job.
So this is going to tell youyour gross profit for each
specific job.
That's all job costing is.
So it's just associating therevenue and the direct costs per
(02:44):
project, because when you lookat your profit and loss overall,
it's just going to tell youoverall.
You know you had your revenue,your direct costs, your cost of
goods sold and then your grossprofit overall, and so the job
costing gives you more detailedinformation on what specifically
happened on each particular job.
Speaker 2 (03:03):
When you talk about direct costs, you're kind of
talking about the things that wedon't really have a lot of
control over.
You know, the cost of the ofthe paint, the cost of the
supplies, the cost of labor toget the job done.
So those are the things thatare going to be directly tied to
earning that money and you havesome control, but probably not
(03:27):
as much as you do with othercosts like advertising and
overhead and things like that.
Speaker 1 (03:34):
Yeah, and the reason why job costing is super
important is because itbasically because a gross profit
is super important.
Gross profit is probably likethe key metric to if I wanna
know how well a paintingbusinesses run.
I can look at their grossprofit and kinda get a real
(03:57):
quick idea of how well they'regonna be doing.
And the average gross profitpercentage as a percentage of
revenue is 40%.
That's like the average.
If you look at the nationaldata.
That basically means that ifyou do a $10,000 project, the
(04:19):
direct cost would be 6,000,that's the labor and materials,
and then what's left over is$4,000, which is 40% of the
10,000.
Speaker 2 (04:27):
You're talking about gross profit here, which is a
little bit different than themoney that actually goes into
your pocket as the businessowner, right yeah.
Speaker 1 (04:36):
Yeah, because then after that you have your
overhead costs which are notthey're not associated with a
specific job, just what you needto do to advertise your
business.
General overhead costs likeinsurance, those things are not
cost of goods sold, they're notdirect costs, so those are not
included in job costing.
Speaker 2 (04:57):
Right, because you're gonna be paying for those,
whether you do 100 jobs or 10jobs, and so the more work you
can do, the lower your overheadbecomes as a percentage of your
total revenue, and I thinkthat's why it's so important to
track your direct cost, your jobcosting, so that you understand
(05:18):
where do I need to makeadjustments.
If my advertising is notgetting me enough work to
justify the cost, then do I needto make adjustments there?
Are we making enough revenue toafford having this extra admin
labor or an outside office orsomething like that?
(05:40):
Yeah, yeah.
Speaker 1 (05:43):
So that's why it's important what should you be
shooting for?
For gross profit, or your grossprofit on each job or overall?
Like I said before, average is40%.
We typically recommend startingout shooting for a 50% gross
profit, meaning that you'recharging your customer twice of
what it costs you to do the job.
(06:03):
So 100% markup is another one.
It's at 50% gross profit.
So if you have a $10,000project, the direct cost would
be 5,000, which would be labormaterials, and then you arrive
at your gross profit there at5,000.
Speaker 2 (06:21):
I've heard some people say like oh man, charge
the customer double the costthat it takes to do the job.
That seems high.
It's not high.
It's actually pretty standardfor most industries.
If you go to a restaurant, thecost of the food they serve you
is less than 50% of what they'recharging you for it.
(06:42):
If you go to the store to buyclothes, like a retailer, the
cost of those clothes to thestore itself is much less than
50% of what they're selling itfor.
So it may sound 50%, man.
That may sound high.
It's not.
It's actually pretty standardamong most industries.
Speaker 1 (07:02):
Yeah, and there's folks that we work with that
have gross profit of like 65%gross profit Granted.
They are a larger, moreestablished.
They've been around, they havea lot of social proof and
established processes, goodsales process, but they're
getting their gross profit isjust blowing 50% out of the
(07:26):
water.
So, yeah, 50% is not high, sodon't be afraid to.
If you can't charge that, youmight need to look at your sales
process and make that a littlebit stronger so you can command
a 50% gross profit.
But that is a separate podcast.
So today we're gonna talk aboutjob costing.
(07:46):
How do we actually do the trackthe cost per job in a stream
line of way?
Now you can keep this simple.
I mean you can have aspreadsheet.
I know there's a lot ofspreadsheets that folks use.
I know Nick Slavik'sspreadsheet's good, which can
work completely.
(08:07):
That works fine.
You basically have your revenuefor the job, how much you're
charging the client and then howmuch labor you paid out for
that job and then how much thematerials were for that job.
So you can keep track of thaton a spreadsheet.
It doesn't have to be anythingor a piece of paper, it doesn't
have to be anything fancy.
(08:28):
Now, as you grow your businessthis might become a little bit
arduous, a little bit difficultto keep track of just this on a
spreadsheet or on a piece ofpaper.
So you might wanna streamlineyour process.
So you're actually doing thistracking in your bookkeeping
(08:49):
software.
Quickbooks Online is what wetypically recommend.
So I'll go through a way youcan do this, set this up in
QuickBooks Online so that theprocess is done in your
bookkeeping records.
So the first thing that youwanna do to set this process up
(09:10):
so that your job costing isbeing tracked in your
bookkeeping records in yourQuickBooks Online, is you wanna
have a job naming convention, sothe job name.
Typically folks are usingsomething like the name of the
customer with the type ofproject, so like John Smith
Exterior, maybe with a year atthe end, like 2024.
(09:33):
And then that's a verydescriptive name, so it's not
like a number.
The problem with like jobnumber five, six, seven, six,
eight, four, three is that it'seasy to transpose the numbers
and when you're trying tocommunicate this to other people
the numbers might get mixed upand everything.
(09:54):
So just kinda keeping it simplewith your job naming convention
so that it uniquely identifiesthe project but is also very
descriptive, so it's easy.
If something is misspelled thepaint store clerk misspells John
Smith you might still be ableto determine what they try to
spell.
Not always the case, but a lotof times you can.
Speaker 2 (10:16):
Oh yeah, I completely agree.
We were at Home Depot the otherday buying some stuff for the
house and when you go to checkout they'll ask you do you want
an email receipt in addition tothe printed one?
And we hit yes and it would notallow me to check out until I
put in a name for that project.
(10:37):
Now I wasn't, I was a homeowner.
I'm just buying some stuff formy bathroom.
But if you've got an easy toremember job costing naming
convention you can put in, youknow, john Smith, dash 2024.
That's gonna be a lot easier toremember than what.
Was it?
8675309 or whatever the numberis, but I thought it was
(11:01):
interesting.
Like you know, like these, youknow suppliers like Home Depot
and Sherwin Williams.
They understand the importanceof this and they're making it
easier for people to matchreceipts with the jobs and that
all goes towards this goal ofjob costing.
Yeah.
Speaker 1 (11:18):
Yeah, so establishing your naming convention, that's
step number one.
And then from there and your inQuipwix Online, what you would
wanna do is either usesubcustomers or Quipwix projects
.
I'm not gonna go too deep intothis, but I'm gonna kind of just
go through the subcustomer way.
(11:38):
Which is a subcustomer is ifyou look at your customer list
in Quipwix Online, you'll seeyou know all your customers and
it should be more likely theirname or the company that you did
the painting project for Asubcustomer is just like an
indentation and there's asubcustomer or a job is what it
really is underneath thatcustomer, and so you might have
(12:03):
John Smith as the main customerand then underneath them you
know, john Smith, exterior 2024.
And then maybe you have JohnSmith, exterior 2022.
You know.
So you have those separatesubcustomers underneath the main
customer.
There's Quipwix projects aswell which you can use that and
it's a little bit more fancy ofa user interface, but it's the
(12:24):
same idea there.
And so that's you know.
You have your job namingconvention and then you have
that subcustomer created inQuipwix Online underneath your
main customer.
And then the next part is yourtime tracking.
Now, if you're this is for ifyou're using employees you'll
(12:44):
wanna have a time tracker,ideally, that syncs with Quipwix
Online and your payrollprovider, ideally, but for job
costing purposes, at least yourQuipwix Online.
So the time time trackers thatsync with Quipwix Online,
there's plenty of them out there.
Quipwix Time obviously syncswith Quipwix Online In most
(13:08):
cases it doesn't need to be setup correctly but it syncs with
that.
And then Clockshark is anotherone that syncs with Quipwix
Online that a lot of folks use.
That works great.
So these time trackers,basically they sync over the
customer names from QuipwixOnline, so those subcustomers
and the customer names.
That syncs it over into thetime tracker so your team can
(13:30):
see oh okay, here's John Smith,exterior 2024.
And this is the one that I needto log my time under.
And then, once the hours areapproved in the time tracker in
Clockshark or Quipwix Time orwhatever you're using, it will
sync the hours back over toQuipwix Online so that you can
(13:53):
have those hours in there.
Now an added bonus is if yourtime tracker can also sync over
the hours to your payrollprovider.
So this might be Quipwix Online.
If you're using Quipwix Onlinepayroll, then it'll make it easy
to run payroll.
Or if you're using GustoClockshark and Quipwix Time
(14:16):
Clockshark definitely integrateswith Gusto.
I think Quipwix Time does aswell.
But just finding that timetracker that kind of works well
with others that you can use tosync those hours and those
customers back and forth, tomake things streamlined and easy
for job costing purposes.
Speaker 2 (14:37):
Yeah, take a step out of the.
It'll reduce your admin costs,right Cause you're taking a step
out of your payroll processingby automatically syncing those
hours over, and then you canapprove them and get them paid.
Speaker 1 (14:51):
Yeah, absolutely All right, then from there.
So that's the time tracking foremployees, and these are
painters on the job site.
Now, if you're usingsubcontractors, this process,
this part, is a lot easierbecause your subcontractors are
probably not tracking their time, so you don't need a time
tracker for them.
And if you're paying them byproject, that makes it pretty
(15:13):
easy, pretty straightforward.
It's just a matter of you know.
If you're paying them by checkin the memo line writing, you
know what project that's for, soyou can go back in your check
register to know it's a matchup.
Okay, this check was for JohnSmith, exterior 2024, and that
can be coded to that subcustomerin QuipLux Online.
(15:35):
Or you could even make it alittle bit more streamlined by
using QuipLux Online's.
They have a contractor payfunctionality in QuipLux Online
where you can pay your yoursubcontractor subcontractors
with direct deposit inside ofQuipLux Online.
It's like an additional 10bucks a month or something like
that, and so you can justbasically, at the end of every
(15:59):
project, pay your subcontractorright within QuipLux Online and
code it to the project, thesubcustomer name and the amount,
and then it will pay them be adirect deposit.
And it also helps with W9tracking for your 1099s as well.
So that's that's a cool featureif you want to even streamline
(16:19):
your, your subcontractor paymentprocess a lot more as well.
So that's the labor piece.
That's how you might want toconsider setting up tracking of
time paying of labor for jobcosting purposes.
Then the next piece is thematerials, and so this is you
(16:41):
know, ordering from SherylWilliams or whoever your, your
paint store provider isBasically providing that.
That job name, you know maybeit's Home Depot, you know, just
putting in John Smith, exterior2024, and that should be put on
the receipt.
And if you're using SherylWilliams or Dunn Edwards, you
(17:04):
know they provide an onlineportal.
They'll have the history of allyour invoices that you paid on
credit there.
So you it will and it will showyou you know the job name, how
much it was and all that stuff.
And so from there you canactually download that as a CSV
(17:25):
and upload it into QuickBooksOnline and track those as
basically like a credit card inyour QuickBooks Online, and
it'll make it easy to track eachindividual material purchase
with the job name in QuickBooksOnline and so you can go in
there, upload it, code it basedoff of the, the PO number that
(17:47):
was on on that CSV and thenyou've now categorized all those
materials in QuickBooks Online.
So it's, it makes that processpretty.
You can do it pretty, prettyquick either on a weekly or
monthly basis.
Knock that out in a few minutesjust by downloading the CSV
from Sheryl Williams or frommaybe Dunn Edwards and then
(18:11):
uploading that into QuickBooksOnline and coding that,
categorizing that, and so thatwill get you you know it's coded
to materials, obviously withthe, the job name, the
sub-customer name in QuickBooksOnline, and then you have your
materials into QuickBooks Online.
Now, from there you know ifyou've tracked your hours and
(18:35):
it's the hours are in QuickBooksOnline and you also have the,
the materials in there.
From there you'll be able torun different reports for
job-classing purposes.
If you're using QuickBooksOnline projects, you can go into
the project and the good thingabout QuickBooks Online projects
(18:58):
is that you can actually haveif the hours are being pushed in
from your time tracker.
You can go in and assign anhourly rate for each of your
employees and it will calculatethe labor for you.
So that's kind of a benefit ofusing QuickBooks Projects.
It kind of takes a step out ofthe labor recording the labor
(19:20):
for job-casting purposes inthere.
So QuickBooks Projects isreally good for that, and then,
if you're not using QuickBooksProjects, you're just using
sub-customers in QuickBooksOnline.
You can still get the laborcaptured in your bookkeeping
software.
You'll just basically need todo a journal entry for your
(19:45):
wherever you're paying your,your payroll.
You run your payroll inwhatever platform you're doing,
and then you'll have to do anentry for your job, for job
costing purposes, and so thatcan get a little bit technical.
So if you need help with that,you might need to get with a
bookkeeping professional.
(20:05):
But if you're using QuickBooksprojects, that process can be
made pretty easy, just if youhave your time tracking sinking
over and then you're justassigning the hourly rate in
QuickBooks projects.
Speaker 2 (20:19):
So, once you have all this information and you have a
really good idea of what eachjob is costing you, what that is
as a percentage of your overallpay or your overall revenue,
what are some of the things thatwe can do with this information
?
Should we talk aboutperformance pay?
Daniel shaking his head?
No, I know, daniel and I bothare big believers in performance
(20:44):
pay and that's basicallyincentivizing your employees to
be more efficient and moreeffective and then rewarding
them monetarily when they'reable to do that.
And you really can't do a goodperformance pay if you don't
know what each job is costingyou.
(21:04):
You need to be able to quantifyhow much money did my employees
save me on this project and howmuch money is there for me to
give them as a bonus or a reward.
And that's where the jobcosting is gonna come in.
So you might set a goal.
You might say, hey, this jobneeds to come in at X amount of
(21:25):
hours, we need to keep ourmaterial costs to X amount of
dollars.
And you talk to your projectmanager or maybe the employees
directly, if you don't have aproject manager and you let them
know that if we're able to notwaste materials, if we're able
to be more efficient, then andwe hit these metrics that we're
(21:45):
looking for, then I wanna rewardyou by giving you a portion of
the savings.
Speaker 1 (21:52):
Yeah, performance pay system can be really powerful.
Actually, Charlie Munger, whojust passed away a little bit
ago, he was a big proponent ofincentives, like making sure you
get the incentives right inyour business, and so I can't
remember what he said exactly,but he was basically like if you
(22:12):
get the incentives right,that's like rock up fuel for
your business.
Speaker 2 (22:17):
Right because we want a lot.
So we have our employees and wehave the business owner, and the
incentives are not alwaysaligned, and we want to try to
align those right.
When you're an hourly employee,sometimes you start to think
like my incentive is to getthrough the day and clock out as
quickly and easily as possible.
(22:38):
The business owner's incentivesare to be as profitable as
possible, and so performance payis a good way to help align
those incentives, to help theemployees have a little skin in
the game, sort of speak.
It helps them feel ownership ofthe project and people will do
things.
When people feel like they haveownership, when they feel like
(23:04):
their contributions reallymatter, they will be motivated
to give you a level of work thatis higher than anything you
could pay them for.
We're human beings.
It's important for us to feellike what we do matters, and so
if they feel like, hey, I'm notgonna throw away that 20% paint
that's left in the can, I'm notgonna overuse tape, I might be a
(23:27):
little bit more efficient withmy brush strokes or whatnot,
that just kind of gets everyoneon the same page and everybody
benefits from it.
Speaker 1 (23:35):
So yeah, and so you'll need to have job costing
set up to do any kind ofperformance pay for your painter
.
So that's the key there, and sowhat we covered today is
basically what job costing iswhat you should kind of be
shooting for in terms of yourgoals.
You know, 40% is average, 50% isat least your target starting
(23:57):
out.
And then we went through a wayto streamline your process using
, you know, a simple to rememberjob naming convention and
QuickBooks projects inQuickBooks Online.
And then setting up your timetracker and ensuring that it
integrates with QuickBooksOnline like something like
(24:17):
QuickBooks Time or Clock Shark,and then making sure that you're
getting that PO number, whichis the job name, on to your when
over your ordering materialsfrom Sherwin-Williams or Home
Depot or wherever, and thenmaking sure you're then
categorizing the materials Ifthey're not, you know if you're
buying them on credit withSherwin-Williams makes you
(24:39):
upload that CSV spreadsheet intoQuickBooks Online and
categorizing all the materialtransactions you know based off
of the job name.
And so you get your time inyour labor.
And then oh yeah, we alsotalked about QuickBooks paying
your subcontractors usingQuickBooks contractor pay to
(25:03):
record those subcontractorpayments really easily and then
getting your subcontractors paidwith direct deposit.
So if you can get thosecomponents put together you can
come up with a really goodstreamlined job costing system
in your QuickBooks Online.
Speaker 2 (25:23):
Yeah, I think you covered that really well, daniel
.
If folks have questions ormaybe you just want to kind of
share with us the way you do jobcosting in your business, grow
your painting business Facebookgroup is where you're going to
want to go.
Let us know your questions orthe things that have worked well
for you.
We'd love to hear your feedback.
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