Job costing in its simplest terms is knowing how much it costs to perform a particular job. But the intricacies of that ?job cost? and how to get to it is where most contractors get bogged down. And once you have collected and organized your job costing information, how do you know it?s right? In other words, how do you know that the 25% of revenues you spend on labor for sweeping a parking lot is what you should be spending on the job?
That?s just one of the questions two veteran contract sweepers - who run two vastly different types of sweeping businesses in different markets of different size - were asking themselves about five years ago. Since then, they have been working jointly, comparing notes and numbers so that each can improve his own job costing - and his company?s bottom line.
Gerry Kesselring, Contract Sweepers & Equipment, runs an employee-owned company based in Columbus, OH, with operations in Cincinnati and Dayton. Contract Sweepers employs 100 people providing parking lot, municipal, and construction sweeping within a 75-mile radius of each location. Contract Sweepers also generates a portion of its revenue from scrubbing, indoor sweeping, distribution, and other pavement maintenance services. ?We are a sweeping contractor first and foremost,? Kesselring says. ?Sweeping is primary to what we do.?
Gabe Vitale, president of C&L Sweeper Service, Jackson, NJ, is a second-generation owner of a 50-person company that generates 85% of its revenue from sweeping (60% shopping centers, 15% construction, and 10% municipal). Like Contract Sweepers, C&L Sweeper also offers full pavement maintenance services.
Their efforts at comparing and contrasting job costing information has its roots in the North American Power Sweeping Association (NAPSA), where both are long-time members. What they?ve determined is fuel costs should be roughly 9.3% of revenues, direct labor (wages only) should be 25% of revenues for parking lot sweeping, and direct labor for broom sweeping should be roughly 25.5%. Neither of the labor figures includes benefits, insurance, etc. (They caution that these job costing figures are benchmarks for the two operations and might or might not be applicable to other contract sweepers.)
Seeking common ground
Vitale and Kesselring acknowledge that virtually all companies who track costs track costs differently - sometimes because of personal preference, sometimes because of company size, sometimes because of the approach to the business, and sometimes because they don?t really know what to allocate where.
So the first step the two took, and Vitale says it was possibly the toughest step to take, was to put together charts of accounts that were similar to one another so when they were making comparisons the accounts contained the same types of information.
?It took a while for us to be able to get some information we could use because we were each measuring differently,? Kesselring says. ?I put all my oil and preventive maintenance in one group, for example, and his is somewhere else. So we started to massage our numbers to come up with a common baseline.
?Once we had some understanding of what each of our numbers was, what each of our operating costs were, we were able to start comparing our organizations. We started understanding what?s going on in each business, and we could start to ask some questions: Why are his costs higher in some areas than mine? Why are some of mine lower than some of his??
And that?s when they really began to see the impact of job costing.
?Once we started looking we noticed there were a lot of similarities,? Vitale says. ?But it was the differences that were the most interesting and the most important.?
Start with information
?We?ve always run our company by the numbers. We wouldn?t have been around for 38 years if we didn?t,? Vitale says. ?But job costing has been an evolutionary process, and today we?re getting to hard, hard numbers.?