The Ultimate Guide to Job Costing: Boosting your Ageny’s Profitability and Efficiency
The power of accurate and timely financial data cannot be underestimated. In the current data-driven era that we are living in, you need quick access to the correct information, especially in an agency environment where business means partnering with multiple clients at any given time. Accurate and timely job data allows you, as a general manager or if you are a manager of a specific department, to make informed and agile decisions based on the most up-to-date financials for each client project.
Use this information to forward plan and improve outcomes and efficiencies for your agency. So, ready to dive into the nitty gritty of job costing and figure out why your creative agency really needs to nail it? Let's go!
What is Job Costing?
It is the process of keeping track of all the costs and revenue associated with a project. More specifically, it involves accounting for all costs and income related to a project, both direct and indirect, to determine the profit or loss of a project. This would include tracking staff hours, materials, overheads, and revenue – all costs relevant to your type of agency.
Why is Job Cost Important?
Ultimately, it allows you to identify the profitability of your agency projects. But for agencies, it is more nuanced than that.
Creative agencies are dynamic businesses – they work alongside multiple clients simultaneously to deliver projects. Every project and client relationship requires accurate time management, job costing, and reporting—without this, it is impossible to know if any of the projects are cash flow positive and contributing to the financial success of your agency or not.
Where does Job Costing Apply in your Agency?
Creative and marketing communication (or MarCom) agency space, most of your employment costs are likely associated with staffing. This means tracking the time your staff spends on projects is vital to accurate job costing and should be happening daily to keep data in real-time.
It is also relevant to account for your agency's indirect costs, for example, overheads, as they form part of the day-to-day running of the business. For that reason, the accuracy of the financial scenario of a project cannot be determined without factoring in all relevant costs.
Here, we will give you a quick rundown of all the factors to consider when determining project costs for your business.
Regular timesheets are a priority
Timeliness is critical when it comes to job costing. If your staff hours were not accurate and regularly entered (daily if possible, or weekly at least), then the data you have gathered would be insufficient to make informed judgments about how a project is doing. You could miss identifying unforeseen cost overruns and the opportunity to redirect a project or request a change order.
Calculate the cost per hour
Breaking down total costs into a cost per hour can be a powerful way to manage your job costs. Determining the cost per hour for each staff member, considering all direct and indirect costs associated with their work (overheads, etc.), gives you an all-encompassing value representing the cost of your personnel time. This improves the accuracy of your financial records for each project. Accurate records mean you can prepare reports that reflect the actual financial status of your projects periodically.
Analyse project costs
The cornerstone of quality management is having the information you need immediately so you can analyse and make decisions —data reporting allows this to happen. When done right, data analysis enables you to identify the main trends in your business, job profitability on your project contracts, cost-saving opportunities, and big-picture financial results for your agency.
Data analysis also presents you with the opportunity to ask interesting questions about your business, such as:
Are the right people doing the work? (Or is an agency principal doing junior designer work?)
Was the estimated time allocated correctly? If not, why?
What have we learned? What can be done better next time?
The Importance of Job Costing Knowledge for Decision-Making
Whether you work as a finance manager, creative or media manager, project manager, or GM, knowing your job costing numbers back to front means you can make informed decisions around your client projects. Not only does it provide a financial snapshot of your current projects, but it also informs future proposals and the development of accurate project estimates. Access to this data is invaluable for ensuring your creative agency's long-term profitability and health.
Integrating Accounting and Agency Management Software for Efficiency
Accounting and agency management software features must be integrated for a job cost system to be successful and efficient. To ensure the project's effectiveness, task numbers and types and any cost codes relevant to the project must be identified. As a result, we will make the procedure quick and simple for all workers to access and submit information.
Finding the Right Job Costing Solution for Your Agency
As you can see, the scope of job cost tracking is wide. The challenge then becomes finding a solution that allows your business to do job costing well! Providing an answer to that challenge is the driving force behind Pegasus Systems. Our software solution, Pegasus Edge, has been designed as an industry-leading tool to support agencies with accurate and timely financial data so they can make decisions that strengthen the success of their businesses.
Pegasus Edge: Your Agency’s Single Source of Truth
As an agency management software, Pegasus Edge becomes your agency’s single source of truth. It covers everything, from time and cost monitoring to work management and reporting. With a host of reporting tools inbuilt, you will have the information you need on hand at the click of a button!
Benefits of Pegasus Edge for Job Costing
Our software solution simplifies work pricing in multiple ways, including accuracy, reliability, security, and efficiency. Allowing you to manage all parts of your business in a user-friendly interface will make it easier to manage processes, timesheets, and finances. Because our solution is cloud-based, you can get your team connected from anywhere at any time.
Additional benefits of agency management software for job costing include the following:
Better time management:
We know that effective time management is essential for the success of any creative agency. That is why our software enables you to raise studio briefs directly from the job header, so you can start production faster and make your clients happier.Accurate billing for jobs:
Ability to track in real-time profitability for all your clients. Track if your clients are performing well and contributing to the bottom line of your agency or not. This function will help you determine if your team is over-servicing, improve profitability and bring transparency for your clients over a scoop creep.Reduce customer conflict:
Companies that correctly disclose expenses can generate better price estimations and set reasonable expectations for their clients. Costs may also be updated as the project progresses, allowing you to share expenditure figures with clients as they come in.Real-time reporting:
Real-time cost information is critical for businesses working on high-stakes initiatives. You may undertake task costing not just afterwards but also throughout the project to monitor how it compares to projections and change as needed, thanks to fast access to labour, materials, and overhead expenses.
Reach out to the team at Pegasus Systems to learn more about the functionality of Pegasus Edge agency management software and how it can revolutionise your job costing process and support the success of your creative agency.