Job Costing: A small investment in time can bring big returns.
By Lakelan Fennell
How do you we know we are getting paid enough for our services? How do we know what our costs are for providing that service? If all we look at is our bottom line to make that determination, we are missing out on the critical information we need to figure out our specific combination of revenue and expenses that can make us more profitable.
One of the most important aspects of running a small business moving company is knowing what our costs are to provide the services we offer. While we cannot realistically know to the penny what the profit margin is on each shipment, we can use tools that provide us with accurate estimates of these costs which can then help us determine the rates we need to charge for our services.
Here is an example spreadsheet that can be used to help you determine your costs for containerized shipments, as well as simple pack jobs. You can adjust the weights, number of cartons and even office and warehouse labor time to whatever fits your specific usage. The weights in the spreadsheet are just examples, so use your own shipment information and fill in the blanks. Pull specific shipments you have serviced at different weights across the spectrum, count the packing on the inventory, find out how much paper pads, newsprint and tape are being used on each sized shipment and input the numbers along with your cost per carton, per paper pad, etc. If you have hourly pack crews you will need to calculate the labor cost and divide by the cwt to get the packing labor cost as a cwt rate. The same goes for Wrap/Load cost, Office and Warehouse Labor costs. If you have contract packers/loaders, input the cwt rate you pay them in the specific boxes.
This spreadsheet will produce a total cost for packing materials, packing labor, wrap/load, office and warehouse costs both in dollars and a per cwt rate. Then you simply input what the cwt rate is you charge, or need to charge, for origin services on a crated shipment (packing, loading, etc) and you can determine your operating profit for each sized shipment. You can also glean information on the higher cost drivers in packing usage. Many think the higher the per carton cost the higher cost it is to use on a job, when in reality NEWSPRINT is often the most expensive packing material used on a per cwt basis. For this reason, it is very costly when packers leave half of a roll of newsprint at the shipper’s residence, or just as bad, throw half of a roll away and use new bundles every time.
Take some time to do a little research into your own costs and this can help tremendously in helping you run a profitable operation. Knowledge is key to good decision making!