Do we care about job costing?

It might seem a strange question as surely the answer is “yes, of course”, but when you go around the country and look at how job costing is actually being managed, much of the time you would conclude – “well obviously not then”.

Many repairs managers have told me matter of factly that they don’t care about the profitability of their service because they are an in-house team and their costs are the organisations costs, or they charge on a PPP basis so it doesn’t matter. I have equally met many managers who say they need to show value for money so definitely care that their costs are accurate – but accept that their current processes do not deliver this. I occasionally encounter “I get a daily profitability report already” which nearly always means it is based purely on the SOR codes claimed, so not in fact a profitability report at all. You know this because hardly anyone has real-time truly accurate material costs – (a problem we are proud to have solved).

At a macro level it is obviously possible to know the total cost of running an in-house team – and there are very good arguments to say that so long as you know this number (plus satisfaction levels) and keep one coming down and the other going up year on year then you can demonstrate value for money. My view is that as a manager of a service you are looking at a range of information to understand where improvements can be made and you need that information to be accurate. If your costing information isn’t accurate then your productivity PIs and spend analysis aren’t going to be accurate either.

Repairs is a high volume business, unless you get the data accurate at source (the operative’s mobile device) then it will be nearly impossible to ever get it completely accurate. Most operatives are told they need to accurately record their time, the SORs they complete and the materials they use – but there is no consequence if this doesn’t happen. Critically, their line managers (supervisors / team leaders) don’t see job costing as part of their responsibility, they get the work done, manage quality and provide technical support, then another separate team (admin or finance) runs a completely separate process to get the job costed and invoiced.

If the data has to be right when it leaves the operative, then their managers have to have responsibility for this, otherwise where will the improvement process be driven from? You must have a direct connection from the invoice data through to the operative – and that chain passes through the supervisor. So the next problem is – the supervisors are busy, they can’t possibly check all the costing data on every job. Completely agreed and I didn’t say it was easy -but it is only a lot of work if the data isn’t right.

SOR codes become very important here. Unless you have an accurate view of what work was carried out, how can you make a decision on whether the costs are right or not? If the operative can complete the code they were sent then don’t be surprised that every job comes back with that code. Only by requiring the operative to actively select every time from a sensible code list do you have a chance of getting high quality information. ‘Sensible’ in this context means the operative can find the code quickly on a phone screen and there is no doubt it is the right code – so any operative doing the same work will pick the same code. ‘Actively select’ means they can’t complete the visit without selecting a code and the screen is blank. The fact that it is blindingly obvious that this is impossible from a 2000+ code schedule where you could find a dozen ways to code almost any job still seems lost on the many organisations insisting on using full NatFed schedules.

Now all you have to do is get the time and material recording right at source – for another article I think….

By |November 5th, 2017|Blog|Comments Off on Do we care about job costing?

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