Profit by Design 99: The Value of Job Costing in Managing Your Gross Profit Margin with Diane Gilson
Diane Gilson joins Dr. Sabrina and Mike Bruno on today’s episode to discuss the value of using job costing to manage your gross profit margin, which translates into more money that you keep.
Although this conversation centers around job costing in the construction industry, there are valuable nuggets of information for those listening who may be in other industries, such as how to be a more effective business owner. Listen in for an inside look at how to design a business that supports the lifestyle you desire.
If you are a regular listener of the Profit By Design podcast, you’ll know that it’s not about how much money you make, it’s about how much money you keep!
Diane Gilson created Info Plus(+) Accounting® In 1994 to help business owners establish job-cost accounting systems so they can access critical day-to-day operations data using QuickBooks as their primary management accounting tool.
Diane’s passion is designing, customizing, and upgrading accounting systems and financial controls for small to mid-sized construction and manufacturing companies.
Her online workshops offer job-cost and management accounting training using QuickBooks and Intuit Enterprise Solutions—as well as in-house products—to teach, trouble-shoot, and coach clients and other accounting professionals throughout the United States.
As a published author, speaker, and professional QuickBooks trainer with over 30 years of accounting experience, she is viewed as a leader in her fields of expertise.
Profit by Design is a Tap the Potential Production in collaboration with Small Business Consulting Group.
Show Highlights:
- Diane addresses the impact on business owners who are not aware of their margins.
- Diane details five ways that job costing dramatically increases your profitability:
- Locate costs that you haven’t billed out.
- Spot and eliminate your low-profit and loser jobs.
- Change your business niche.
- Review estimate versus actual reports.
- Use a 3-step combination method to increase your prices:
- Decrease your costs of goods sold or production costs by 5%.
- Increase your prices by 5%.
- This increases your gross profit margin of 10%. Gradually increase volume.
- Once business owners start seeing numbers that make sense and are set up in a logical format, it can change their lives.
- Investing 20-40 hours is all it takes to learn the job costing system. This could mean an extra $100,000 a year.
- If you’re in an industry where job costing is not part of the conversation, Dr. Sabrina encourages you to be curious about what it might look like in your business, how it would empower you to have that information at your fingertips, and what different decisions would you be able to make with that information.
- Diane covers the hidden costs of hiring people for your team and how that eats away at the gross profit margin.
- Dr. Sabrina shares the 80/20 principle, which is where 20 percent of clients are responsible for 80 percent of your revenue. Clients with the Tap the Potential and Better Business, Better Life™ programs learn this principle and how to zero in on the best clients to work with. In this way, you do not need as many team members, and those team members you do have tend to be A-players, who are able to focus on how best to serve your clients.
- Don’t count on somebody else to learn this job costing process for you. The business owner should be responsible for learning the process and then can later decide if this should be assigned to another team member.
Links and Resources:
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Profit by Design, a Tap the Potential production in collaboration with Small Business Consulting Group
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Books Mentioned:
Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine by Mike Michalowicz
The Pumpkin Plan: A Simple Strategy to Grow a Remarkable Business in Any Field by Mike Michalowicz
Connect with Diane!
Diane’s Website BuildYourNumbers
Diane’s LinkedIn
Diane’s FaceBook
Diane’s Twitter
Diane’s YouTube
FREE Resources From Diane, Just for You!
- A free ebook: A Tale of 4 Companies: A Job Cost & Gross-Profit Percentage Drama
- Informative blog post called “The many faces of construction job-costing.” In it, Diane talks about how nearly every company has a different set of needs when it comes to what they want to track and see. The good news is that Diane can usually structure your internal information to provide exactly what you need to see!
Mentioned in this episode:
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