True Product Costs

One of the most vexing problems for our small business clients is figuring out their true overall costs on a job, or, in day-to-day operations. True product costs are a mystery to many businesses – many owners of small companies cope by adopting a work-around solution of “backing into” a percentage representing overhead costs and simply tacking that on to every wholesale job cost when they bid a job out.

Accurate costing is important to any business

It seems to work OK most of the time, and that’s good enough for them.

BUT, that really isn’t good enough, because if you bid on a job where the costs allocated to a particular part of the job are abnormally high, and, those costs are a major component of your overall job costs, you will lose money. Maybe a lot of money, if it’s a big project.

You may get the job, and drive your company into insolvency by the time you finish the job. Cash flow is great, but profit is not.

Here’s an interesting article about just this subject – it’s a great piece with easy-to-understand illustrative examples.

Of course, if you are still lost, or, you are just too busy with getting new business (completely understandable), we can do this for you. In fact, we do this sort of thing for our accounting clients all the time. Just give us a call.

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