Job Costing – What is its Importance for Small Businesses?

April 11, 2022
Job Costing – What is its Importance for Small Businesses?

Cropped shot of a woman going through her finances at home


Most people think that job costing is only essential in manufacturing, but that couldn’t be further from the truth.

Small businesses rely on job costing to maximize each employee’s time, make strategic pricing decisions, determine whether it is prudent to expand margins, as well as track inventory more effectively.

In this blog post, you will learn why job costing is important for your small business. See how it can help you save money and reach profit goals faster. Read on to find out more!


Why is Job Costing Important for Small Businesses?


1. Improves Decision Making


You can make better pricing decisions and determine if it’s prudent to expand margins by costing each project. Because of all these factors, job costing helps you optimize each employee’s time. Also, by understanding how much a job costs (per hour), you will understand where cuts need to be made when your business is in an unprofitable state.


2. Help Businesses Set Prices


The price of a product or service can often be one of the most difficult factors to establish. By determining your costs, you can begin to set a price that covers those costs and covers your desired profit margin. This will help you in setting competitive prices while remaining profitable. When pricing products and services, it’s always wise to research how competitors are priced so you don’t undervalue or overprice your products and services.

3. Makes Optimum Use of Limited Resources


Every business has a finite amount of time, money, as well as other resources. Businesses must efficiently utilize these resources to maximize output and keep costs down. Keeping track of employee hours enables you to better manage your resources. Instead of working straight through lunch or staying late, employees can take breaks when appropriate and even leave early if they’ve finished their daily assignments on time.

4. Improve Cash Flow Management


Inventory costs money to maintain. This can take a chunk out of your business’s profits. However, if you use job costing, you can gain better control over your inventory levels and optimize your cash flow to ensure profitability. If certain products are always hard to move or never sell, job costing gives you time to adjust before ending up with a bunch of inventory taking up space in your warehouse or lying around on store shelves – money down the drain!

Job costing is one of the areas that can positively impact your business. Foster Financial CPA can teach you more about job costing. Contact us and schedule an appointment to learn more about small business management.