Fix the 4 ways contract services suffer job profitability issues
Almost every company can say their always busy, but not many of them generate the kind of profits they’d like to. In an industry like engineering services, it can seem the conveyor belt of contracts and projects is never-ending and there’s barely enough time to fit it all in, but your revenue figures never quite reflect that frantic level of activity.
Nobody wants a business full of busy fools – people who toil away on job after job all day without any focus on the outcome and end result. It’s not exactly a secret to say that delivering profitable jobs requires costing them accurately in the first place. However, many companies – across engineering services and other contract service sectors – struggle to truly nail down their job costing. If this sounds like your business, the issue is likely to be wasting the potential of your workforce and making it impossible to maximise profitability.
There are many reasons why job costing can go wrong and damage profitability – but there are also solutions at hand. Here we highlight four of the biggest job profitability obstacles and explore the kind of business software that can address them.
1. Data inconsistencies
Poor quality data is the biggest enemy of profitability. A host of other problems will follow when there are gaps or discrepancies in data across the business – and these inconsistencies make it impossible to track profitability accurately.
This situation tends to arise when data is held in disparate systems like project management and accounting tools, rather than aggregated on a single platform. An over-reliance on manual processes, such as paper timesheets that are submitted by service engineers at the end of the day, also makes it almost impossible for businesses to get a real-time picture of the way jobs are progressing.
2. Inefficient resource scheduling
A common problem that arises from poor data visibility is the inefficient scheduling of resources. When staff are out in the field all day, your management team needs to know exactly how long each job takes, as well as when they have taken longer than estimated on a job and when they have unexpected spare capacity.
Without this level of visibility, it’s extremely difficult to allocate resources efficiently. You need the ability to identify spare capacity as early as possible in order to make changes to the work schedule without losing out.
3. Uncontrolled purchases
It’s absolutely essential that purchasing activity is tightly controlled and consistent. If it isn’t, the margin you’re making on each job will start to slip before you can do anything about it. The best solution is to implement a system that only permits access to the purchasing function for authorised users and enables senior management to sign off on all orders before they go through.
4. Delayed analysis
Too often, companies find out too late that they’ve lost money on a job. Work on the next project can be well underway before they realise something went wrong – and even more time can pass before they work out why.
This is a problem of delayed analysis. Costing data is not analysed until weeks later, usually because the data was simply not available at the time. Key details may have to be transferred from a project management system to the accounting software, or collated from various spreadsheets. The result is a missed opportunity to spot an emerging issue early and get the job back on track to profitability.
SMEs across many industries are increasingly using mid-market ERP platforms like SAP Business One to streamline processes, increase visibility for management and analyse data.
Companies in the engineering services sector are no exception, but the standard platform does not always adequately reflect or cater to the precise nature of their business processes. The use of custom add-ons for key functions like job costing, however, can unlock a rich vein of functionality with all of the features required by businesses that do project and contract services.
To find out more about job costing powered by SAP B1, please get in touch or click below.