Activity-based job costing lets you see how much you’re making on specific activities both for individual jobs and across multiple jobs. Most companies don’t even try to do activity-based job-costing because, apart from Chronicle, gathering the data for a particular activity across many jobs would take more time than is available. However, when using Chronicle and QuickBooks, this previously impossible data gathering is automatically done for you. Chronicle’s activity-based job costing lets you see which activities you’re really making money on and which you aren’t doing so well with. It also tells you on a job-by-job basis whether particular activities are falling within budget. Regardless of whether this leads you to seek more of particular types of activities, change your estimating procedures, or just expect different profit margins, knowing how profitable different activities are is important for planning and improving your business.
The setup for activity-based job costing is fairly significant, but it only has to be done once, and once it’s done, the benefits are substantial. However, if you chose to skip this part of the setup for now, you’ll still be able to take advantage of departmental and job-specific job costing; this part of the setup is only needed for activity-based job costing. You can decide to start implementing activity-based job-costing at any time.
To do job costing on the activity level:
- Set up the items and accounts lists in QuickBooks so there’s at least one item or sub-item for each production-related activity in Chronicle.
- Associate items & accounts from QuickBooks with Chronicle activities.
- On an ongoing basis, for each income and expense, indicate in QuickBooks which item(s) or account(s) it applies to.