How Can Job Costing Help Increase Your Service Territory?
September 27, 2023 | Read: 8 minutes
Balancing direct and indirect costs affects every growing trades business. But manually tracking each variable is impossible.
Fortunately, this is where job costing software shines…
The best admin teams use this tool to get the most value from each job.
After all, expanding your service territory relies on your decision-makers understanding how each aspect of your business affects profits.
We’ll also cover seven variables that can affect your company’s profits & losses, which includes a look at questions you can ask, and how job costing can help expand your service area!
What is Job Costing?
Job costing is a system that helps businesses understand how each of their services impacts their revenue. Further, digital payment and pricing systems are being essential for trades businesses. From installations, inspections, and repairs, field service teams need a reliable costs and pricing system to ensure each appointment makes money.
Platforms like these help service teams guarantee each appointment positively influences company cash flow. After all, field service businesses can organise all financial information associated with their services and build accurate forecasting reports with job costing software.
As you know, the revenue you make this year doesn’t just cover current spending; it directly impacts what you can do next year. Not only will costs increase each year, but planning and saving for slow periods rely on a positive balance at the end of the year. Earning exponential growth depends on understanding how each service you offer impacts your revenue.
At the end of the day, the companies that don’t plan don’t last. Increasing your service area isn’t easy, but the right reporting tools can make it easier.
Now, let’s cover what you should do to start costing your jobs more accurately (and the job costing metrics your team should track)!
1. Identify Which Service Type is Most Profitable
As you work to increase your territory, you need to identify your strongest and most lucrative services. These could include
- Installations
- Repairs
- Emergency call-outs
- Planned preventive maintenance
- Inspections
- And more
To identify which are most profitable, think about these points:
It’s important to know how many of each service your team needs to perform each month to hit quota. But it’s not solely about quantity! Your team can complete hundreds of expensive jobs and still not make a profit due to poor or unknown margins.
From the moment your team builds an estimate, you should understand what your profits and losses will be. They shouldn’t be a mystery. Having the right pricing systems in place makes growth much less daunting. A dedicated sales platform can help.
Now let’s cover one of the most significant aspects of service pricing: stock control software.
2. Understand How Stock and Parts Impact Pricing
Many of your services and appointments necessitate using inventory and parts. Establishing and charging the right margins for your parts is crucial.
Take these questions into account:
While at the appointment, your engineers may throw in a free air filter or drain cover. This is great customer service. Freebies, given tactfully, shouldn’t be discouraged. But tracking and accounting for each discount is a necessity.
Each part, big or small, is a negative cost against your revenue. Small freebies, like a $1 socket cover, are insignificant in the moment, but they slowly add up!
Commusoft’s job costing software, for example, makes it easy for engineers to account for freebies. Further, our system automatically tracks purchase orders and parts costs per individual job. This means the true cost of your inventory and its margins will never be unknown!
Next, we’ll delve into labour rates.
3. Quantify How Labour Rates Affect Costing
Service companies handle salaries and charge labour rates differently. After all, when you have a team with varying experience and skill sets, it’s natural each engineer will charge a different rate for their time and service.
Here are some questions to review:
It’s essential that these costs are tracked. Further, it’s valuable to determine billing rates for emergency appointments outside of normal business hours.
Remember, your figuring out labor rates, you should cover additional costs including uniforms, tools, and company phones. Furthermore, as your admins aren’t actively making money in the field, their costs need to be both accounted for and covered, within the margins of your services.
Continuing, we’ll jump to travel times.
4. Determine The Impact of Travel Times
Many gas, plumbing, heat, and electrical companies have certain service territories they don’t charge within, and a fee when travelling outside. Others vary the price of the service for each unique appointment.
As you know, maintaining your company fleet comes with many necessary, but expensive, costs each year.
Think about this:
As you know, expanding your service territory will increase your travel times. Further, costs will continue to rise year over year. If you have high maintenance costs, or are looking to purchase new vehicles, you might want to pad these expenses with a slight increase in the rates you charge. Real-time vehicle tracking and optimal routing are effective methods for cutting costs
Let’s pivot to warranties and service contracts.
5. Recognise How Warranties and Contracts Affect Pricing
Warranty jobs and service contracts are significant in commercial maintenance. First, for each, your team needs to understand what is and isn’t covered. Further, your team needs to remain vigilant if you offer SLAs with discounts if certain criteria aren’t met.
Here are some points to think over:
There are a lot of moving parts. Commercial assets have more wear and tear compared to residential appliances. That’s why it’s not only valuable to price services based on appliance but property type.
Contracts and warranty jobs can greatly inform which service types make the most profits. Further, warranty and contract jobs, like yearly electrical generator inspections, are guaranteed. That’s why upselling contracts to new customers is so important. Job costing can help your team ensure each of these services is priced with padding your revenue in mind.
Ultimately, it’s a trickle-down effect. Expertly completing warranty and contracted work proves your devotion to customer care. A great reputation makes expanding your business territory easier. More customers and services with the right margins ensure you see an improvement in revenue year over year.
From here, we’ll cover credit card fees.
6. Measure How Credit Card Fees Affect Pricing
Digital payment options are becoming more and more of a necessity for service businesses. While many customers will opt for check or direct deposit for large jobs, many will opt to pay with credit for smaller works.
Consider these questions:
Taking these fees into account not only impacts your revenue but offering modern ways to pay impacts your customer service and retention rates.
As you know, no customer likes to pay for extra line items, however, these costs shouldn’t be rolled into your overhead. Your team needs to be mindful of how you charge to cover these costs.
Credit card processing fees add up, and they add up fast.
Whether you use SumUp, Stripe, or a payment gateway like GoCardless, understanding how interchange, payment processing, and assessment fees impact your company’s wallet is invaluable.
Finally, let’s discuss your competitors!
Learn more about transforming payments with instant bank pay and our integration with GoCardless
7. Assess How Competitors Are Pricing Their Services
Your competitors are one of your most valuable resources! After all, expanding your service area comes with new competitors.
Competitor analysis should reveal the following:
Not only can evaluating your competitors help you determine how you should price your services, but identifying gaps in the market can help you diversify your offerings.
As you dig into service pricing, the best way to stand apart is not only by offering competitive prices but with high-quality services. The right job-costing software ensures your team stands apart from the crowd!
How Job Costing Can Help You Price Your Services
Taking control of your company’s growth necessitates taking control of job costing.
Ultimately, understanding which services put you in the red or green, and why, leaves you with more control over how to increase your revenue.
Ready to take control of your profits? Commusoft’s job costing software can help!
Our all-in-one field service management software and sales platform was built for growing trades businesses. From initial enquiry to final invoice, our solution guarantees your team has everything they need.
It’s never been easier to provide unmatched experiences to customers, all whilst boosting your company’s revenue:
