Accounting is how you know if your job shop is doing well or not. And it’s about more than whether you’re making money. Accounting gives you a look into how your shop is doing, provided you have the in-depth reporting to tell you.
If you have accurate, real-time accounting data, you can make better decisions for your shop. It doesn’t help you to find out that your shop was starting to lose money a month ago. You need to know as it starts happening so you can fix the problem. Alternatively, if you have a time where your shop is making more money than usual, it’s helpful to know about that as soon as possible as well. That way, you can see exactly what is causing your shop to be more profitable and do more of it. And you can start planning on the best use of that extra money.
Essentially, job shops sell time. A big part of the quoting process is how long each machine needs to work on a particular job. This means that you can see how effectively your shop is selling time, based on your accounting. Are jobs making money? If jobs tend to take more time than you’ve quoted them at, your accounting data is one way you can find out. And once you know, you can watch your jobs more closely until they start making money again. If your shop floor is selling time, it had better be selling it at the correct price.
Change is difficult, and making a case for it can be even harder. However, with accurate accounting data, you can truly see if a change is needed. Maybe your shop is spending too much time and money on reworked or rejected parts. By getting a dollar amount of the time and material used and comparing that with a dollar amount of more training, you can prove that more training is worth it.
If your shop is considering purchasing an ERP system, it’s helpful to know how much money you’ll save by implementing it. If you know how much time your employees spend on manual processes they won’t have to do anymore once they get an ERP system, you can find out how much those processes cost to do. What is your annual shop spend on manual processes compared to the cost of an ERP system?
Accounting can even help your shop decide on whether to buy new machines. If your shop tends to send out parts to be heat-treated, that’s an added time and cost. When you compare the heat treatment cost and the added time to any job that needs it to the cost of bringing heat treatment in-house, you can see if it’s worth bringing that process in.
While many job shops are focused on the shop floor and only look to accounting for profit, accounting data can give your shop a wealth of information. Rather than trusting your gut, you can see the numbers behind any decision to find the one that makes the most sense for your shop with detailed accounting data. An ERP system is a great way to manage this data and make your shop even better.