What P&L Statements Show About Job Profitability

A time-consuming activity on a job site is having installers try to keep track of how many feet of this or that got pulled today, how many connectors got used, how many plates were installed. This slows down the actual installation work, while providing information that isn’t worth as much as the time it takes to collect it.

Ask the installers to make notes about high-impact things like: What didn’t get done that we still need to get done or customer change order requests. And ask them to record the time they arrived at the job site and when they left. But beyond that, ask them to install. They are there to produce revenue. You can use your profit and loss statement (P&L) to glean any info needed about job costs and profitability.

The Truth Is on the P&L
Your P&L should have an Income account, and a COGS (Cost of Goods Sold) account, for tracking equipment sales and costs. If equipment items are set up as inventory parts (recommended), the P&L will provide precise sales, COGS, and GM (Gross Margin) info for equipment - company-wide, by job, or by invoice.

Your P&L should also have a separate income account, and a corresponding COGS account, for install parts. This is where you track costs and revenues for all the pieces/parts/wire/cable you use in all jobs. Because install parts are best tracked as non-inventory items, the P&L captures parts costs as items received from the supplier. It captures parts income as the client is charged for parts on customer invoices.

If your Parts Gross Margin averages 50 percent or more on your monthly P&Ls, you are charging a fair amount for parts across all jobs. If it's less than 50 percent, your parts consumption is too high, relative to how much you are charging customers. You can quickly calculate what your per-job parts charges need to be as a percentage of total job revenues, to realize a profitable outcome going forward.

Labor, Too
You can manage labor profitability in a similar fashion. Again, your P&L should have:

1. A separate income account for labor revenues
2. A separate payroll account for billable employee wages

Your GM on Labor can be quickly calculated from these two numbers. If it is less than 40 percent, you need to increase per-job labor allocations, and/or reduce the amounts you pay to get jobs done. But if the Labor GM is 50 percent overall – or 60 percent, even better! – you can be confident that you are allocating enough labor to your jobs.

Jobs differ, of course. Inevitably, no matter what controls you might implement, some will be more or less profitable than others. But it’s overall profitability that pays the bills, and enriches the owners – and that’s what your P&L should tell you.

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