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Track Profitability at Your Machine Shop

Jan 3, 2017 8:02:00 AM / by Brian Paulson posted in small business accounting, machine shops

Some machine shop owners assume they know how much it costs to run a job based on gut instinct or because of their experience. Others simply rely on bank balances to measure the success of their business at the end of each month.

To run and grow a thriving machine shop, you should know which jobs are truly profitable, and which jobs didn’t make you money.machine-shop-accounting.jpg

This can be achieved by clearly understanding the cost per hour within different areas of your shop, and by appropriately costing the work in each department.

Without proper accounting and bookkeeping, however, the process of gaining an accurate picture of every job can be difficult and time consuming.

Tracking Job Profitability

To analyze cost down to the department level, you should have an accounting system in place that tracks the following:

  • Labor based on employee hourly rates for each job
  • Labor overhead (such as employer paid benefits and taxes) based on labor hours
  • Shop overhead based on the cost of running machines by job and department
  • General overhead (all of the “other” costs of doing business, including sales and administration) applied proportionally to each job
  • Material and outside service costs based on actual expenses

Having these basic numbers on hand will allow you to make proactive business decisions, increase efficiency, and develop a cost structure to ensure profitability moving forward.

Choosing a Partner

Partnering with an accounting service frees you from the burden of tracking and analyzing such data, which gives you more time to solve day-to-day issues.

Running a machine shop presents enough challenges. Use an accounting service with experience in your industry to help you understand the value of proper job costing and to provide support for all of your accounting and tax responsibilities.

Ready to learn more?

Contact us for a complimentary consultation, and download our Small Business Accounting Kit for tips and resources heading into the new year!

Download the Small Business Accounting Kit

Brian Paulson

Written by Brian Paulson

Brian began working at CSI in 1996, and he purchased the business in 2002. As Owner, his primary role is in the management and growth of the firm. Since 2002, the firm has more than quadrupled in size. In 2009, Brian started CSI’s payroll service to complement CSI’s accounting and tax services. Brian received his Bachelor’s degree from the University of North Dakota, with a double major in Accounting and Financial Management. He’s a member of both the National Society for Tax Professionals and the National Society for Accountants, and he serves on the board of directors for the Professional Association of Small Business Accountants, where he was once president. Brian also serves on the business advisory council for Opportunity Partners, an organization that helps people with disabilities find employment. He’s also contributed to several business books, including Six Steps to Small Business Success and The Lean Mean Business Machine. Fun Fact: To help put himself through college, he used student loans, delivered pizzas, and worked summers in a salmon processing plant in Alaska.