Category Archives for Accounting

Importance of Burdened Labor Costs to your Contracting Business

Importance of Burdened Labor Costs to your Contracting Business

If you are the owner of a small business that generates its revenue through hourly billing, then you must understand your fully burdened labor costs in order to survive. The first thing you need to know is that your employees fall into two categories, namely direct employees and indirect employees.

Direct EmployeesImportance of Burdened Labor Costs to your Contracting Business

Direct employees are those workers on the job site who bill their efforts at an hourly rate. They are the direct source of your company’s revenue.

Indirect Employees

Indirect employees support but are not directly involved on the job site. Examples are administrative positions such as purchasing, bookkeeping, accounting, and marketing.

Burdened Labor Costs

In order for a contracting business, for example, to properly determine its billing rate for direct employees, it must first establish its labor burden rate, followed by the fully-burdened labor costs per hour worked. This can be extremely complicated but is vitally important to the success of your company, since your billing rate will determine whether your business is profitable, or whether you lose money every time you do a job. You billing rate is too critical to simply guess. Luckily, a Burdened Labor Costing Tool can take the guess work out of this process.

Labor Burden Rate

Labor burden rate is the total indirect costs as a percentage of the company’s direct labor. For every dollar of direct labor allocated, apply labor burden as a percentage of the direct labor. Break costs down into direct and indirect costs. Known expenditures directly associated with the project are direct costs. These include direct labor, materials and supplies, equipment rentals, bonds, and permits. These costs are obvious inclusions for job estimates. The indirect costs are not so obvious.

Indirect costs that need to be included in any job estimate include workers’ compensation, general liability and automobile insurance, motor vehicle and equipment repairs and maintenance, depreciation, employee benefits such as health, life, disability, profit sharing, bonuses and 401(k) match, and payroll taxes. It is also necessary to account for vacation time, holidays, sick days, training, and safety.

Burdened Labor Costing Tool

A Burdened Labor Costing Tool can track all direct labor costs in detail. It calculates burdened labor as the sum of direct labor (vehicle) costs including but not limited to payroll taxes, worker’s comp, benefits, and an adjusted percentage of your indirect labor and overhead costs. It then reports on these specific costs that tie directly to each direct employee. You can use the information to set flat-rate pricing, time-and-material pricing, job quotes, and labor estimates. The result is a clear understanding of the critical data needed for effective business decision making.

If you would like to talk about burdened labor costs, or if you have general questions about bookkeeping, please call 262-563-9266 or email info@BookkeepingByMike.com.

Compelling Reasons to Outsource Bookkeeping for Small Business

Compelling Reasons to Outsource Bookkeeping for Small Business

Small business owners wear many hats. Bookkeeping is an essential task for a smoothly-running business. However, for a busy business owner, it not a value-added activity that is contributing to the growth of the business.  Simply put, this is time spent working in the business rather than working on the business. There are many compelling reasons to outsource bookkeeping for small business. This will remove an item from your to-do list, freeing some of your valuable time for business growth activities. Here are just three of the reasons to outsource your bookkeeping.

Compelling Reasons to Outsource Bookkeeping for Small BusinessSpecialization

Most small business owners have no specific training in bookkeeping. You may not be familiar with all of the rules and regulations that apply to your business.

When you outsource bookkeeping for small business, you are trusting your books to an expert. They can take steps to make sure you are compliant. Additionally, this expertise may help you find ways to save your business money.

A good bookkeeper can often pay for the cost of their services by increasing the profitability of your business.

Reduced Labor Costs

When you have a bookkeeper on staff, you are responsible for their payroll costs. If they are a new hire, you need to budget for the training costs to get them up to speed.

For most small businesses, bookkeeping is not a full-time task. However, you remain responsible for this employee’s salary even when things are slow. When you outsource bookkeeping for small business, you have the advantage of only paying for the services that you need.

Another benefit of outsourcing is that if your bookkeeper quits or is terminated, you don’t have to find a replacement. This can lead to substantial savings over time.

Privacy

Trusting internal financial records to a company employee can be risky. In other words, business owners want this information kept private and secure. Finding an employee who will stay with the company long term and maintain confidentiality is not a simple task. In contrast, if you outsource bookkeeping for small business, you gain peace of mind. You know that nobody in your community can gain access to your financial records.

Conclusion: Outsource Bookkeeping for Small Business

For any small business, keeping up to date bookkeeping records is essential. Outsourcing your bookkeeping is an easy solution.

Geographic Bookkeeping Service Area of Bookkeeping By Mike LLC

Serving the business bookkeeping needs of businesses in these Waukesha County communities:

Bethesda, Big Bend, Brookfield, Brookfield, Buena Vista, Butler, Camp Whitcomb, Chenequa, Colgate, Delafield, Dousman, Eagle, Eagleville, Elm Grove, Genesee, Genesee Depot, Goerke's Corners, Guthrie, Hartland, Jericho, Lac La Belle (partly in Jefferson County), Lake Five, Lannon, Lisbon, Mapleton, Menomonee Falls, Merton, Milwaukee, Monches, Monterey, Mukwonago, Mukwonago (partly in Walworth County), Muskego, Nashotah, New Berlin, North Lake, North Prairie, Oconomowoc, Oconomowoc Lake, Okauchee Lake, Ottawa, Pewaukee, Saylesville, Stone Bank, Summit, Summit Center, Summit Corners, Sussex, Vernon, Wales, Waukesha, Waukesha (county seat). If we're an exceptionally good fit, also serving clients in Jefferson, Milwaukee, Walworth, and Washington Counties.

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