Step Two in our spreadsheet construction process is easy if you are a good manager. If you are not, it will help you become one.
Last month we began to assemble what might best be described as a chain of information. When we are done, we will have a tool that allows us to see exactly what any job running through the shop is costing us at any given point in that jobâs progress.
Think of it. Knowing every day where your costs truly stand in comparison to your estimate. With information like that, making money gets a whole lot easier.
Our tool is a cost accounting spreadsheet â a template, really â that we will be able to use again and again, job after job.
We started with rows and columns for documenting materials purchases; relatively simple stuff to get you accustomed to moving around and working with spreadsheets. Armed with that experience, you are now ready for the next âlinkâ in our chain. Almost.
Though a little more complex, Step Two brings profound rewards. Beyond getting you closer to the finished template, this step will make you a better manager. I kid you not.
Without question, the weakest link in this cost analysis chain we are working on is the quality of our information. If the numbers arenât good, the information is useless. And the second part of our worksheet is where we will enter information provided by our employees â specifically, the amount of time they work each day on given jobs.
Where we only have ourselves to blame if we enter, say, the wrong price for a piece of material, the responsibility for recording accurate labor data rests entirely with the employee. If just one employee fails to provide that information, the costing process is pointless.
Recording the information is the employeeâs responsibility, but holding employees accountable for it is yours â and for many shop owners and managers, this is where the wheels come off. Iâm not just talking about cost accounting. Many of us are reluctant managers, at best. Many more are downright unwilling to manage.
That is unfortunate, because effective management is (1) easy to learn and (2) the difference between your companyâs success and failure.
Holding people accountable starts with making certain they know exactly what is expected of them. So before we work on the next part of the costing template (the specifics of which we will cover next month), we are going to get your workers âprimedâ to give you the information you will be putting there. To do it, follow these steps:
1) Create a form on which employees will track their time for as many jobs as they might work on in a single day. Keep it simple. Something like the graphic below is all you need.
2) Buy clipboards for everyone in the shop (and a few extras for new hires). Label each clipboard with a shop employeeâs name. Put exactly five blank time sheets on each clipboard. Include the employeeâs name and the day and date for each day of the next full week already filled in, using your computer â NOT HANDWRITTEN.
3) First thing next Monday morning, hold a meeting of all shop employees (salaried and hourly administrative employees need not â and should not â attend).
At the meeting, call each employeeâs name and distribute the clipboards. Then, explain that each employee is now responsible for keeping track of each job he or she works on during the day, every day, for as long as they work for you. Each minute must be accounted for on the time sheet, in PENCIL.
Make clear that filling in time sheets at the end of the day is NOT an option, because nobodyâs memory is good enough to be that accurate. Jobs and time spent are to be recorded âon the flyâ throughout the day. Clipboards are to be kept in a conspicuous place at each employeeâs workstation, because you will be checking them regularly.
Finally, make clear that each employee is to have five sheets â no more, no less â on his clipboard at any given time. Have everybody count their sheets just to be sure (and have someone other than yourself check before you hand them out so you are not embarrassed!). Most important, explain that the only way they get a blank sheet for next Monday is by turning in a finished one today. The same goes for Tuesday, Wednesday and so on.
(For holidays, you need only provide a sheet with âHolidayâ written across it, though it still should have the employeeâs name, day and date, generated on your computer. Then, even in a holiday week, employees will have five sheets on their boards. If your shop works a four-day or six-day week, adjust things accordingly.)
4) Ask for questions. If you get the obvious one (âWhy do we have to do this?â), be concise: âBecause it is going to make this company more profitable.â Donât bore them with a big speech about cost accounting.
If you get the rebellious question (âWhat happens if we donât do it?â), be more blunt: âI have decided that this is important. If you donât comply, you will get a written warning. If you repeat, you will be fired. Two strikes on this is all you get. If you are not sure how to record something, come and ask. But not filling it in for fear of doing it wrong is not an acceptable excuse.â Be sure everyone understands this, whether you get that rebellious question or not.
5) Once you have fielded all the questions, turn them loose. Above all, remember that what you are asking is not rocket science. You are giving an order here, not making a request. If your meeting runs longer than 15 minutes, you have lost control of it.
Just a couple of things in closing this month: First â and at the risk of repeating myself â use this opportunity for holding people accountable as a turning point in your management approach. It is in no way unreasonable or tyrannical to require employees to do what is expected of them, and the key to good management is making sure people understand what is expected of them.
Second, be sure you are devoting the time and resources necessary to cost accounting to get it right. If it makes sense to have an administrative person prepare and distribute the time sheets each day, delegate that responsibility and hold him or her accountable for it. If that person is going to leave early one day and will be unable to do it, he/she must let you know so you can make the necessary arrangements. Make this project your top priority because, in case you forgot, you are in business to make money.
Similarly, follow through on your promise to help employees get their time sheets right. Be available for questions. Donât âmeeting themâ to death, but consider a follow-up meeting at the end of the first day and maybe another at the end of the first full week.
Most important, stick to your guns. Make good on your promise to do unannounced checking of clipboards â especially during the first few weeks â so people know you are serious. Do not tolerate laziness or procrastination about keeping time sheets. Issue those written warnings when necessary and make clear to offenders that their next strike is their last.
Is cost accounting really this important?
You bet it is.
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