The Trouble with Job Costing

Over many years and many discussions I found that Deltek Vision’s concept of job costing is still a stumbling stone for many accounting specialist, especially when it comes to explain this to their accountant at year end.

The main issue with this is probably because most consultants will tell these firms to offset the values in the job cost credit account with actual payroll cost and it will never tie out. Let me try to fix this later in this post.

But first…A Primer to Job Costing in Deltek Vision

Vision is not able to split actual payroll cost down to projects. This has many reasons and I list just a couple of those here:

  • Payroll happens at the end of the month (or pay period) and project managers need the costing before that
  • Most of the vision users don’t have payroll integrated to Vision
  • it would be very complicated to apply the actual payroll cost down to each project because of the many possible variations in pay.

This is why Deltek Vision takes a slightly different path and works with cost accruals. These cost accruals debits and credits, cross-charges, etc. are calculated for you but it basically does this:

  • create a debit of hours worked x cost rate (from employee screen or cost rate table) against the project selected in the timesheet. The account used is linked to the employee type and should be a direct (consultant) expense account.
  • create a credit of the exact same amount against a indirect (consultant) expense account usually called “Job Cost Variance” (I personally would rename it to “Job Cost Offset”) and an overhead project defined in the accounting setup
  • Combined, these two transactions will ALWAYS cancel themselves out and no real value is added or subtracted to the overall chart of accounts
  • The real expense is then added as one or more payroll expense transactions debiting an indirect expense account and crediting your bank account(s)

Where Things Get Out Of Control

Most firms are advised to debit their payroll expenses against the job cost credit account to “work off the account balance” and this is where things can get out of hand and people find themselves in a pickle to explain to their accountants what’s in that account balance…because the account will NEVER balance to zero.

The reason for this is of course that Vision works with assumed cost rates that might or might not cover all of the employee’s payroll cost or it is a burdened rate and because the payroll cycle most likely will never match your job cost cycles. Then the firm ends up with a balance of a couple thousand dollars credit or debit at the end of the year with no good explanation on what causes this.

Keep It Clean

Here’s my suggestion on how to get around these year end discussions: KEEP IT CLEAN!

  • Don’t touch the internal accrual accounts for job costing (credit and debit) and these accounts together will always tie out to zero
  • Create specific indirect payroll accounts for pay, deductions, etc and only use those to account for your actual payroll cost
  • Create account groups for both sets of accounts so that the internal accrual account group will show zero on your balance sheet and the payroll account group will show your true employee cost
  • Compare your payroll cost (and overhead cost) to your job cost offset account and based on the variance make adjustments to your overall job costing. If your variance is positive it means that your cost rate is too high and if it’s negative it’s too low


I hope this will help firms getting their year-end done or at least prepare them for an easier year-end for the next time around.

And as always, these are my personal opinions and do not reflect the opinions of Deltek or anybody else.