Margin vs Markup

Many of you create estimates for jobs with the idea of achieving a certain profit.  Often you have a percentage in mind.

When reviewing the job cost reports in QuickBooks and turning on the %, it’s important to know just what percentage you see in the report.  Where this really jumps out is comparing the P & L for a particular job to the Job Profitability Detail report. You’ve probably noticed these percentages are not the same.  I must admit to sometimes being a little dense but one day the light bulb went on and I realized just what each was measuring.

If you use the estimate in QuickBooks (even if it was created in an add-on product and then imported into QuickBooks), you can turn on the markup column.  This simply means you will mark your costs up by a certain dollar amount or percentage with the goal of achieving a certain profit, often thought of in percentages (profit margin). In other words, you mark your costs up to achieve a certain profit margin.

Some add-on products focus on the profit margin but when you look at the estimate in QuickBooks, there’s no column for profit margin – only profit.

When you run the P & L for a particular job and turn on percentages, you will see your profit margin percent.  However, when you the Job Profitability Detail report and turn on percentages, that is the markup percentage, NOT your profit margin.  Both are useful in helping you estimate future projects.

 

So next time you run your job cost reports and click on Customize to add the %, take the time to compare the differences between the two reports. I think you’ll find that both reports will guide you in your future estimates.  If you have any questions, please be sure to reach out!

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