Why post-calculation doesn't happen, and how to make it happen
For CFOs, owners and work planners of manufacturing companies who want to know whether an order earned what was estimated.
Short answer
Post-calculation usually doesn't happen because the basics are missing, not because nobody wants it. The estimate has no cost lines to compare against, hours are not booked to the order or operation, material is not issued to the order, and nobody owns it. Fix it in that order: the same cost lines in estimate and actuals, hours per operation on the order, material on the order, and a fixed 30-minute monthly review of the three largest deviations.
In short
- Without the same cost lines in estimate and actuals you compare apples with pears.
- Hours on the order, preferably per operation, is the most important condition.
- Count causes using a fixed list. Then you see what goes wrong structurally.
- 30 minutes a month on the three largest deviations is enough to learn.
1. Four reasons it doesn't happen
| Reason | How to recognise it | What to do |
|---|---|---|
| No cost lines in the estimate | The quote has four columns or one total | Build the quote per cost line: material, operations, outsourced, mark-ups |
| Hours not on the order | Hours are on a weekly timesheet or only in payroll | Book hours to the order, preferably per operation |
| Material not on the order | Material comes from general stock without issuing | Issue material to the order when it leaves the warehouse |
| No owner | Everyone finds it important, nobody does it | One owner and a fixed monthly review |
Software doesn't solve this. Most ERP packages for manufacturers can register hours on an order or project and put estimated next to actual. The problem is what ends up in the system.
2. Fix it in this order
- 1
The same cost lines
Build the estimate per cost line, with the same names that will be booked on later: sawing, welding, assembly, and so on. How that works is in cost build-up of a quote.
- 2
Hours on the order
Have people book hours to order and operation. Start with one department. Paper is fine at first, as long as it reaches the order daily.
- 3
Material on the order
Issue material to the order when it leaves the warehouse. That only works when items have a fixed number.
- 4
A fixed monthly review
One owner, 30 minutes once a month, only the three largest deviations. One action per deviation.
3. Compare estimated with actual
Below is a fictional order. Per cost line, fill in estimated and actual costs. The tool shows where the margin went and which deviations to discuss first.
Post-calculation: estimated versus actual
- Material+€420
- Sawing+€68
- CNC machining-€115
- Welding+€845
- Hydraulics€0
- Electrical+€195
- Assembly and test+€240
- Engineering-€240
- Outsourced work€0
Discuss these three in the monthly review
- 1. Welding+€84522.4% over estimate
- 2. Material+€4204.7% over estimate
- 3. Assembly and test+€24010.0% over estimate
4. The 30-minute monthly review
| Time | What | Who |
|---|---|---|
| 5 minutes | Which orders were finished, and how long were they open? | Work preparation |
| 15 minutes | The three largest deviations. Was it the estimate, the execution, or extra work not charged? | Estimating and work preparation |
| 10 minutes | What do we change in the costing rules or way of working? Who does it, and when? | Owner of the review |
Keep it small
Don't discuss every deviation. Three per month, each with one action, yields more in a year than a long list nobody finishes.
5. Count the causes
For every large deviation pick a cause from a fixed list. After six months you will see what goes wrong structurally. If 'extra work not charged' keeps coming back, the fix is a change-order form, not a better estimate.
- More or less work than estimated
- Material price higher or lower
- Error or rejection
- Extra work not charged
- Waiting for material or information
- Hours booked wrongly
If a key figure keeps being wrong, adjust the costing rule. That way post-calculation becomes how you keep estimating knowledge up to date.
Frequently asked questions
What is post-calculation?
Post-calculation (job costing) compares what you estimated for an order with what it actually cost, per cost line. The goal is learning: which cost lines are structurally off, and why.
How often should you post-calculate?
On every finished order, but only discuss the largest deviations. A fixed 30-minute monthly review works better than an extensive analysis once a year.
Per order or per operation?
Per operation if possible. If you only know an order took 20% more hours, you still don't know where. If you know it was welding, you can adjust the welding rule.
What if hours aren't booked properly?
Start small: one department, daily, on order and operation. Show what happens with the figures in the monthly review. People book better when they see it serves a purpose.
How much deviation is normal?
There is no fixed standard. Many companies first look at cost lines more than 10% off. More important than the threshold is that you count the causes and improve one thing at a time.
Sources
Other people's figures and statements on this page come from here. Calculation examples are fictional.
- ECI: Ridder iQ, cloud ERP for manufacturers Example of an ERP for manufacturers with time tracking per project.
About the author
Safouan Bolbaroud · Founder of Agentfabriek
At Agentfabriek, Safouan builds automations on top of the ERP systems of manufacturers and wholesalers. He writes about what needs to be in order before automation makes sense.