In one way or another, every company in the North American oilfield service industry is familiar with job costing. 

For many companies, if not most, job costing refers to the process by which they develop a project quote for a prospective customer. They consider how many hours of labor will be required, which kinds of equipment will be used and what quantity of materials will be consumed to complete the work. Add in a reasonable profit margin, and there’s your quote.

According to Jory Lamb, President and CEO of VistaVu Solutions, some companies take the idea of job costing much, much further than this.

“Rather than seeing job costing as a one-time activity, these companies see job costing as a continuous loop of information,” says Lamb. “Over time, their understanding of the costs that go into a project becomes more and more granular. They understand their costs for labor, equipment and materials down to the penny.”

How far can job costing knowledge go? What can it do for a company? Lamb believes there’s no finer example than one VistaVu customer he’s worked with for years. Whenever this company completes a project, information on estimated vs. actual costs is fed back into the company’s system.

While many oilfield service companies operate at a 10% to 20% profit margin this company regularly registers a 50% profit margin.

“These guys will tell you, job costing is why they win work,” says Lamb, “and it’s why they made it through 2009, when the energy service sector was essentially upside down and it seemed like there was no work for anyone.”

As Lamb explains, this company was an early adopter of SAP Business One and FieldVu, using this all-in-one solution to manage their day-to-day operations, costing, payroll, billing, finance and HR functions.

Many other companies make do with back-of-the-envelope job costing, and pay the price in terms of efficiency and profitability. In fact, Lamb considers Absence of True Job Costing to be one of the 10 Deadliest Sins of Oilfield Service Companies.

“With the right system in place, every project is an opportunity to understand your costs in greater and greater detail,” he says. “Improving your job costing has a snowball effect that delivers a huge impact on profitability over time.”