Productivity Tip 18 – Labour Cost Recovery

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Productivity gains can be achieved through accurate Labour Cost Recovery measures.

When booking labour costs to Jobs or Assemblies an offset posting is required to counter the direct wages that are typically entered as an expense. We call the accounts posted to, ‘Labour Recovery Accounts’. 

Labour Recovery Accounts enable the analysis and reporting of the recovery of direct and overhead costs – in other words:

  1. Are the costs for our product and/or services complete and accurate, and 
  2. Are our labour charges (that are also used in quoting and budgeting) under or over recovered?

The resulting Labour Variance can then be used to more accurately determine the ongoing Standard Labour Costs.

Once this is achieved, the business will have a more reliable understanding of which products and services are profitable.

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