Job-Order Costing and ERP Systems
The document flow in job-order costing is fundamentally a data integration problem—which is exactly what ERP systems solve.
What needs to talk to what
| System | Data It Holds | What It Needs From Others |
|---|---|---|
| Sales/CRM | Customer info, orders, pricing | Job costs (for quoting), delivery status |
| Inventory | Stock levels, locations | Requisitions, reorder triggers |
| Purchasing | Supplier info, POs, invoices | Stock levels, budgets |
| Timekeeping | Labour hours by employee | Job numbers, wage rates |
| Production | Job status, materials used | All of the above |
| Accounting | POHR, journal entries, statements | Actuals from all systems |
| Estimating | Budgeted costs by job | Actuals for variance analysis |
Without integration
| Problem | Consequence |
|---|---|
| Manual data entry across systems | Errors, delays, reconciliation nightmares |
| Batch updates (end of day/week) | Stale information for decisions |
| No single source of truth | Conflicting reports from different departments |
| Can’t trace costs in real time | Job profitability unknown until after completion |
What ERP does
ERP = one integrated system that handles the document flows Chapter 5 describes manually
When a materials requisition is entered, it simultaneously:
- Updates inventory quantities
- Posts to the job cost sheet
- Creates the journal entry (Dr. WIP / Cr. Raw Materials)
- Updates job status visible to production
Connection to Chapter 5 concepts
| Chapter 5 Concept | How ERP Handles It |
|---|---|
| Materials requisition form | Digital form triggers inventory + accounting entries |
| Time ticket | Time tracking linked to job numbers and payroll |
| Job cost sheet | Real-time accumulation from all cost inputs |
| POHR application | Automatic as labour/machine hours are logged |
| Under/overapplied variance | Calculated continuously; visible before year-end |
Why this matters
The manual document flow (sales order → production order → requisition → time ticket → job cost sheet) reveals what information needs to flow where. Understanding the flow conceptually helps you:
- Recognize what ERP systems are actually doing
- Troubleshoot when systems don’t integrate properly
- Design workarounds when full integration isn’t available
- Ask better questions during system selection or implementation