Construction Job Costing: How to Know What Each Job Really Made

Job costing means tracking every dollar of labor, materials, subs and equipment against the job it was spent on, so you can compare what each job actually cost with what you bid. Done every month, it shows which jobs are making money while there is still time to fix the ones that aren't.

Most contractors know their revenue. Far fewer know, job by job, what they kept. That gap is where margin quietly disappears.

What job costing tracks

Every job gets the same four buckets of direct cost:

• Labor, including the burden on top of wages: payroll taxes, workers comp and benefits.
• Materials bought for that job.
• Subcontractors.
• Equipment and other direct costs, like rentals, permits and dump fees.

Rent, office staff, trucks that serve every job and your own pay are overhead, not job cost. They get covered by the margin the jobs earn.

For each open job you want three numbers by bucket: the budget from your estimate, the actual cost so far, and the cost to complete, meaning what is still left to spend.

A worked example (made-up numbers)

Example Co. signs a $120,000 kitchen and addition remodel. The estimate looks like this:

At about 60% done, here is where the job stands:

The projected gross profit is now $26,000, or 21.7%, against the 25% bid. That is a $4,000 fade, and it is visible with 40% of the job still to go.

Look at where it comes from. Materials look $3,400 over budget, but most of that is timing: cabinets were bought early, and the projected total is only $1,000 over. Subs look under budget for the same reason in reverse. Labor is the real problem: $3,000 over at finish. That is a conversation with the crew lead this week, not a surprise at closeout.

This is why the cost to complete matters more than the actual-to-date number. Actuals alone mix timing with overruns. The re-estimate tells you which is which.

Why job costing breaks

When job costing doesn't work, it is almost always one of four things:

1. Payroll isn't split by job. Hours land in one wage account, so every job looks cheaper than it was.
2. Materials go on a card and get coded to supplies. The cost is real, it just isn't on the job.
3. Change orders get done but not added to the contract or billed. The cost shows up, the revenue doesn't.
4. Bills get entered weeks late. Jobs look profitable until the supplier and sub invoices catch up.

Job costing in QuickBooks Online

In QuickBooks Online Plus or Advanced, set up each job as a project and tag every bill, expense and invoice to it. Payroll has to land on the job too, which usually means time tracking tied to projects. Then the project profitability report gives you cost and margin by job. Classes are for a line of work or a crew, not individual jobs. More on that in classes vs locations vs projects.

Job costing with JobTread, Buildertrend or another field system

The field system usually holds the budget by cost code, and QuickBooks holds the bills and payroll. Job costing works when both tell the same story: the same jobs, cost codes mapped to the right accounts, and every bill entered once. When the two drift, owners stop trusting either number. More on how we run it in JobTread accounting.

How often to look

Monthly at minimum, on every open job, with the project manager updating the cost to complete. Weekly on your biggest jobs. The point is to see the fade while there is still time to change the outcome: a change order, a crew conversation, a conversation with a supplier.

Job costing is also the input for a WIP report, which compares what you have billed with what you have earned on each job.

Questions

What is job costing?

Tracking the labor, materials, subs and other direct costs of each job against its budget, so you know what each job made.

Is job costing the same as overhead?

No. Job costs belong to a specific job. Overhead, like rent, office staff and your own pay, is paid out of the margin all the jobs earn together.

Is job costing the same as a WIP report?

No, but a WIP report depends on it. Job costing tells you what each job cost. A WIP report uses those costs to show how far along each job is and whether your billing is ahead of the work or behind it.

See what your pricing is doing

If your jobs are earning less than you bid, the next question is whether your prices cover overhead, your pay and the profit you want. Bring four numbers from the last 12 months to a free 15-minute profit check and you'll leave with the answer.