CONSTRUCTION JOB COSTING
Know What Your Jobs Are Actually Costing
Revenue tells you what came in. Job costing helps you understand what it took to earn it. Excel Consulting helps contractors organize project income and costs so they can see where money is being spent, which jobs are profitable and where margins may be slipping.
WHY JOB COSTING MATTERS
A Profitable Company Can Still Have Unprofitable Jobs
A construction company can show a profit at the end of the month while individual projects are quietly losing money.
Without consistent job costing, materials may be charged to the wrong project, payroll costs may not be allocated accurately, subcontractor expenses can be difficult to track and change orders may never be reflected in the original budget.
The result is a financial statement that tells you the company made money—but doesn’t tell you where you made it or which jobs ate into your margins.
Knowing your total profit is useful. Knowing which jobs created—or destroyed—that profit is better.
Job Costing Helps You Answer:
- Which jobs are actually profitable?
- Are labor costs running over budget?
- Are material costs higher than expected?
- Are subcontractor costs being captured correctly?
- Are change orders improving or hurting the margin?
- Which types of projects are most profitable for the business?
- Where are costs consistently getting away from you?
WHAT SHOULD BE TRACKED
What Costs Should Be Tracked on a Construction Job?
Accurate job costing depends on consistently assigning project-related income and expenses to the correct job. If costs are recorded differently from one project to the next—or never assigned to a project at all—the profitability numbers quickly become less useful.
Depending on the type of contractor and how the business operates, job costs may include:
- Labor — wages, payroll taxes, workers’ compensation and other labor-related costs
- Subcontractors — payments to trade contractors and other outside labor
- Materials — lumber, fixtures, finishes and other materials purchased for the project
- Equipment — rentals, equipment charges and project-specific tools
- Permits and fees — permits, inspections and other job-specific costs
- Delivery and freight — shipping or delivery expenses tied to the project
- Change orders — additional revenue and the corresponding labor, material and subcontractor costs
- Other direct job expenses — anything incurred specifically because that project exists
Consistency Matters
The exact categories may vary from one construction company to another. What matters is creating a structure that fits the business and using it consistently so one project can be meaningfully compared with another.
If the costs aren’t assigned to the job, they can’t help you understand the job.
The Goal Isn’t Just to Know What Happened
Good job costing should help you see problems while there is still time to do something about them.
The sooner you know where the numbers are drifting, the sooner you can make a better decision.
BUDGET VS. ACTUAL
Job Costing Should Show You Where the Estimate and Reality Part Ways
An estimate tells you what you expected a project to cost. Job costing shows you what actually happened.
When labor, materials, subcontractors and other project expenses are tracked consistently, you can compare estimated costs to actual costs and identify where the job is running ahead—or falling behind—before the project is finished.
That can help uncover problems such as:
- Labor taking longer than estimated
- Material costs exceeding the original budget
- Subcontractor pricing changing during the job
- Change orders that increase revenue but also increase costs
- Costs being charged to the wrong project
- Scope changes that were never reflected in the original estimate
- Jobs that look profitable on paper but are losing margin as the work progresses
JOB COSTING + PROJECT MANAGEMENT SOFTWARE
Your Job Costing is Only as Good as the Information Feeding It
1. Project Activity
BuilderTrend • BuildTools • Procore
Estimates, change orders, purchase orders, subcontractor costs and other job information begin with what is happening on the project.
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2. Accounting Records
QuickBooks • Sage 100 • FreshBooks
Project-related income and expenses need to be recorded consistently and assigned to the correct jobs.
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3. Job-Cost Reporting
Budget vs. Actual • Profitability • Margins
When the information flows correctly, job-cost reports can actually help you understand project performance.
Good job costing depends on good information— and a workflow that gets that information where it belongs.
BETTER FINANCIAL VISIBILITY
Better Job Costing Helps You Make Better Decisions
Job costing is not just about looking backward at whether a project made money. When the information is accurate and reviewed consistently, it can help you make better decisions about future estimates, staffing, subcontractors, project types and pricing.
Over time, job-cost information can help you identify patterns in the business—where estimates tend to miss the mark, which types of projects consistently perform well and where margins are most likely to slip.
Better Job Costing Can Help You See:
- Which jobs and project types are most profitable
- Where labor estimates consistently run over
- Which material categories are driving cost increases
- Whether subcontractor costs are staying within budget
- How change orders affect project margins
- Whether your estimating assumptions match actual results
- Where future bids may need to be adjusted
And Make Better Decisions About:
- Pricing future work
- Which projects to pursue
- Labor and staffing
- Subcontractor budgeting
- Purchasing and material allowances
- Estimating practices
- Where the business should focus its resources
The goal isn’t more reports. It’s better information for running the business.
Ready to Get Better Visibility?
Stop Guessing Which Jobs Are Making You Money
If your financial statements tell you how the company is doing but not how individual projects are performing, it may be time to take a closer look at your job-costing setup. Excel Consulting can help you organize project costs, improve the accounting workflow and build more useful financial information for running your construction business.
Frequently Asked Questions
about Job Costing
What is construction job costing?
Construction job costing tracks the income and expenses associated with individual projects so you can understand what each job actually costs and whether it is profitable. Costs may include labor, materials, subcontractors, equipment, permits and other project-specific expenses.
Why is job costing important for contractors?
Company-wide financial statements can show whether the business is profitable overall, but they do not necessarily tell you which projects made money. Job costing helps identify where margins are strong, where costs are running over budget and which types of work are most profitable.Can QuickBooks track construction job costs?
Can QuickBooks track construction job costs?
Yes. When QuickBooks is structured correctly and project-related transactions are assigned consistently, it can help track income and costs by job. The level of job-costing detail available depends on the QuickBooks product and the way your accounting workflow is set up.
Can job costing work with Buildertrend, BuildTools or Procore?
Yes. Many contractors manage project activity in construction project-management software while maintaining financial records in QuickBooks or another accounting system. Excel Consulting can help review how information moves between those systems so project costs are recorded consistently.
What should be included in a construction job cost?
Depending on the business, job costs may include direct labor, payroll-related costs, subcontractors, materials, equipment, permits, delivery charges, change-order costs and other expenses incurred specifically for the project.
Can you help fix job costing that has already been set up incorrectly?
Yes. Excel Consulting can review how projects, accounts and transactions are currently being tracked and identify areas where the accounting structure or workflow may need to be corrected. If older transactions require substantial correction, bookkeeping cleanup may be needed before reliable job-cost reporting can be established.
Learn About Bookkeeping Cleanup →