Job Costing: Knowing Your True Cost Per Job

What Job Costing Is

Job costing means tracking every cost associated with a specific job — materials, labor, equipment, subs, permits — so you know exactly what that job cost you to deliver. Then you compare it to what the customer paid. The difference is your gross profit on that job.

Without job costing, you are averaging. You assume that if total revenue exceeds total costs, you are profitable. But averages hide the truth. You might have five jobs at 50% margin and three jobs at -5% margin. The average looks fine. The reality is that three jobs lost money and you did not know it.

Why It Matters

You find your money losers

Every business has jobs that lose money. Not occasionally — regularly. Without job costing, these jobs hide in the averages. With job costing, they are exposed and you can stop doing them or reprice them.

You improve estimating

When you compare estimated costs to actual costs on every job, your estimates get better. You learn where you consistently underestimate and can adjust. Over 50 or 100 jobs, this feedback loop transforms your pricing accuracy.

You know what to sell more of

Job costing reveals which services are most profitable. That tells you where to focus your marketing and sales effort.

You spot operational problems

If one crew consistently runs over on labor while another hits estimates, you have found a training or management problem. If a particular type of job always runs over on materials, your material takeoff process needs work.

Setting Up Job Costing

Step 1: Create a Job Number System

Every job gets a unique identifier. Keep it simple:

• 2026-0142 — Year plus sequential number
• RES-0142 — Service type prefix plus number
• SMITH-BATH-0126 — Client, project, and number

Pick a format and stick with it. Every receipt, timesheet, and purchase order references this number.

Step 2: Track Direct Labor by Job

Your crew needs to log their hours against specific job numbers. This is not optional. Options include:

• Time tracking apps (Busybusy, TSheets/QuickBooks Time, Clockify)
• Daily time cards with job numbers
• Foreman daily logs

Track at minimum: who worked, which job, how many hours, what they did.

Step 3: Track Materials by Job

Every material purchase must be tagged to a job number. Methods:

• Job-coded purchase orders at your supplier
• Photo receipts with job numbers written on them
• Material tracking in your accounting software

For materials pulled from inventory, create a job transfer record.

Step 4: Track Subcontractor Costs by Job

Every sub invoice should reference the job it belongs to. If a sub works across multiple jobs, break the invoice down proportionally.

Step 5: Track Equipment and Other Direct Costs

Job-specific equipment rentals, permit fees, disposal fees, and inspection costs all get tagged to the job.

The Job Cost Report

After every job, produce a simple report:

| Category | Estimated | Actual | Variance | |----------|-----------|--------|----------| | Materials | $4,200 | $4,650 | -$450 | | Labor (hours) | 80 | 92 | -12 | | Labor (dollars) | $3,200 | $3,680 | -$480 | | Subcontractors | $2,000 | $2,000 | $0 | | Equipment/Other | $300 | $475 | -$175 | | Total Direct Cost | $9,700 | $10,805 | -$1,105 | | Revenue | $15,000 | $15,000 | $0 | | Gross Profit | $5,300 | $4,195 | -$1,105 | | Gross Margin | 35.3% | 28.0% | -7.3% |

This single page tells you everything you need to know about that job's financial performance.

Analyzing Job Cost Data

Once you have 20–30 completed jobs with real data, start analyzing trends:

By Service Type

Which services consistently hit target margins? Which ones consistently miss? Double down on the winners. Fix or drop the losers.

By Crew or Project Manager

Are some teams more efficient than others? The data will tell you. Use it for coaching, not punishment.

By Customer Type

Are commercial jobs more profitable than residential? Are repeat customers more profitable than one-time clients? These patterns drive strategy.

By Season

Do margins compress in busy season (rushing) or slow season (discounting)? Understanding seasonal patterns helps with pricing and scheduling decisions.

Common Objections

"It is too much paperwork"

It takes 5–10 minutes per day per crew member to log time and code materials. The return on that investment is knowing whether your business actually makes money. That is worth 10 minutes.

"My guys will not do it"

Make it a non-negotiable part of the job. No timesheet, no paycheck. It sounds harsh, but inaccurate data is worse than no data.

"I already know which jobs make money"

You probably do not. Owners who say this are consistently surprised when they start tracking. The jobs they thought were profitable often are not, and the ones they undervalued often are.

Getting Started

You do not need perfect systems on day one. Start with:

1. Assign a job number to every active job
2. Have crews log hours by job starting this week
3. Code material purchases to jobs starting this week
4. At job completion, run the numbers
5. After 10 jobs, review the data and look for patterns

Imperfect job costing is infinitely better than none. Start rough, refine as you go, and within 90 days you will wonder how you ever ran the business without it.