What should I track for accurate job costing?
Accurate job costing requires tracking everything that goes into completing a project. That means labor, materials, subcontractors, equipment, and allocated overhead. Miss any of these and your profit numbers are fiction.
Labor is more than just wages. Track hours by job and by phase within the job. Then add the burden, which includes employer payroll taxes, workers’ comp insurance, health insurance contributions, and retirement matching. A $30/hour employee actually costs you $38 to $42 per hour once burden is included. If you’re tracking wages but ignoring burden, you’re understating labor costs by 25% or more.
Materials need to be coded to specific jobs at the time of purchase. When your crew picks up lumber at the supply house, that receipt should show which project it’s for. Don’t wait until month-end to figure out where everything went. Include delivery charges and account for reasonable waste. The dumpster full of cutoffs came from somewhere.
Subcontractor costs often represent 40% to 60% of a project. Every sub invoice needs to hit the right job. Track committed costs too. If you’ve signed a $15,000 contract with a plumber but only received $8,000 in invoices so far, you have $7,000 more coming that should factor into your job cost projections.
Equipment costs depend on whether you own or rent. Rental invoices are straightforward to code. Owned equipment is trickier. You need an internal rate that reflects depreciation, maintenance, fuel, and repairs. An excavator sitting on your lot doesn’t cost you nothing just because you own it. Allocate equipment time to jobs based on actual usage.
Overhead gets tricky because it’s not tied to any single project. Your office rent, estimator’s salary, accounting fees, insurance, and vehicle costs all support your jobs but don’t belong to any one of them. Pick a reasonable allocation method. Some contractors allocate based on job revenue percentage. Others use labor hours. The method matters less than being consistent.
Change orders require separate tracking. When the customer adds scope, that’s new budget you’re working against. Keep original contract amounts separate from approved changes so you can measure performance against what you originally estimated.
The level of detail matters. Tracking labor to the job level tells you something. Tracking to the phase level tells you more. Tracking to the cost code within each phase tells you exactly where you’re making or losing money. A construction bookkeeper in American Fork who understands the trades can help you set up the right structure without overcomplicating things.
All of this tracking serves one purpose. Knowing your true margins so you can estimate better, bid smarter, and stop losing money on jobs you thought were profitable.
Utah's Construction Bookkeeping Specialists
The Next Step:
A 15-Minute Call
We'll ask a few questions about your business, figure out what you need, and give you a straightforward price.
More Questions
How do I stop losing money on jobs?
Start tracking costs by job in real-time so you know where money is going before it's gone. Most contractors lose money because they don't see the problem until the job is done and the damage is already on the books.
Read answerHow much does a bookkeeper cost for a small business?
Most small businesses pay between $200 and $800 per month for bookkeeping services. The actual cost depends on transaction volume, complexity, and what's included. Specialized industries like construction typically cost more.
Read answerHow do I track costs for each construction project?
Assign every expense to a specific job at the time it happens using cost codes that match how you estimate. Track labor, materials, and subcontractor costs separately by phase, then compare budget to actual weekly.
Read answerWhat financial reports should a general contractor review monthly?
Contractors should review profit and loss statements, balance sheets, job cost reports, work in progress reports, and aging reports for receivables and payables. The job cost report matters most because it shows actual profitability by project rather than just overall company numbers.
Read answerWhat is the best way to set up a chart of accounts in QuickBooks?
Start with QuickBooks' default industry template, then customize to match your reporting needs. Keep it simple because too many accounts leads to inconsistent categorization and reports that don't tell you anything useful.
Read answerWhat financial systems do I need to grow my business?
At minimum, you need separate business bank accounts, properly set up accounting software, and a consistent way to track expenses. As you grow, add job costing, payroll, and cash flow forecasting.
Read answer
