How can I improve profit margins on my construction projects?
You can’t improve margins on something you’re not measuring accurately. The first step is knowing exactly where your money goes on every project. Not just total cost versus total revenue, but cost by phase and cost code compared to what you estimated. Without that level of detail, you’re guessing at what’s eating your profits.
Most contractors who feel squeezed on margins have the same handful of problems. They underestimate labor on certain phases. They don’t account for material waste accurately. Their change order process lets scope creep happen without price adjustments. Or they bid too aggressively on work that was never going to be profitable regardless of execution.
Detailed construction job costing exposes these patterns. When you track framing labor separately from finish carpentry, you might discover you consistently run 15% over on trim work. When you code materials by phase, you find your drywall estimates never account for actual waste on your jobs. These aren’t random bad luck. They’re systematic estimating errors you can fix once you see them.
Review job costs weekly during active projects. A monthly look at financials means you find problems after they’ve already cost you money. Weekly review means you catch the framing overrun while there’s still time to adjust how you staff the rest of the build.
Track change orders separately from original scope. When the homeowner adds a feature mid-project and you absorb it into your existing budget line, it looks like you went over on that phase. In reality, you added scope without adjusting the budget. Keep original estimates separate from approved changes so you can see true performance against your bid.
Know which types of work actually make you money. Some contractors discover their most profitable jobs aren’t the biggest ones. Some find that certain project types consistently underperform. Historical job cost data lets you see patterns across dozens of projects and bid selectively on work that fits your strengths.
Your estimates should come from actual cost history, not industry rules of thumb or what you charged three years ago. Labor rates change. Material prices change. Your crew’s productivity on different work types is specific to your operation. Build estimates from real data and your bids get more accurate over time.
This is where bookkeeping services American Fork contractors actually rely on becomes valuable. When every labor hour, material purchase, and subcontractor invoice gets coded to a specific job and phase, you build a database of real costs. Reports show budget versus actual at whatever level of detail you need. The discipline of coding everything correctly pays off in knowing exactly where margins come from and where they disappear.
The contractors along the Wasatch Front who consistently hit their target margins aren’t doing anything magic. They just know their numbers well enough to bid accurately and catch problems before those problems become expensive.
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More Questions
How do I set up job costing in QuickBooks?
Job costing in QuickBooks requires enabling projects or sub-customers, structuring your chart of accounts for construction, and coding every transaction to the correct job. The setup takes a few hours but the real challenge is maintaining consistency.
Read answerWhere can I find a construction bookkeeper in American Fork?
TRUEquity Bookkeeping is based in American Fork and specializes in construction accounting. The firm works with contractors, tradespeople, and home builders throughout Utah Valley, with a focus on job costing that shows profitability at the project level.
Read answerWhat is the best chart of accounts for a contractor?
A contractor's chart of accounts should separate direct job costs from overhead. This structure is what enables job-level profitability reporting instead of just business-wide totals.
Read answerWhat are cost codes and how do I use them?
Cost codes are a numbering system that assigns every job expense to a specific category like framing, electrical, or finishes. They let you track exactly where money goes on each project instead of lumping everything together.
Read answerWho does bookkeeping for contractors in Salt Lake City?
Several bookkeeping firms in the Salt Lake City area work with contractors, but not all understand construction accounting. Look for someone with job costing experience who knows how to track costs by project and phase.
Read answerWho provides payroll services for contractors in Utah?
Several types of providers handle contractor payroll in Utah including national payroll companies, local bookkeeping firms, and construction-specialized services. The right choice depends on whether you need job costing integration and certified payroll capabilities.
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