Why is my profit different from my estimate at the end of a job?
Your estimate was a prediction. Your actual costs are what happened. The gap between them usually comes from one of two places. Either the job actually cost more than you expected, or your tracking missed costs that should have been captured.
Start with your job cost report and compare estimated labor, materials, and subs to what you actually recorded. Look at each category separately. If materials were on budget but labor was 40% over, you know where to focus your attention.
Labor overruns are the most common culprit. You estimated 80 hours of framing and your crew took 120. Maybe the plans were more complex than you thought. Maybe weather caused delays. Maybe your crew wasn’t as productive as your estimate assumed. The estimate might have been fine and the execution just took longer. Or the estimate was optimistic from the start because you’ve never tracked actual hours against estimates before.
Material costs shift between bid and build. The lumber you priced in January costs more in April. You estimated 10% waste and actually had 15%. Small material purchases from the hardware store got paid for but never coded to the job. These add up faster than most contractors expect.
Change orders that weren’t properly tracked create phantom overruns. The homeowner added an outlet and you did it for $200. If that $200 in labor and materials hit the job without increasing the estimated budget, your variance shows an overrun that’s actually additional scope. Keep original estimates separate from approved changes so you can see true performance.
Expenses that never made it into the job are the silent killer. You bought materials with cash. A sub’s invoice got coded to the wrong project. Your own time on the job never got logged. The job costing report only shows what was recorded. Miss recording something and your actual profit looks better than reality until you realize you lost money.
Overhead allocation can create variance too. If you estimated overhead at 10% and your actual overhead runs at 15%, that difference hits every job. This often means your overhead rate needs updating based on actual costs rather than assumptions from years ago.
The fix isn’t just better estimating. It’s tracking costs during the job rather than after. Weekly reviews catch labor running hot before framing is done. You can adjust, reallocate, or at least know you’re over budget before you hand over the keys.
Construction job costing done right means the end-of-job profit isn’t a surprise because you’ve been watching it the whole time. A contractor bookkeeper in American Fork can set up systems that compare budget to actual as the job progresses. That way you’re managing the variance while you can still do something about it instead of just discovering it when the job closes out.
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More Questions
Is there a bookkeeper near me in Provo that works with contractors?
TRUEquity Bookkeeping serves contractors in Provo and throughout Utah County. Based in American Fork, we specialize in construction accounting and job costing for contractors across the Wasatch Front.
Read answerWhat is progress billing and how do I track it?
Progress billing is invoicing based on work completed rather than waiting until the project ends. Track it using a schedule of values that breaks the contract into line items, then invoice for the percentage complete on each item each billing period.
Read answerHow much of my bank account is actually mine?
Your bank balance includes money you owe but haven't paid yet. Subtract accounts payable, payroll, payroll taxes, sales tax, and customer deposits for unfinished work to find your true available cash.
Read answerIs there a construction accountant near American Fork?
Yes. TRUEquity Bookkeeping is based in American Fork and serves contractors throughout the Wasatch Front. The firm specializes in construction accounting and job costing for contractors and tradespeople.
Read answerHow do I track material costs for drywall jobs?
Track drywall materials by coding every purchase to a specific job in your accounting software. Capture receipts in the field immediately and reconcile weekly to catch miscoded expenses before you forget which job they were for.
Read answerHow do I handle Utah sales tax for my business?
Register for a sales tax license through the Utah State Tax Commission before collecting any tax. Collect from customers on taxable sales, track everything by location, and file returns monthly, quarterly, or annually depending on your volume.
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