What is job costing and why does it matter?
Job costing is a method of tracking all expenses tied to a specific project or job. Instead of seeing one big number for materials, labor, and subcontractors across your whole business, you see those costs broken down by each individual project. This tells you not just whether your company made money last month, but which jobs contributed to that profit and which ones ate into it.
For contractors and construction businesses, this distinction matters enormously. A general contractor might complete ten projects in a quarter and show a decent profit overall. But without job costing, there’s no way to know that seven of those jobs hit their margins while three went significantly over budget and dragged down the total. The profitable jobs are subsidizing the losers, and without job-level data, you’ll keep repeating the same mistakes.
The method works by assigning every cost to a specific job number. When you buy materials, that purchase gets coded to a project. When your crew logs hours, those hours get assigned to whatever job they worked on that day. When a subcontractor invoices you, that invoice hits the specific project it relates to. At any point, you can pull up a job and see exactly what you’ve spent versus what you budgeted.
This level of detail changes how you run your business. You start to see which types of projects consistently hit their margins and which ones tend to run over. You can identify which subcontractors deliver on budget and which ones always surprise you with extras. Problems become visible early enough to address them instead of finding out after the project closes.
Construction job costing also makes your estimates better over time. When you know that your last five kitchen remodels ran 12% over on labor, you can adjust future bids accordingly. Without that data, you’re guessing based on feel rather than facts.
Any business that works on distinct projects needs some form of job costing. General contractors, specialty trades, remodelers, custom home builders, and real estate developers all benefit from seeing profitability at the job level. If you bid work competitively and need to know whether each project actually made money, job costing is how you get that answer. A construction bookkeeper in American Fork who understands the industry can set this up properly so you get useful reports instead of just categorized expenses.
The alternative is flying blind. You might feel like things are going well, but feelings don’t pay the bills. Real numbers do.
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More Questions
What 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 answerWhat accounting method should a contractor use?
Most contractors under $30 million in gross receipts use the cash method for tax simplicity and timing flexibility. But accurate job costing often requires tracking revenue and costs on an accrual basis internally.
Read answerHow do I handle bookkeeping for multiple job sites?
Track each job as a separate profit center in your accounting software. Every expense, labor hour, and material purchase gets assigned to the specific project it belongs to, giving you visibility into which jobs actually make money.
Read answerHow do I track materials and supplies by job?
Tag every material purchase to a specific job at the time of purchase. Write the job name on receipts, set up job references with suppliers, and enter expenses in your accounting software with job assignments. This gives you accurate job costs instead of guesswork.
Read answerWhy is my profit different from my estimate at the end of a job?
The gap usually comes from labor overruns, material cost changes, untracked change orders, or expenses that never got coded to the job. Separating real cost increases from tracking problems helps you fix the right issue.
Read answerHow do I track labor costs by job in construction?
Track labor costs by capturing hours daily with timesheets or a time tracking app, assigning every hour to a specific job, and including burden costs like payroll taxes and workers comp in your calculations.
Read answer
