Which of your jobs last month actually made money?
If you had to stop and think, you’ve got company. A lot of contractors know the business made money overall. Few can say which jobs carried it and which ones dragged it down.
That’s what job costing fixes.
What is job costing?
Job costing means tracking the money in and out of each job, separately.
Every job gets its own income: the invoices you sent for it. And every job gets its own costs: materials, your crew’s time, subs, equipment, permits.
Income minus costs, job by job. That’s your profit on each one.
Simple idea. But most trades businesses don’t do it, because it only works if every cost lands on the right job.
Why does job costing matter so much?
Because your next quote is only as good as what you learned from the last job.
Here’s a made-up job to show the math. It’s an example, not a real client.
Say you quote a bathroom reno at $24,000. Here’s what it costs you:
| Cost | Amount |
|---|---|
| Materials | $9,500 |
| Your crew: 120 hours at $45 an hour, wages plus payroll costs | $5,400 |
| Plumbing sub | $3,800 |
| Permits and dump fees | $600 |
| Total cost | $19,300 |
Profit: $4,700. About 20%. Not bad.
Now say materials ran $1,200 over and the crew put in an extra 20 hours. That’s another $2,100 in cost.
Your profit just dropped to $2,600. About 11%.
You lost almost half your profit on that job. And without job costing, you’d never see it. You’d quote the next bathroom the same way and lose it again.
What costs belong on a job?
Everything you spent because of that job:
- Materials, including the supply run on the way to site
- Labour, at what your crew really costs you: wages plus the employer side of payroll, and your WorkSafeBC premiums, which run off payroll too
- Subcontractors, every bill coded to the job it was for
- Equipment rentals and the fuel to run them
- Permits, dump fees, inspections
What about overhead? Rent, your truck payment, insurance, the office.
Some contractors spread it across jobs, some don’t. Start without it. Get the direct costs right first, then decide.
How do you set up job costing in QuickBooks?
If you’re on QuickBooks Online, you need the right plan. In Canada, QuickBooks Online Plus and Advanced include Projects, which tracks income and costs by job and shows project profitability. So you need one of those two plans.
Then:
- Turn on Projects in your QuickBooks settings.
- Create a project for each job, under the customer it’s for.
- Code every cost to a project. Bills, receipts, sub invoices, all of it.
- Track your crew’s time by job. If you use QuickBooks Payroll and Time, Intuit says labour costs and expenses update automatically.
- Invoice from the project, including progress billing and change orders.
Step 3 is where it falls apart for most people. A receipt with no job on it is a cost that disappears from your job numbers. That’s why our clients snap their receipts in MBCapture, our receipt app, the minute they buy something.
What should you check every month?
Three numbers, per job:
- Profit so far, in dollars and as a percentage
- Quoted versus actual, for materials, labour and subs
- What’s billed versus what’s done, so you’re not carrying work you haven’t invoiced
Only have time for one? Make it quoted versus actual. That’s the number that fixes your next quote.
And when a job finishes, look at it once more before you quote the next one like it.
Did labour run over? Did a sub come in high? Was the job priced right in the first place?
That one habit pays for itself.
How does job costing help you quote the next job?
This is where it pays off.
After a few jobs of the same type, your job costs tell you things your gut can’t:
- How many hours a bathroom really takes your crew
- How far materials usually run over
- Which sub always comes in at their quote, and which one never does
So the next quote isn’t a guess. It’s built on what the last five jobs actually cost.
Say your last four bathrooms all ran 15 to 20 hours over on labour. That’s a made-up number, but it’s a real decision.
Do you keep quoting the same hours, or do you fix the quote? Job costing is what puts that choice in front of you.
And it works the other way too. If one type of job keeps coming in fat, maybe that’s the work to chase.
What about holdbacks?
Here’s one that confuses people. Under BC’s Builders Lien Act, the person paying on a contract holds back 10% of what’s owed until the holdback period ends.
That 10% is still your income. It belongs in your job’s profit. But it’s not in your bank account yet.
So a job can be profitable on paper and still leave you short on cash. Job costing tells you about profit. Cash is its own conversation.
What are the most common job costing mistakes?
- Receipts with no job on them. The cost happens, but no job carries it.
- Labour at the wage, not the real cost. Payroll costs and WorkSafeBC premiums are part of what an hour costs you.
- Change orders that never get billed. Extra work, no extra invoice.
- Sub bills coded to “general.” Then every job looks better than it was.
- Equipment and fuel left off the job. The truck that hauled everything to site had a cost too.
- Only looking at year-end. By then, you’ve already quoted twenty more jobs the same way.
Want job costing set up for you?
Job costing by project is part of our Growth Partner bookkeeping and The Clean Books Year. Trades and construction is our specialty, so we know what belongs on a job.
Our bookkeeping starts at $800 a month, and here’s what decides your number. See what’s included on our services page, or book a free 30-minute call.