How do I track job costs for my construction business?
Job costing means assigning every expense to the project it belongs to. Without it, you know your total revenue and total costs for the month, but you have no idea which jobs made money and which ones lost it. You might stay busy all year and still wonder where the profit went.
The costs you need to track fall into a few categories. Materials are the obvious one. Lumber, concrete, fixtures, fasteners, everything purchased for a specific job. Labor includes your crew’s wages plus the employer payroll taxes that go with them. Subcontractor payments get coded to the job they worked on. Equipment costs are trickier since you might use the same tools or machines across multiple projects. Some contractors allocate equipment based on days or hours used per job. Others treat equipment as overhead spread across all work.
The tracking happens in your accounting software. QuickBooks has job costing features built in, but they only work if the system is set up correctly. Each project becomes a customer or job in the software. Every expense gets coded to the job it belongs to. When you buy materials for the Johnson remodel, that receipt gets entered with that job attached. When you pay a sub, that check gets coded to their project.
The habit that separates useful job costing from useless data is timing. Code expenses when they happen, not weeks later when you’re trying to remember which job that load of drywall was for. Same-day entry is ideal. Weekly at the latest. Wait until month-end and you’ll be guessing, which defeats the purpose.
Track labor by job using time sheets or a simple time tracking app. Have your crew note which project they worked on each day. Reconstructing labor allocation from memory produces numbers that don’t reflect what actually happened.
Reconcile your books weekly rather than monthly. Catch mistakes while you still remember what happened. Weekly review also gives you early warning if a job is running over budget before it’s too late to adjust. A bookkeeping service that understands construction can handle this reconciliation and flag problems you might miss.
Most contractors who say they don’t know their real job costs have software that could tell them. They just never set it up properly or don’t enter data consistently. The system doesn’t need to be complicated. It needs to be used every time, without exceptions.
If you’re bidding new work based on gut feel because you don’t trust your historical cost data, that’s a sign the tracking isn’t working. Accurate job costing lets you bid with confidence and stop underbidding jobs that eat your margin. Construction accounting done right gives you the numbers to make real decisions about which types of work are worth pursuing.
The Treasure Valley's Tax and Accounting Team
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More Questions
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