What is job costing and why is it important for contractors?
You finished a job last month, collected the final check, and felt good about it. But did you actually make money? Without job costing, you’re guessing. Your bank account went up, but you have no idea if that specific project contributed to profit or quietly ate your margin.
Job costing is an accounting method that assigns every expense to a specific project instead of just categorizing it as a general business cost. When you buy materials, pay a subcontractor, or track labor hours, those costs get coded to the job where they belong. At the end of each project, you can see exactly what you spent compared to what you bid and collected.
The information matters because construction work is project-based with unique variables on every job. Materials prices fluctuate, labor hours vary, unexpected problems arise. A bid that should have been profitable can turn into a loss if costs aren’t monitored throughout the project. Without tracking by job, you might know your business made $50,000 last year, but you have no idea which jobs contributed to that and which ones actually lost money.
Job costing directly improves your future bidding. If you track that your actual labor hours on bathroom remodels consistently run 20% over your estimates, you adjust future bids. If you notice materials waste is higher on certain job types, you account for it. Real data from completed projects beats gut feeling every time.
Catching problems early is another major benefit. When you’re three weeks into a six-week job and already over budget on materials, you know to adjust before things get worse. Without job costing, you find out you lost money after the check clears and there’s nothing you can do about it.
Setting up job costing requires discipline. Every purchase gets assigned to a job. Labor hours get tracked by project, not just by pay period. Subcontractor invoices get coded to the right job. Accounting software like QuickBooks handles this well if configured properly, where each project becomes a job that accumulates its own costs.
Construction businesses in the Treasure Valley often discover surprises when they start tracking by job. The work they thought was most profitable isn’t. The clients they love might actually be costing them money. Overhead-heavy projects have thinner margins than expected. These insights only come from real tracking.
As you grow and run more projects simultaneously, job costing becomes even more critical. What works with three jobs a year breaks down at fifteen. Costs get misallocated, expenses slip through the cracks, and you lose visibility into what’s actually happening.
If setting up job costing feels overwhelming, working with Nampa bookkeepers who understand contractor accounting makes a difference. They can configure your system correctly, train your team on coding expenses, and produce reports that help you run your business with real numbers instead of guesses.
The Treasure Valley's Tax and Accounting Team
The Next Step:
A Short Conversation
Tell us what you're dealing with. We'll listen, answer your questions, and give you a straightforward quote.
More Questions
What records do I need to keep for construction projects?
Keep contracts, change orders, invoices, material receipts, labor records, subcontractor agreements, permits, and inspection reports. These records support tax deductions, protect you in disputes, and help you understand job profitability.
Read answerHow do I handle change orders in my accounting?
Record change orders as soon as they're approved, tracking both the additional revenue and the associated costs separately from the original contract. This lets you see whether change orders are actually profitable.
Read answerCan restaurant owners deduct employee meals?
Yes, meals provided to employees during their shifts are generally 100% deductible when furnished for the employer's convenience. For restaurants, this test is typically easy to meet since staff need to stay on-site during service.
Read answerWhat is prime cost and how do I track it?
Prime cost is your cost of goods sold plus total labor costs, expressed as a percentage of sales. For restaurants, it's the single most important number for understanding profitability. Track it weekly by monitoring food costs and all-in labor expenses.
Read answerHow do I calculate overhead rates for bidding construction jobs?
Add up all costs not tied to specific jobs, divide by your expected billable labor hours for the year, and multiply that rate by estimated hours for each job you bid.
Read answerHow do I account for materials on job sites?
Materials should be expensed when used on a job, not when purchased. Code every purchase to a specific job immediately, document transfers between jobs, and track returns carefully so your job cost reports show true profitability.
Read answer
