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📊 Job Costing Basics

Job costing tells you if you're making or losing money on each project. Without it, you're flying blind.

Key Principle

Know your numbers in real-time. Finding out you lost money after the job is over is too late.

Job costing flow
1
Set up cost codes
Create a consistent cost code structure that matches your estimating categories. Every dollar must have a code.
2
Establish the budget
Load the estimate into the job cost system. This becomes the baseline to measure performance against.
3
Track costs in real time
Code every invoice, timecard, and purchase order to the correct job and cost code. Garbage in, garbage out.
4
Review cost reports
Compare actual costs to budget weekly. Calculate cost-to-complete and estimated final cost for each line item.
5
Take corrective action
When costs exceed budget, investigate immediately. Identify whether it's a productivity issue, scope change, or estimating error — then fix it.

What Is Job Costing?​

Job costing tracks all costs associated with a specific project:

  • Labor
  • Materials
  • Equipment
  • Subcontractors
  • Other direct costs

Then compares them to your estimate/budget.

Setting Up Job Costing​

Cost Categories​

Direct costs (track by job):

  • Field labor (wages + burden)
  • Materials
  • Equipment
  • Subcontractors
  • Other direct costs

Indirect costs (allocate or overhead):

  • Supervision
  • Temporary facilities
  • Small tools
  • Safety equipment

Cost Codes​

Use consistent cost codes across all jobs:

  • Match your estimate structure
  • Enable comparison across projects
  • See our Cost Coding Guide

Tracking Costs​

Labor​

  • Time cards coded to job and cost code
  • Include burden (taxes, insurance, benefits)
  • Track by activity, not just total hours

Materials​

  • Code purchase orders to jobs
  • Track delivered vs. invoiced
  • Include freight and handling

Subcontractors​

  • Track commitments vs. invoiced
  • Include approved change orders
  • Monitor for pending changes

Equipment​

  • Owned: Use internal rate
  • Rented: Actual cost
  • Track by job

Job Cost Reports​

Weekly Review​

For each job, track:

  • Original budget
  • Approved changes
  • Revised budget
  • Costs to date
  • Committed costs
  • Projected final cost
  • Variance (over/under)

Example Report​

Cost CodeBudgetActualCommittedProjectedVariance
Labor$50,000$35,000$0$52,000($2,000)
Material$30,000$25,000$8,000$33,000($3,000)
Subs$40,000$20,000$20,000$40,000$0
Total$120,000$80,000$28,000$125,000($5,000)

Variance Analysis​

When you see a variance:

  1. Is it real or a coding error?
  2. What caused it?
  3. Is it a one-time issue or ongoing?
  4. Can it be recovered?
  5. What action is needed?

Projecting Final Cost​

Earned Value Method​

  • % complete × budget = earned value
  • Compare to actual cost
  • Project remaining cost

Units Method​

For unit-price work:

  • Actual cost ÷ units complete = cost per unit
  • Remaining units × cost per unit = cost to complete

Common Mistakes​

  1. Not tracking in real-time — Weekly minimum
  2. Ignoring variances — Address immediately
  3. Poor coding — Everything in "misc"
  4. Missing committed costs — POs and sub commitments
  5. Not including burden — Labor costs more than wages

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