What is job costing in construction?
Job costing is the practice of recording every cost against the specific job and cost code it belongs to, so you know what each project is really earning while it is still in progress.
How job costing works
Every project gets a budget broken into cost codes, usually following a structure such as CSI MasterFormat divisions. Each bill, payroll entry, equipment charge and subcontractor invoice is coded to a job and a cost code. At any moment you can compare three numbers: the budget, the committed cost (signed subcontracts and purchase orders), and the actual cost to date.
The five cost types
- Labor: field payroll, burden and benefits
- Materials: purchased and stored materials
- Equipment: owned and rented
- Subcontracts: the largest line on most jobs
- Other: permits, insurance, general conditions
Why general accounting is not enough
A general ledger tells you what the company spent. Job costing tells you what each job spent against what it should have spent. Without it, a contractor can show a healthy bank balance while individual projects quietly lose money, because progress billings, retainage and deposits hide the true picture until the job closes.
What good job costing gives you
- Projected profit on every open job, updated as costs arrive
- Early warning when a cost code runs over budget
- Accurate work-in-progress (WIP) schedules for your CPA, surety and bank
- Better estimates on the next bid, because you know your real unit costs
Getting started
- Use one consistent cost code structure across estimating, field and accounting.
- Code every transaction to a job and cost code at the time it is entered, not at month-end.
- Track commitments (subcontracts, POs and change orders), not just actual costs.
- Review profit by job at least monthly, weekly on large jobs.
Stratacore’s construction accounting team and job-cost dashboard do this work on top of QuickBooks, Foundation or CMiC.