Job costing
Job costing is tracking revenue and costs for each individual job, so you can see the profit or loss on every project instead of one blended total.
Labor hours, materials, subcontractors and equipment are assigned to the job they belong to. Overhead is allocated on a consistent rule.
Example
Two jobs each bring in $50,000. Job A used $30,000 of labor and materials and earned $20,000. Job B used $47,000 and earned $3,000. Only job costing shows the difference.
Common mistake
Costing only direct materials. Labor, subcontractors, equipment and a share of overhead all belong in the job, or every job looks more profitable than it is.
How to use it
Code every bill, timesheet and receipt to a job when it happens, and review job cost reports monthly.
What belongs in a job
Direct costs are the obvious part: materials delivered to the site, subcontractors on that job, and the wages of the crew while they are there. Less obvious items still belong: equipment you own used on the job, permits, dump fees and a fair share of overhead like insurance and office costs. Leave these out and margins look healthy until the year ends and the profit is not there.
Job costing and estimating
The payoff of job costing is better estimates. When you know what past jobs actually cost by phase, your next bid is built from evidence instead of memory. Contractors who estimate from gut feel repeat the same underpriced job year after year. A job cost history, kept job by job and phase by phase, is the fix, and it only exists if costs are coded correctly as they happen.
How it connects to WIP
Job costing feeds the work in progress schedule. Percent complete is usually measured by costs to date against expected total costs, so sloppy job costing makes the WIP wrong, and a wrong WIP makes revenue and profit wrong. Our work in progress glossary entry explains the schedule itself, and the percentage of completion entry covers the revenue side.
Making it stick month to month
The hard part of job costing is habit, not math. Every timesheet, supplier bill and subcontractor invoice needs a job and a cost code at the moment it arrives, because recoding a month of paperwork is slow and error-prone. A bookkeeper who codes transactions as they post, and reconciles job costs monthly, keeps the reports trustworthy enough to price the next job.