Why Did I Lose Money on This Job? | Financial Intel

Every contractor has had a similar experience — a job that begins “I wish I’d never taken on that project.” It happens for a myriad of reasons. To understand what happened, and why it happened, requires excellence in job costing. You can’t be an excellent contracting firm if you don’t have precise job costing.

Why It Happens

Every direct cost — including labor, materials, subcontractors, equipment, permits, etc. — needs to be captured by job or by project. And these costs need to be captured in the same manner as each project is estimated.

Job Costing By Phase, On a Roofing Job

I was once COO (Chief Operating Officer) for a Commercial Roofing Construction firm. Each project was estimated by phase:

Phase One — Mobilization — included site safety and materials delivery.
Phase Two — Tear-off — removal of the faulty existing materials.
Phase Three — Replacement — installation of the new roof system, including insulation, membrane, tapers, etc.

Each cost associated with these activities — labor, materials, equipment, subcontractors — was estimated by each phase as part of the bidding process. Consequently, our job costing was captured by phase. In this way we were able to determine exactly where our actual costs deviated from our estimated costs.

What To Do About It

This allowed us to examine the productivity of each crew and allowed us to modify our estimating standards based on real-world experience. Excellence in contracting requires excellence in job costing. There is quite simply no alternative.

Excellence in job costing means you’ll never utter “Why did we lose money on this job?” Because, you’ll know exactly why!

Frequently Asked Questions

What’s the number one reason contractors lose money on jobs they thought were priced right?

Job costing that doesn’t match how the job was estimated — so nobody can see where actual costs deviated from the bid.

How should I structure my job costing?

By the same phases or categories used in your estimate. That’s the only way to compare actual to estimated and find exactly where the gap is.

What does job costing actually let me do differently?

It lets you examine the productivity of each crew and modify your estimating standards based on real-world experience — instead of finding out you lost money after the job is already closed.

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