How Do I Know Which Jobs Are Making Money?

What Job Costing Actually Requires

In order to implement job costing, we need to capture actual costs in the same manner as which we estimate, including:

• Labor — our work force will need time sheets that capture what job they work on and for how long.
• Materials — invoices for materials purchased for the job need to be costed to the job. Materials supplied from inventory need to be relieved from inventory and costed to the job.
• Equipment — if our work is equipment intensive (like roadwork), we need to capture equipment hours and apply the company standard billing rate to cost the equipment to the job.
• Subcontractors — if subcontractors are utilized, their invoices must be costed to the job.

There are other job expenses (like permits) to consider as well.

What You'll Learn Once It's Implemented

Once implemented, you'll know! You'll know if you made what you expected or not. Digging deeper will let you know where actual costs deviate from estimated costs. This will allow informed decisions, including:

• Do we need to adjust our estimating standards?
• Do we need to consider alternative vendors and suppliers?
• Do we have productivity issues?
• Do we have pricing issues?

Construction is a margin-sensitive business. Small changes in margin have outsized impacts on the bottom line, both for good and for ill. As such, contractors must job cost to understand why or why not their margin expectations are being realized.