Job Costing Basics for Trades & Contractors.

The Simple Guide to Protecting Profit on Every Job

If you’re a contractor, you already know this:
Jobs don’t lose money all at once — they lose money one receipt, one hour, and one invoice at a time.

And 90% of the time, it comes down to one thing:

Most contractors don’t have a real job costing system in place.

They think they do, but here’s what it usually sounds like on the job:

• “I think labor will be about this…”

• “Materials should be close to last time…”

• “Subs usually charge around this…”

• “We should be fine — I’ve done jobs like this before.”

This isn’t job costing.
This is guess costing — and it’s the #1 reason contractors:

• underbid

• lose margin

• have surprises at the end

• and wonder why there’s no profit left over

What real job costing does instead:

A true system tracks all four key areas — labor, materials, subs, and overhead — and compares what you estimated with what actually happened.

With real job costing, you can:

• price jobs with confidence

• see problems early

• stop profit leaks before the job ends

• and build a business that grows without chaos
  
  

Why Job Costing Matters? (The Real Reason)

1️ It Shows Your Real Profit on Every Job

Without job costing, you’re guessing.
With job costing, you can clearly see:

• Did this job actually make money?

• Where did we lose money?

• Which phase went over budget?

• Did labor, materials, or subs cause the overrun?
  

This removes the mystery and gives you hard numbers, not feelings.

2️ It Helps You Bid Smarter on the Next Job

When you know what your last job really cost, your next estimate becomes:

• more accurate

• more profitable

• and easier to defend

Your bids stop being educated guesses.
They become data-driven, repeatable, and consistent — the way real construction businesses scale.

The Bottom Line

Contractors who job cost:

• catch mistakes earlier

• protect their profit

• price future jobs more accurately

• and build a business that can scale without burning out
  

Job costing isn’t paperwork. It’s the system that turns a contracting business into a predictable, profitable machine.

The Four Pillars of Job Costing

Every job has four cost buckets. If you track these correctly, you’ll know exactly what happened on every project.

Let’s break them down.

1️ Labor Costs

Labor is the most common area contractors lose money.

What should be tracked:

• Employee hours per job

• Payroll taxes

• Burden (workers comp, benefits, etc.)

• Overtime

• Drive time (if paid

• Per diem

• On-site vs shop time

Why labor goes wrong:

• No time tracking

• Hours not assigned to jobs

• Crew moves fast; paperwork moves slow

• Too much shop time

• Fixes and callbacks not tracked

What to do:

• Use a daily time log or app

• Require foreman approval

• Sync payroll hours into job codes

• Review labor weekly
  
  
  

Labor overruns are the #1 silent profit killer in construction.

2️ Materials

Materials are straightforward — but easy to lose track of.

Track all materials by:

• Receipt

• Vendor invoice

• Delivery slip

• PO (purchase order — optional but helpful)

Why materials go wrong:

• Crew buys materials without turning in receipts

• Vendor accounts run wild

• Delivery slips thrown away

• Items purchased for multiple jobs mixed together
  
  

What to do:

• One job folder for every job (Use Google Drive or other Online Drive)

• Store all receipts, invoices, and delivery slips in that folder

• Reconcile materials weekly

• Compare totals to estimate by cost code

• Have all invoices go to a designated email

• Have Project manages approve all invoice and mark what jobs the should be on

3️ Subcontractors

Subs are easier to track — but they create job costing gaps if you’re not careful.

What to track:

• Sub invoices

• Change orders

• Payments

• Retainage (if used)

Why subs go wrong:

• Invoices show up after job closeout

• No W-9 collected

• Change orders not documented or approved

• Sub costs not tied to job correctly in QuickBooks or other accounting system

What to do:

• Require subs to send invoices per job

• Store them in that job’s folder

• Track payments against each sub

• Reconcile subs at month-end
  
  

4️ Overhead & Indirect Costs

These get forgotten — and it destroys margins.

Examples:

• Fuel

• Small tools

• Dump fees

• Rental equipment

• Shop supplies

• Admin time
  

These should be assigned to jobs using:

• Cost codes

• Allocation methods

• Percentage distribution

A small amount each job adds up fast. You can see if you job are able to support your general business expenses as well.

Actual vs Estimated (The Most Important Report)

This single report gives you full control over profitability.

Your estimate includes:

• Labor estimate

• Materials estimate

• Sub estimate

• Overhead allocation

Your actuals show:

• Total hours actually worked

• Actual material cost

• Actual sub cost

• Actual overhead allocations
  
  

The result:
You know exactly where you were over or under budget.

This is how contractors improve every single job, and why job costing is the foundation for scaling.

Common Job Costing Mistakes (These Hurt Your Profit)

❌ Not using cost codes
❌ No job folders
❌ Labor not tracked by job
❌ Receipts missing or lost
❌ Sub invoices not assigned to jobs
❌ End-of-month cleanup only
❌ Estimates not tied to actuals

Fixing even one of these increases your job profit instantly.

How Job Costing Makes You More Profitable

Here’s what changes when you implement job costing:

✔ You price jobs more accurately

You stop underbidding because your numbers are real.

✔ You see problems sooner

If materials or labor are trending over — you fix it mid-job.

✔ You make better hiring decisions

You’ll know which crew members are profitable and which ones aren’t.

✔ You protect your margin

No more “I thought we made money, but the bank account says otherwise.”

✔ You scale with confidence

Your systems grow before your chaos does.