Job costing

What is job costing?

Job costing is tracking the actual labor, material and other costs of each job against its price. Each job gets a number; direct labor, materials, subcontract and equipment costs are charged to it, and overhead is allocated on a set basis. The result is a profit and loss view for every job, which shows contractors what they really make on each type of work.

Why it matters to a revenue leader

Without job costing, a revenue leader cannot tell which work is worth selling. Gross margin by job type, customer, estimator and seller shows where the team wins profitable work and where it buys revenue. It is also the honest check on pricing. If actual costs run well above estimates on a type of job, the issue sits in estimating or scope, and sales will keep selling the problem until someone looks. Many services companies pay sellers on gross margin, which only works when job costs are accurate and timely.

A mechanical contractor reviews 50 closed retrofit jobs. Bid margin averaged 30%, but job-costed margin averaged 21%. Labor overran on jobs above $250,000, and most of those came from two sellers working with the same estimator, which points the revenue leader at scope review on large jobs.