Job costing means recording labour, material, equipment and subcontract costs against the same budget lines your estimate used, and comparing them every week. Done properly, it tells you a job is fading while there is still time to fix it, and it teaches your estimators what their numbers really mean. Done badly, it produces a report nobody reads after the job is closed.
What it looks like in practice
Here is the kind of job that makes the case. A commercial mechanical package is won at $480,000 with a planned gross margin of 22%, or $105,600. The labour budget is 3,000 field hours at a loaded cost of $72 an hour, so $216,000.
At what the project manager calls 50% complete, the crew has used 1,800 hours, against 1,500 earned. Labour is running 20% over. If that rate holds to the end, labour costs about $43,200 more than planned, and the job closes at $62,400 of gross profit: a 13% margin instead of 22%.
Nobody stole anything and no single mistake caused it. The ductwork arrived late, the crew stood around twice, a change was installed without paperwork, and the drawings were unclear on one floor. Caught at the 50% mark, some of that can be recovered through change orders and resequencing. Caught at close, it is just a lower number on the WIP schedule. Our WIP schedule guide explains how that report shows fade across all your jobs at once.
Who it is for
- Commercial and institutional contractors with jobs that run longer than a month
- Residential new-construction firms working on multi-unit or tract projects
- Service shops that want to know which job types make money, not just which customers pay
- Any firm whose year-end profit regularly surprises the owner, in either direction
What is included
- Cost code structure that mirrors your estimate template, so budgets transfer directly from the winning bid.
- Time capture rules so field hours land on the right code, with a short guide for foremen and technicians.
- Weekly job review: a 30-minute meeting format and a one-page report showing budget, cost to date, percent complete and projected margin for each open job.
- Change-order routine: who identifies extras, who prices them, and the rule that work outside scope is not started without written approval, or at least a dated record.
- Close-out review: a comparison of estimated and actual hours by code, fed back into your estimating rules.
Timeline
Setup takes four to six weeks for most firms. The first two weeks map your estimate template to cost codes and configure your system. Weeks three and four train project managers and the office. From week five we sit in on the weekly reviews for one or two months, then hand them over. A retainer can keep us in the room after that.
How we measure results
The simplest measure is fade: the difference between bid margin and final margin on completed jobs, compared with the previous year. We also track how many open jobs have a current projected margin, how quickly change orders are priced and signed, and the share of field hours coded correctly. The numbers are yours and come from your own system.
Mistakes to avoid
- Percent complete by feel. A project manager's estimate of progress is usually optimistic. Use earned hours or installed quantities wherever you can.
- Costing after the fact. Timesheets coded at month end are guesses. Daily or weekly capture is the minimum.
- Unsigned extras. Work done on a verbal request is the most common source of lost margin we see.
- No feedback to estimating. If completed jobs never change future bids, the same fade happens again.
- Too many codes. Field staff stop using a structure they cannot remember.
Job costing pairs naturally with capacity planning, because labour overruns on one job steal crew from the next. The services overview shows how the pieces connect.
Frequently asked questions
Do we need new software?
Usually not. Most accounting and field-service systems used by Canadian contractors can hold cost codes and budgets. The problem is normally setup and habit, not the tool. If your system genuinely cannot do it, we say so and help you list what to look for.
How detailed should cost codes be?
Detailed enough to match how you estimate, and no more. If your estimator prices rough-in and finish separately, track them separately. Twenty well-used codes beat two hundred ignored ones.
Does this work for small service jobs?
For service work we track by job type rather than individual job: average hours, materials and callbacks per drain call, water heater swap or furnace replacement. Patterns matter more than any single ticket.
Who prepares the WIP schedule?
Your accountant or controller, usually. We help you read it and connect it to the weekly job reviews, so the numbers at year end are not a surprise.