Ask most contractors which of their jobs made the most money last year, and you’ll get a guess. Maybe a good guess, but still a guess.
That’s a problem. When you don’t know which jobs are profitable, you can’t price the next one with confidence. You might keep taking work that barely breaks even, or even loses money, without realizing it.
Job costing fixes that. Here’s what it is and how to set it up.
What is job costing?
Job costing means tracking every dollar of income and expense by job. Instead of seeing one big total for “materials” or “labor” each month, you see exactly what each job cost and what it earned.
For example, say you finished a kitchen remodel for $42,000. With job costing, you can see that materials cost $14,500, your crew’s labor cost $9,800, a subcontractor cost $6,000, and permits cost $700. That leaves $11,000 in gross profit, or about 26%.
Now you can compare that to your estimate. Did the job come in on budget? Where did it run over?
Why it matters
Better pricing. When you know your real costs, you can bid with confidence. You stop leaving money on the table.
Spot problems early. If one type of job keeps running over budget, you’ll see it in the numbers, not just feel it.
Smarter growth. You can focus on the work that makes you the most money and say no to work that doesn’t.
Cleaner taxes. When costs are tied to specific jobs, it’s much easier to support your deductions and handle subcontractor 1099s at year end.
How to set up job costing in QuickBooks Online
QuickBooks Online has built-in tools for job costing. Here’s the basic setup.
Step 1: Turn on Projects
In QuickBooks Online, go to your settings and turn on Projects. Each job becomes its own project, linked to a customer.
Step 2: Create a project for every job
When you win a new job, create a project for it right away. Use a clear name, like “Smith Kitchen Remodel.”
Step 3: Tag every expense to a project
This is the most important step. Every time you buy materials, pay a subcontractor, or record labor, assign it to the right project. If you skip this step, job costing doesn’t work.
Step 4: Track labor by job
Labor is often the hardest cost to track. Use time tracking so your crew logs hours to each project. Then those hours, and their cost, show up on the job.
Step 5: Invoice from the project
Send invoices and progress bills from inside the project. That way, all income for the job is in one place.
Step 6: Review the project reports
QuickBooks Online shows a profit report for each project. Compare it to your original estimate. Look for patterns over time.
Common job costing mistakes
Buying materials for many jobs at once. If you buy supplies for three jobs on one receipt, split the cost across all three projects.
Forgetting small costs. Dump fees, permits, and equipment rental add up. Track them all.
Not tracking overhead. Office rent, insurance, and your truck payment aren’t job costs, but they still need to be covered. Make sure your job profit is high enough to pay for overhead and still leave you a real profit.
Skipping change orders. When a client asks for extra work, write it up as a change order and add it to the project. Otherwise, the extra cost shows up but the extra income gets lost, and the job looks worse than it really was.
Waiting until the end. Review job costs while the job is in progress, not just after it’s done. That way, you can fix problems before they get expensive.
You don’t have to do it alone
Job costing takes discipline, and it’s one more thing on a contractor’s already full plate. That’s where we come in.
At On Track Solutions, we offer bookkeeping for contractors built around job costing. We set up your projects, keep every expense tagged to the right job, and send you clear financial reports each month. If your books are already behind, we start with a bookkeeping cleanup for contractors to get you a clean foundation.
We also work with HVAC, plumbing, and electrical companies and landscapers, where job costing is just as important.
Ready to know your numbers?
If you want to stop guessing and start knowing which jobs make you money, let’s talk. Book a free 45-minute consultation or call (214) 200-1231. We work with contractors in all 50 states, fully virtual.