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In construction, costs for every nail, hour of labor, and sheet of drywall can really add up. Without a clear system to track it all, it's far too easy for costs to spiral out of control. That's where job costing comes in.
Job costing isn't just another admin task - it's your compass for tracking project costs & profits. In construction, accurately tracking costs can mean the difference between making (or losing) money.
Here we explore how adopting the best practices in construction job costing can significantly enhance your profitability, reduce risk and contribute to your long-term success.
Job costing in the construction industry is the process of tracking all costs associated with a specific job or project. This includes labor, materials, equipment, subcontractor expenses, and overhead costs.
Unlike general accounting, which looks at a company’s overall financial health, job costing drills down into individual projects. It allows contractors to answer crucial questions like:
By having clear answers, you not only improve future estimates but also make informed decisions in real-time. In short, if you want to know your numbers, job costing is non-negotiable.
Here are six practices that every contractor should implement:
Throwing all your costs into a general "materials" bucket might be easy, but it won't help you understand where you're bleeding money. Break your expenses into detailed cost categories: labor, equipment, subs, overhead, and so on.
Using consistent cost categories (also called cost codes) across all projects helps you see trends, compare jobs, and make better forecasting decisions.
So for example, you can compare Electrical Cost in Project A vs. Electrical Cost in Project B.
One of the biggest pitfalls in construction is waiting until the end of the job to tally everything up. By then, it’s too late to fix a budget overrun. That’s why tracking your labor hours, purchases, and expenses as they happen is a game-changer.
Quick Tip: Use mobile-friendly tools that let your crew log hours and receipts right from the field. This keeps the data flowing (in real time) and saves your office team from chasing down paperwork. Tools like OnTraq AI can help automate this process so you’re not buried in paperwork or spreadsheets.
Even the best estimates need a reality check. If you wait until the end of the job to compare your estimate to what you actually spent, you're missing out on a huge opportunity to course-correct mid-project.
Pro Move: Set a recurring time (weekly or biweekly) to review job cost reports. When something's off, you can act fast.
Manually entering receipts is nobody’s favorite task. Plus, it opens the door to errors. Using software that can snap, scan, and sort your receipts and bills automatically keeps things organized and saves a ton of time.
Automation also helps ensure you're not missing vendor payments or duplicating costs.
Labor is often one of the largest and most variable costs on a construction project. Without accurate tracking, it’s easy to lose visibility on where time (and money) is going.
Use time-tracking tools that log hours by project, task, and employee. GPS-enabled apps can ensure accountability and give you a precise breakdown of how labor contributes to each job’s cost.
This level of detail not only helps with billing and payroll but also improves your estimating for future jobs.
Your job costing system shouldn't live on an island. When it's tied in with your accounting software, everything stays aligned—from cost tracking to tax prep.
Look for platforms that sync with systems like QuickBooks. It cuts down on double entry and helps you see the full picture without flipping between systems.
Here are a few real contractors who nailed their job costing process and saw real-world benefits:
Rodney used to keep receipts in a shoebox and relied on memory to track labor. Once he moved to a digital job costing system, he realized he was underbilling for change orders. The switch saved him over 50% of his admin time.
By breaking down every expense and doing weekly cost check-ins, this team spotted a recurring overage on materials. Adjusting their ordering process saved them over $15,000 in just one year.
They started using GPS timesheets to log labor by project. The real-time data helped them catch time theft and eliminated hours of manual payroll work each week.
Let’s be real: job costing might not be the flashiest part of construction, but it might be the most important if you care about your bottom line. These best practices in construction job costing aren’t complicated — but they do require commitment. Track costs live, automate where you can, and review your numbers often.
And if you want to make the whole process simpler?
Give OnTraq AI a look. It tracks receipts, labor, and budgets automatically, all in one place. That means less time on paperwork and more time running jobs (and making money).
Because it shows you where your money is really going. Instead of guessing at profit, you know exactly what you earned (or lost) on every job.
The biggest ones are inconsistent data entry, lost receipts, and disconnected systems. If you’re relying on paper or spreadsheets, it’s easy to make mistakes.
Some contractors still use spreadsheets, but many are switching to tools that integrate receipts, labor tracking, and accounting all in one place.
It helps you stay on budget, spot issues early, and protect your margins. It also helps estimate better in future projects.
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