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A Guide to Construction Job Costing

Accurate job costing is essential for construction businesses to ensure that projects not only complete within budget, but to ensure healthy cash flow, too. 

Whilst job costing is used across all industries, it’s particularly crucial in the construction industry and the ability to accurately record job costs in construction can set your company up for success.

This guide covers the basics of construction job costing and highlights the importance of accurate job costing.

What is Job Costing?

Construction job costing is a method of calculating actual costs of a project. 

This is done by breaking the project down into subgroups, such as materials, labour, and other overheads. 

By recording all these individual costs throughout the course of a contract, you can determine the actual cost of a project, allowing you to see how profitable a contract really is.

Labour

When it comes to construction job costing, the cost of labour is one of the main things to consider. 

By keeping track of how much labour you are using throughout the job, you can spot any potential overspends before they occur and take action to prevent or minimise them.

It’s important to remember to include not only the workers wages but also taxes, insurance, overtime, expenses, and any other associated costs. 

Materials

With construction job costing, you need to include both direct and indirect materials. 

Direct materials are things such as concrete, steel and wood. Indirect materials are things such as nails and screws. By ensuring you account for the cost of every material you need to complete a project, you can keep an accurate record of job costs and improve your chances of completing within budget. 

Overheads

It is important to include overhead costs in construction job costing. This is essentially the costs of running your company and includes things such as rent, taxes and administration. Overhead costs must be considered when job costing and are typically spread out consistently over all projects. 

Benefits of Accurate Job Costing

Accurate construction job costing is key to cashflow and knowing exactly how much a project has cost (or will cost) is crucial for predicting margins and avoiding overspending. 

Accurate construction job costing predictions can give you a good idea of profitable a project will be and can help you avoid losing money on projects.

Job Costing Software

Although construction job costing can be done manually, the process is tedious and leaves plenty of room for error. The best way to improve job costing accuracy is to take advantage of construction-specific software such as Evolution Mx from Integrity Software.

Our construction-specific accounting and management software offers a fully integrated solution to not only take care of job costing but also subcontractors, applications, retentions and more. 

If you’d like to find out more about how our software can help increase the accuracy of your job costing book a free, no-obligation demo today.