For contractors, builders, and other professional trades, profitability isn’t just about landing big jobs, it’s about knowing what each job actually costs you.  That’s where job costing becomes an essential tool in building a successful business.

Whether you’re a general contractor, electrician, plumber, or landscaper, job costing helps you answer critical questions: Am I making money on this project?  Did I underestimate materials? Am I overpaying on labor? Without this data, you’re operating blindly. That’s a risky way to run any business.

In this blog, we’ll break down what job costing is, why it matters, and how you can set up a simple but powerful system in QuickBooks Online that helps you stay competitive and profitable.

What Is Job Costing?

Job costing is a method of tracking all the direct costs related to a specific job or project (typically labor, subcontractors, and materials) so you can determine how profitable that job really was.

Unlike general accounting, which looks at your business as a whole, job costing gives you a microscope into the financial performance of individual projects.  This is especially important in trades where costs and margins can vary wildly from one job to the next.

Why Job Costing Matters

Here’s what effective job costing allows you to do:

• Estimate more accurately: When you understand your real costs, your future bids become more competitive and profitable.
• Spot problem jobs: If you’re consistently losing money on certain types of projects or customers, you can pivot.
• Track labor efficiency: You’ll gain insight into how much time is being spent on each job and whether it’s aligned with your budget.
• Improve cash flow: Better cost tracking can help you bill faster and ensure you’re covering expenses as they occur.

In short, job costing turns your gut instincts into hard data. Hard data helps you make better decisions.

The 5 Core Elements of Job Costing

To keep things simple, you’ll want to track 5 main cost categories for each job:

1. Employee Labor – Employees will need to keep timecards by job (QuickBooks Time is a great option).
2. Subcontract Labor – Subcontractors will need to submit their invoices by job.
3. Materials – Material purchases that can be specifically identified to a job should be charged directly to that job. Materials that are consumed across multiple jobs and cannot be reasonably traced (e.g., nails, screws, adhesives) should be treated as indirect materials and included in overhead.
4. Travel – This is usually not as common as labor and materials.
5. Other Direct Costs – This is anything that does not fit in the other 4 categories.

In QuickBooks Online, you should, at minimum, have these 5 accounts set up as COGS in your chart of accounts.

How to Set Up a Job Costing System

You don’t need a complex ERP system to start job costing.  Here’s a simple framework to implement for QuickBooks Online:

• Step 1: Assign Job Numbers
  Every job or project should have a unique identifier in your accounting system.
• Step 2: Track Expenses by Job
  Use accounting software like QuickBooks Online to record every expense against its related job number. Make sure you have the appropriate subscription level of QuickBooks Online that allows job costing.
• Step 3: Record labor hours
  Apps like QuickBooks Time can help log hours worked per job. Remember, after payroll is processed, your accountant needs to complete a labor distribution. This ensures all jobs receive the correct wages associated with it.
• Step 4: Review & compare
  At job closeout, compare your estimated costs vs. actuals.  Where did things go over budget?  Where did you save?

Final Thoughts

Job costing isn’t just another accounting task. It’s your blueprint for sustainable growth.  In an industry where one underbid can erase months of hard work, understanding your true job costs puts you back in control.

Whether you’re running a solo operation or managing multiple crews, job costing gives you the clarity and confidence to grow smarter, not just bigger.

If you’re ready to start job costing but don’t know where to begin, our team specializes in helping contractors build custom, easy-to-manage systems tailored to your trade.  Let’s make sure every job pays what it’s worth and then some.