Job Costing Benefits for Contractors

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What is job costing? Job costing is a categorization method in your bookkeeping allocating expenses and income to correlating project you are working on.

1. Ability to know the profit of each job

Have you ever wondered how much money you are actually making off a project you are working on? By using job costing in your bookkeeping, you will be able to pull reports of the income and expenses associated with each of your jobs. You will be able to see if you made a profit or loss on the job.

2. Ability to make better business decisions

With the capability of pulling reports per job, you will be able to see cumbersome expenses. This will allow you to either reconsider your pricing or research new suppliers/vendors to cut costs. You will also have a better idea of what to expect per job for budgeting purposes, allowing you to know when you can strategically make investments.

3. Ability to improve your project estimates provided to customers

Through consistent use of job costing and analyzing associated reports, you will have a better grasp as to how much to estimate future jobs. In turn, this creates a better contractor-client relationship, because they will know what to expect and not be unhappy to find a large increase in their bill that was unexpected. 

4. It can help you determine productivity

With job costing, you will be able to track labor costs per job and determine average labor costs. If you have similar jobs and one job is taking or costing more than average, you will know to dig a little deeper to find out why this job is costing so much more in labor. You may find employees slacking, padding their hours, issues with leadership, or some other area of improvement.

With advantages, there comes disadvantages. The disadvantages for implanting job costing in your bookkeeping is that it can be labor intensive and a different form of filing your records. You will want to write on your receipts and invoices which job it is associated with and file them all in the correlating files. Weekly or monthly, you will want to total your expenses and income per category per job and figure the differences. It can be extremely helpful, give you peace of mind, and save you money by investing in a virtual bookkeeper to handle the tasks of categorizing everything appropriately and generating associated reports to help you make better business decisions.

If you would like to talk more to see if I would be a good fit as your virtual accountant for your business, you can send me an email at

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