Job Costing in Plain English: The Puzzle Every Contractor Gets Wrong

Every contractor knows the feeling:

• your revenue looks good,
• but your cash feels tight,
• and somehow your jobs never show the profit you expected.

It’s not because you’re overpaying subs, buying wrong materials, or misestimating labor.

It’s because you’re missing the one system construction companies cannot function without:

Job Costing.

Let’s break it down in plain English.

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What job costing actually is

Job costing answers one question:

“Did we make money on this job — yes or no?”

To answer that, you need three puzzle pieces:

1. All revenue for the job

2. All expenses for the job

3. A clean comparison of budget vs actual

If any piece is missing, you’re operating blind.

Where most contractors go wrong

Here’s the real issue:

Most contractors track revenue by job,
but track expenses by vendor or bank feed,
and hope it somehow lines up.

It doesn’t.

This leads to:

• cost overruns
• disappearing profit
• inaccurate invoices
• retainage confusion
• unexpected losses
• bonding issues
• chaos at tax time
• stress during AIA billing
• cash flow shortages

And worst of all:

You can’t tell which jobs are actually making money.

The three types of costs you MUST track

Every job has these categories:

1. Labor

This includes:

• payroll
• subcontractors
• burden (taxes, insurance, fringe)

2. Materials

Lumber, concrete, steel, hardware — the obvious stuff.

3. Subs & Vendors

Every external trade:

• electricians
• plumbers
• HVAC subs
• roofers
• concrete crews
• equipment rentals

If these aren’t tied to a specific job, your books become useless.

Percentage-of-Completion (POC) complicates everything

Construction accounting uses POC in many cases, which means:

• revenue is recognized based on job progress
• not just what you billed
• not just what you collected

To do POC correctly, you need:

• job budgets
• actual costs to date
• percent complete
• WIP schedule
• over/under billing calculations

When these puzzle pieces don’t match, your financials become a mess.

AIA billing + retainage adds even more complexity

Contractors also have to navigate:

• Schedule of Values
• G702/G703 forms
• retainage withheld
• original contract vs change orders
• progress billing
• final release stages

Tracking this without job costing is like trying to drive with your eyes closed.

What job costing gives you

Once your system is built right, you gain:

✓ real-time profitability
✓ early detection of overruns
✓ accurate progress billing
✓ clean WIP/POC reports
✓ lender/bonding readiness
✓ predictable cash flow
✓ confidence in pricing new jobs

Job costing is not a luxury — it’s survival.

How the Clarity Reset fixes everything

A full Reset reconstructs:

• job-level coding
• budgets
• subcontractor cost matching
• vendor statement tie-outs
• retainage tracking
• AIA alignment
• WIP schedule reconstruction
• revenue recognition corrections
• cost allocation cleanup
• POC accuracy

Once that’s rebuilt, your financials stop lying.

If you don’t know which jobs make money, your business can’t scale

But we can fix that.

Start your Clarity Reset or project engagement here.