Job Costing

Job costing tracks the labour, materials, subcontractors, equipment, and overhead tied to a specific job, so the business can see the margin on that job instead of only on the month.

How It Works

A job becomes a container. Every cost that belongs to it gets coded to it as the cost occurs: hours from a timesheet, materials from a purchase or a stores issue, subcontractor invoices, equipment time, and an allocation of overhead. Revenue billed against the job sits on the other side. The difference is the job margin.

Cost codes divide a job into parts, so a contractor can see that concrete came in under budget while electrical ran over. Without cost codes a job produces one number, which tells you the outcome and none of the cause.

The Part Most Businesses Miss

Three cost figures matter, and most small operations track only one.

• Budget is what the job was priced to cost.
• Committed is money you have promised, meaning issued purchase orders and awarded subcontracts, even though no invoice has arrived.
• Actual is what has been invoiced and recorded.

A business watching only actual cost is reading a lagging indicator. Committed cost is what tells you a job is going over while there is still time to act on it. Producing budget against committed against actual, by cost code, is the single most useful report in a job-based business.

Where It Applies

Job costing is the same discipline under different names across several sectors. Construction and trades call it job costing. Energy services attach it to a field ticket and a well. Manufacturers call the container a work order or a production order. Recyclers can apply it to a processed load.

• ERP for Calgary construction companies covers change orders, holdback, and committed cost
• ERP for Calgary oil and gas companies covers field tickets as the source document
• ERP for Alberta manufacturing companies covers bills of materials and routings
• Field service software vs ERP covers where the capability lives

What Breaks It

Hours recorded on paper and typed in a week later. Purchase orders issued by email with no record against the job. Overhead allocated once a year instead of as work happens. Change orders performed on a verbal instruction and priced afterward. Each of these produces a job margin that is arithmetically correct and operationally useless, because it arrives too late to change anything.