Job costing is a financial activity that helps construction industry businesses calculate the cost of a project. This process considers all materials, labor, time tracking, and overhead expenses. Proper job costing is vital for setting and meeting budgets, ensuring profitable project development, and meeting deadlines and expectations.
Table of Contents
To calculate job costing in the construction industry, you must break the project into its essential components: materials, labor, time tracking, and overhead costs. Thoroughly calculating each category will help you provide a comprehensive total cost estimate.
Materials encompass everything you can imagine that will be required for the project, from the nails to the concrete. To calculate materials costs, you must list each item needed and its price, considering that prices may vary given their quantity, supplier, and external market forces. Labor costs are usually determined by calculating the number of hours it will take for each worker to do their work, multiplied by their hourly wage rates. On the other hand, having a clear understanding of your executive capacity is vital to providing accurate estimates for project delivery timelines and costs. Finally, overhead costs are a bit more complex to account for because you must cover expenses that may not be tied to physical construction but are nonetheless required for project completion: these are often items such as permits, insurance, and equipment rentals that can make or break profitability for the project.
Adding all of these elements is how a construction firm can determine the total job cost of a project, setting the stage for accurate bidding and financial planning.
Tracking time in the field tends to be a complex process for the foreman and field workers. The nature of fieldwork makes it difficult, and adding cost codes adds another element that can overcomplicate the process. However, many construction project management solutions have a mobile app feature that helps crews simplify the time card logging process.
With construction project management software, the Foreman can efficiently complete time cards and daily work reports from their smartphone, including cost codes that improve job costing. With eSUB Cloud, this process can be done quickly and as easily as sending a text message, even offline. The Foreman can complete the report, and once internet access is established, information will automatically sync.
Afterwards, the Project Manager can compare the actual hours that went into any given task against the budgeted hours. Doing this time tracking process proactively allows managers to catch any early indicators that the job is going off budget.
Note: Cost codes are effective in highlighting specifically the problem areas for any given project (See example below)
In this example the project manager and foreman are able to collaborate and determine what specifically is causing the cost code of Conduit Rough-in to take longer than anticipated. For that task, the time cards have tracked that 29% of hours budgeted have been used, however the project manager has determined that task is only 25% complete. It may seem like a small difference, but if the current levels continue the team is at risk of going over the budget hours. Detecting and resolving an issue quicker minimizes the damage to schedule and profits.
While many aspects can help subcontractors improve job costing, there are vital aspects to prioritize.
Investing in job costing software is a game-changer for construction businesses and professionals looking to reduce errors, boost profitability, and stay competitive in a fast-moving landscape.
Job costing software like eSUB Cloud automates and streamlines the tracking of materials, labor, time-tracking, and overhead costs, providing a real-time snapshot of financial health. It not only saves time but also enhances decision-making with accurate, updated financial data.
At eSUB Cloud we have helped hundreds of trade contractors modernize their business, improve their job costing, and remain competitive by helping them with:
Improve your time tracking processes and say goodbye to timecard hassles today with eSUB Cloud.