Job costing tracks every dollar tied to a project, so you know each job's real cost and profit. For construction firms and contractors in Florida, this is essential. It helps you price confidently, control labor and materials, and prevent profit leaks as jobs move from estimate to close-out.

Job costing groups costs into three buckets for each project:

• Labor: In-house wages and subcontractors

• Materials: Job-specific materials and equipment

• Overhead: A portion of your overhead gets applied to the job.

Your formula is:

Total Job Cost = Labor + Materials + Overhead Allocation

To calculate your profit margins, you'll compare that total to your contract price.

If you're reading this, you probably already know how important that is. However, here is a recap of some of the key benefits:

• Pricing with confidence: The more you know your job cost, the more familiar and confident you'll be in pricing a contract accurately.

• Staying on target: If you maintain regular job costing, particularly on larger jobs, you'll catch overruns early and can issue change orders on time.

• Controlling costs: As crucial as the pricing is, controlling costs is just as important. If your manager knows how much the budget is and is on board with sticking to it as much as possible, you'll be able to catch things early to correct them. This will allow you to reduce waste and stay profitable.

• Improving the next bid: A key aspect is using the information to help you next time. By tracking performance, we can see what went wrong, what you did well, and how to improve things moving forward!

Example:

We'll use a simple job to break it down:

• Labor: Two techs spend 32 hours on a rooftop unit swap. At $30/hr, this comes out to $960. We'll add payroll taxes, workers' comp, and benefits to a total $1,200.

• Materials: Unit, equipment rentals, misc. Total equals $8,800.

• Overhead: In this example, 5% of the overhead is applied for a total of $1000

Total job cost: $11,000. If this were priced at $16,000, you'd have a profit of $5000, good for 31% - it doesn't get much better! Remember, we've also applied your overhead percentage, which is sometimes forgotten.

Overhead percentage:

Applying the overhead percentage is an integral part of this. It can sometimes be forgotten, and there are a few different ways it can be calculated. But it's essential to apply this to get the true profitability of the job.

Setting up Project Costing in QuickBooks Online

You can track your job costs in a few ways, and if you use QuickBooks, you'll need its help. We like to track many of the costs inside of QuickBooks, then do a final put together and presentation out of QuickBooks in a spreadsheet to ensure we calculate everything correctly. Regardless of how you do it, here are a few tips:

1. Turn on Projects or Customer, and code every bill and receipt for the proper job.

2. Use "Items" as your cost codes that mirror your cost buckets.

3. Track time to projects: This may look different depending on your payroll system, but you'll need to track labor costs per project. Your team must be aware of this and track their time correctly.

4. Put it all together: Get help from your accountant or bookkeeper to put it all together and get your final profitability picture!

Don't already have an accountant or tax preparer? Feel free to schedule a call to see if we'd be a good fit for you. We specialize in helping Florida contractors, builders, and construction firms manage their accounting and optimize tax strategies.