Most trades businesses know exactly what they turned over last year and have no idea which jobs made money. The busy months and the good months are not the same months, and without job costing you cannot tell them apart.
Why your profit and loss cannot answer this
A standard profit and loss tells you that you spent $180,000 on materials and $240,000 on wages across the year. It cannot tell you that the Brookvale job lost $4,000 while the three small jobs you nearly turned down returned 34 percent.
So the year averages out, you see a profit, and you go on quoting the same way. The jobs that lose money are invisible because the jobs that make money are paying for them, and you will keep winning more of the wrong kind because you priced them to be competitive.
Job costing puts every dollar against the job that caused it. That is the whole idea, and the difficulty is entirely in doing it consistently.
What a job actually costs
Four buckets, and most businesses count two.
Materials
The one everyone gets right, with two exceptions. Materials bought for one job and used on another need to move with the work, not stay where the invoice landed. And a run to the supplier costs a chargeable hour plus the vehicle, which almost nobody books to the job.
Labour, at what it actually costs you
This is where most job costing quietly fails.
A worker on $40 an hour does not cost you $40 an hour. On top of the base rate you carry superannuation at 12 percent of qualifying earnings, workers compensation, annual leave, public holidays and personal leave, plus any allowances the award requires.
Then there is the part that hurts. You pay for a full week, but only some of those hours land on a job. Travel between sites, loading the ute, quoting, waiting on an inspection and cleaning up are all paid and none of them are billable.
So the real figure is not the hourly rate. It is total annual cost of employing that person divided by the hours they actually spend on jobs. If someone is paid for 38 hours and works 30 on jobs, everything unbillable is being carried by those 30. Work out that number for one employee and you will understand your margins better than any report will explain them.
Your own hours count too. Owners routinely leave themselves out of job costing, which makes every job look better than it is and makes the business look unsaleable. If you spent two days on site, that is two days of cost.
Subcontractors
Straightforward to allocate and easy to lose track of when invoices arrive weeks after the job finished. A subcontractor invoice that lands in the next quarter and gets coded to general expenses has just made a finished job look profitable when it was not.
Overhead
Insurance, vehicles, phones, tools, software, the office, your admin person. These do not belong to any one job and still have to be paid out of the margin on all of them.
Do not over-engineer this. Take your annual overhead, divide by the total billable hours you expect across the year, and you have a rate per hour to apply. Rough and applied consistently beats precise and abandoned by March.
The four leaks that do the most damage
- Variations done and never billed. The client asks for one more thing on site, you say yes because it is small, and nobody writes it down. This is the largest single profit leak in trades and it is entirely a process problem, not a pricing problem.
- Rework costed as if it were new work. If the fix is booked to the job, you learn which jobs go wrong and why. If it is absorbed somewhere general, you repeat it.
- Retentions treated as received. Money you earned, invoiced, and will not see for months. It is profit today and it is not cash today, and forgetting that has sunk businesses that were trading well.
- Progress claims that lag the work. Every week between doing the work and claiming for it is a week you funded the job out of your own account.
Work in progress, and why the numbers jump
If you spend three weeks on a job and bill at the end, those three weeks show all cost and no revenue. Then the invoice lands and one month looks extraordinary. Neither month is true.
Tracking work in progress smooths this out so you can see what is actually happening. It matters most when the month a job finishes decides whether your year looks good, which is exactly when you need an accurate picture rather than a flattering one.
Want to know which jobs actually made money?
We will set up job costing in your existing software and show you last quarter’s jobs ranked by real margin.
Making it work in practice
Job costing fails for one reason: it depends on people in vehicles recording things, and if it is not effortless it does not happen.
- Time captured on a phone, on site, against a job. Not reconstructed on Friday from memory, which is always wrong and always in the same direction.
- Supplier invoices coded to jobs as they arrive, not in a monthly catch-up when nobody remembers which site the timber went to.
- Purchase orders for anything substantial, so materials attach themselves to a job at the point of ordering.
- A variation process that takes one minute. A photo and a line of text approved by the client beats a formal document nobody completes.
Most job management apps connect to Xero, MYOB and QuickBooks and will do this. The integration has to be reconciled monthly, because an app that pushes costs into the ledger and drifts is worse than no app at all.
The report to run every month
One report: every job completed in the month, with revenue, materials, labour at real cost, subcontractors, allocated overhead, and margin in dollars and percent. Sorted worst first.
Read the bottom of that list rather than the top. The losing jobs have something in common, and it is usually a job type, a client, a site condition or a person doing the quoting. Once you can see it you can price it or decline it.
That is the whole return on job costing. Not better records, better quoting. See bookkeeping for tradies for how we set this up, or why profitable businesses run out of cash if retentions and progress claims are the part biting you.
Superannuation figures apply for the 2026-27 financial year. Workers compensation rates vary by state and industry, so use your own.
