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In construction, rising material prices and higher labor costs can quickly reduce profit margins. For small general and trade contractors, precise job costing is critical to staying ahead. Job costing involves systematically monitoring and categorizing every project expense—from direct costs such as labor and materials to indirect overhead expenses.
This guide will cover seven essential tips to help refine your job costing approach for 2025. You’ll learn how to use real-time tracking tools, leverage past project data, and communicate more effectively with your team. This will help you keep your projects on budget, submit competitive bids, and protect your bottom line.
Job costing assigns each expense—whether it’s wages, material costs, or office expenses like overhead—to a specific project. This level of detail helps you see exactly where your money is being spent, and can show potential budget overruns early (before they happen).
So if material costs change during the project, or your crew hours (labor costs) are higher than expected, you can now see up to date financial data that allows you to make the right decisions or adjustments, before these can take a toll on your project profits.
Additionally, small contractors often have lower profit margins than larger firms, leaving less room for error. A minor oversight—like failing to account for increased insurance premiums or missing a spike in steel prices—can reduce profitability.
But with a construction job costing software, it becomes easy to see this information in real time, without having to spend hours trying to track this on spreadsheets.
Below are seven ways to get your job costing done, maintain profitability, and stay ahead of cost overruns.
In a recent survey of contractors, it was found 6/10 projects go over budget. Which is why it is crucial for you to know your exact costs in real time.
Having a construction job costing software lets you see this information without much manual work. The software automatically keeps track of your actual costs vs. budgets, by always keeping data up to date every time a receipt, bill or time card is processed.
So if for some reason, material costs are higher than expected, you can see this immediately and react - by either finding different suppliers, or by even discussing a change in pricing with your clients.
Modern construction job costing software also lets you set alerts, so if any line item exceeds its budget, you will be notified.
To build a reliable estimate, you need to rely on actual data from past projects. By seeing this data, you can get a more accurate view of how labour hours, material needed, etc stacked up against what you have been estimating. You can then use this information, to build a more precise estimate for your current or future projects. For example, if you notice that concrete work routinely takes 15% more hours than planned, factor that into your new estimates/bids. Over time, this leads to more consistent profitability because your bids start to align more closely with reality, and you avoid unexpected surprises.
Here is where you need to be very careful. Labor costs can range between 30-60% of a project's total cost, and often go over budget. A small percentage change in your labor costs can completely eat up your entire project's profit.
By using a construction job cost tracking software that monitors labor hours in near-real time, you’ll quickly see if certain tasks are taking longer than budgeted. This will help you better keep track of your crew, intervene where needed, and take corrective action before it's too late. This also has the added benefit of making sure your project stays on schedule. It can also help you troubleshoot any bottlenecks your crew is facing, which is possibly causing a further drain on their time (& adding up to your wage bill).
Indirect costs like time spent on commute, office expenses, other admin support, or other expenses like insurance, can over time have a significant impact on your overall project cost and therefore on your profit margins.
But when you have a job costing software, you can see in real time how these costs are getting distributed across your projects, and how they impact each project's profitability.
It also allows you to ensure you have kept enough margin in your projects to handle these expenses. Often this is overlooked, and while you make money on your material and time, the overheads will end up sucking out these profits, leaving you the owner with very little profit after all the hard work.
This also makes your bids more transparent, as clients can see that each cost element is accounted for, reducing the chance of disputes or surprises down the road.
Working with spreadsheets, or desktop based software (which you can only access while in the office), makes it difficult to stay updated and make the right decisions quickly. Which is why in today's age (2025!), you absolutely need cloud based software, where you can get visibility in real time, from anywhere - whether it’s your phone, tablet or laptop.
It also brings the whole team on the same page - from site supervisors to accounting - where if information is updated on the field, it is visible for everyone to see and take prompt action whenever needed. It also increases transparency in the business.
Cost codes are used to categorise expenses. These are generally construction specific codes for material, labor, subs, etc. For small contractors, we recommend having anywhere between 10-40 cost codes to ensure expenses are bucketed in a way that makes sense. So when you get receipts or bills, and you can use cost codes to categorize them, your expense tracking across projects gets standardized. This allows you to compare actual vs. budgets, and also see how you spend across projects.
Construction job costing software, makes this process a lot more seamless and efficient. In addition to standardized expense tracking, this also helps ensure your job costs are under control. Analysing your expenses by cost code and across projects is also very useful historical data for preparing new estimates.
Communication is key to ensure job costing is working for you. Schedule frequent check-ins where project managers, estimators, and field supervisors review updated cost reports. For example, if the drywall is exceeding its labor budget, supervisors can suggest modifications or highlight unforeseen challenges. This ongoing communication ensures small problems are resolved before they escalate into major overruns and encourages a culture of accountability and collaboration.
Manually doing job costing on spreadsheets is too tedious, especially when you can use automated job costing software that does it for you. This ensures you get the right information, yet save hours every week of admin work.
It is important to pick the right platform, which is easy to use and implement for your business. For small to medium size contractors, Ontraq Job Costing Software serves as an affordable and easy to use cost tracking software for construction.
It automates tracking of labor, materials, and overhead on a project by project basis. So you get an instant snapshot of your costs vs. budgets, without spending hours doing data entry in spreadsheets. It also integrates seamlessly with accounting systems like QuickBooks.
What also sets OnTraq apart is its AI powered receipt scanner and GPS enabled time clock, making it one of the most comprehensive tools out there for tracking your receipts, job costing, and crew time tracking; all while sending this data automatically to QuickBooks, making bookkeeping easier and cutting down on 70-80% admin hours every month.
Visit OnTraq AI to learn more and schedule a demo.
Job costing involves tracking all expenses associated with labor, materials, equipment, and overhead on a specific project. With construction job costing software, you track actual and estimated costs during the project's life cycle allowing you to monitor for overages and protect profit margins.
Ontraq Job Costing Software is designed specifically for small to medium general and trade contractors. It is easy to use and provides real time visibility into actuals vs. budgets for all your projects. It also makes it very easy to manage receipts, categorise expenses, and also track time for crews. It seamlessly integrates with QuickBooks, ensuring all this data automatically gets updated there (saving hours of bookkeeping time).
By using construction job cost accounting software, you can track these variables closely, identify emerging cost overruns, and fine-tune your plans before they affect your bottom line. This can make the difference between a project being actually making vs. losing you money.
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