Job Costing for Construction

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Job Costing for Construction

No two jobs are the same in construction, which makes estimating tough. Job costing is one of the best ways to develop an accurate budget and avoid blow-outs, but it’s traditionally been hard work. Job costing software could make it more practical for you.


Job costing versus process costing

Construction and manufacturing projects are traditionally priced in one of two ways.

Process costing works best in industries with uniform costs like some forms of manufacturing. Job costing is more rigorous, involves fewer assumptions and – when done right – gives you more certainty. It’s particularly useful in construction, where there are so many variables from one job to the next. But it can be time-consuming and labour-intensive.

Breaking down job costing

Job costing only gives you a precise estimate if you’re precise with your inputs. You need to think the project through, double-check the drawings, and visit the worksite to figure out how the job will unfold. Then you separate the project into major cost centres:

1. Labour

Start by working out how much it costs per day (or hour) to have your direct employees on the job. Multiply that rate by the time you expect the job to take. Identify where you’ll need subcontractors, then confirm their availability – you don’t want to be waiting on them. Have the contractors estimate the job but be aware they may not be as precise as you. It pays to do your own calculations based on their hourly rate. You might want to build in some contingency to cover the tricky tasks that always seem to come up.

2. Material

Calculate a cost for direct materials like wood, steel and electrical wiring, then add indirect materials like fasteners and caulking. Make sure equipment hire is covered here too. You might also charge a margin on these materials to cover things like delivery and wastage.

3. Overheads

You’ll need to charge an overhead to account for depreciation of equipment, and for other business expenses like office rental and administration. These costs don’t directly relate to the job so this step is an approximation rather than a calculation. Many builders work out the overhead by adding a percentage to each job – but each business is different. It’s best to have an accountant help you find out how you should treat overheads, we can help.

Job costing software

Doing job-costing calculations used to require hours on spreadsheets and there was a lot of room for error. Job costing software streamlines the process and automates the calculations to make everything easier and faster. It allows you to:

Get the security of accurate job costing

Avoiding cost overruns in construction isn’t easy. Job costing software gives you the best chance at estimating the right price upfront. It’ll also help you track budget as the project unfolds, so you can address issues quickly. Packages like WorkflowMax will help you avoid risky assumptions and stay in control of your business’s profitability. If you’re a Xero customer, you can:



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