Job Costing

Job costing is the practice of recording every cost incurred on a project - direct labor, materials, sub-contractor fees, and a share of business overhead - against a specific job record. The goal is to know, at the end of each job, whether you made the margin you expected when you quoted it. Without job costing, a business can show a healthy bank balance while quietly losing money on individual projects. The gap between estimated cost and actual cost on a completed job is the clearest measure of operational accuracy in any project-based business.

What Job Costing Measures

Three cost categories form a complete job cost record.

Direct labor covers all hours worked on a specific job, valued at the fully burdened rate - not the direct wage alone. A technician paid $30/hour typically costs $45-$55/hour once employer taxes, insurance, tools, and vehicle costs are included. Hours logged to the wrong job, or not logged at all, create a gap between what the system shows and what the job actually cost. Across twenty jobs a month, even two unrecorded hours per job at $50 burdened adds up to $2,000 in invisible labor costs.

Direct materials include every item consumed on the job: goods ordered on a job-specific purchase order, van stock drawn on site, and anything pulled from warehouse inventory. Materials not attributed to a specific job typically disappear into general overhead, where they reduce overall business margin without being visible at the job level.

Applied overhead is the portion of fixed business costs - rent, utilities, insurance, administration salaries - allocated to each job. If annual fixed overhead is $80,000 and annual direct costs are $400,000, the overhead rate is 20%. A $10,000 job carries $2,000 of overhead in its cost calculation, and that recovery only works if the job is actually costed and the overhead rate is applied consistently.

The Estimated vs Actual Comparison

Quoting a job produces an estimated cost. Running the job produces actual costs. The gap between them is where margin is won or lost.

The most common problem in project-based businesses is not that costs run over unpredictably - it is that costs are not captured at all. A sub-contractor invoice arriving after the customer invoice has been sent. Van stock consumed on site and never booked to the job. An extra day of labor added informally without a works order. Each gap is individually small, but across a month of active projects, unattributed costs can erode margin by thousands of dollars without appearing anywhere visible until month-end reconciliation - if then.

Comparing estimated vs actual cost after each job closes also sharpens future quotes. If labor consistently runs 15% over estimate on a particular job type, adjusting the labor rate for that type prevents the same loss from repeating.

In Zigaflow, every purchase order, works order, delivery note, and invoice links to a job record. Actual costs accumulate against the job as work progresses, so the estimated vs actual comparison is available before the customer invoice is raised - not compiled in a batch at month end.