Why Accurate Job Costing is So Important

For businesses whose projects regularly fluctuate in scope, timeline, or workforce configuration, job costing is a vital and indispensable tool. In essence, job costing involves the meticulous tracking of revenues and costs related to each specific business project. 

The beauty (yes, we’ll go there) of job costing lies in its universal applicability; whether you’re running a small landscaping business, a large marketing agency, a construction company, or a different small-, mid-, or large-scale business, the same benefits await you.


By calculating the expected costs of labor, materials, and overhead, and engaging in thoughtful employee time tracking, job costing ensures accurate project estimates now and in the future. Job costing demystifies the costs, profits, and labor strategies necessary for each project – turning what feels like an incomprehensible slew of factors into an opportunity to improve profitability, accurately generate project estimates, streamline management decisions, and ensure efficient financial reporting.

Above all, job costing reduces the occurrence (read: the unpleasant surprise) of unexpected costs. No deterioration of profit margins, no inaccurate employee scheduling, and no unhappy customers billed beyond the original estimate.

Lastly, if you’re looking to win the hearts of your company’s accounting and finance staff, remember that job costing makes tax filing, back-office processes and holistic evaluations (and forecasts) of your company’s financial standing infinitely easier.

Note: Are some of your projects more predictable and consistent (say, steady manufacturing runs of the same item)? Maybe process costing is a better fit for you, or additional tool to add to your arsenal. To explore the applications of job costing vs. process costing, read our article on “Understanding the Difference Between Job Costing and Process Costing” for some additional insights.

For Intrepid Job Costers

Now that we’ve established that job costing is a more than worthwhile consideration for your business, let’s explore its benefits in greater detail. As we mentioned, job costing is usually most beneficial to businesses pursuing projects with multiple stakeholders, workflows, inputs/outputs, and a range of employees (in-house, contractors, or otherwise).

Although material and overhead considerations are crucial factors in the job costing process, especially for construction companies, manufacturers, and others, in every case, there is an equally important dimension of employee timekeeping. Let’s explore this and other reasons why job costing is so beneficial.

  • Employee time tracking – Job costing accurately tracks the number of hours and which type(s) of work each employee has executed. For a small or mid-sized business where one employee may complete multiple tasks or fulfill multiple roles, it’s particularly important to document these distinctions.

  • Real-Time Tracking and Historical Data -  Job costing grants you the opportunity to engage in real-time tracking: to monitor the status of any facet of any project at any time and determine to what degree the project is on/off schedule, over/under budget, or in need of resource reallocation. This not only prevents unexpected costs and billing adjustments; it also creates a permanent record of a particular project that you can examine if a) a client has a question about labor allocation or b) your business would like to analyze the data to optimize your operations on future projects.

  • Billing and Finances – Without the use of job costing, it can be difficult to determine exactly what you need to charge to achieve your ideal profit margin on each project. Additionally, job costing streamlines your invoicing process, generating easy-to-interpret rundowns of your costs, and ensures that your accounting staff remain informed, sane, and affable (always a win) 😊 When your estimates match final invoices and outcomes, life is good.

  • Pinpointing Successes – Since your business likely offers a variety of services that are tailored to each client or project, job costing can be used to determine which project types are most (or most consistently) profitable for you. These insights could lead to more holistic adjustments to your future marketing, branding, value propositions, or preferred project types. From a human capital management (HCM) perspective, evaluating this data can help you identify areas where efficiency can be improved, applauded, or addressed to make operations around specific project types more honed and predictable. 

How WorkForce PayHub Can Help

Job costing is a highly effective accounting and time-tracking process, but its implementation can be complicated. You can maximize the value of this method by working with PayHub’s Human Capital Management System and Time and Labor Management System. Used in unison, these tools can provide your business with all of the benefits outlined in the article, namely:

  • Understanding and reaching your company’s target goals for profit margins per project
  • Ensuring the “parallel” accuracy of estimates and final invoices
  • Uncovering and addressing inefficiencies regarding materials, overhead, and labor costs
  • Providing dynamic, real-time reporting for projects-in-progress
  • Keeping clients and staff happy with accurate and consistent expectations
  • Consolidating and interpreting valuable accounting and time-tracking data into one easy-to-use digital space

At its core, responsible job costing brings efficiency, transparency and predictability to companies whose work and workforces are dynamic and malleable. We’d love to help you streamline this process for the best possible results. Contact us today to discuss how we can track labor costs, improve labor allocation, and – through the setup of our payroll/HCM software - bring peace of mind to your business’ job costing process.

Eric Jones
How to Calculate Job Costing Understanding the Difference Between Job Costing and Process Costing
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