Job costing for tradies: a plain-English guide

"Job costing" sounds like accountant talk, but it's dead simple: it's knowing what a job costs you versus what you charge for it, so you know whether it made money. Do it well and you stop guessing which jobs are worth taking.

What job costing actually is

For every job you take the money coming in (the invoice or quote total) and subtract everything that job cost you to do - materials, labour, hire, disposal, the lot. What's left is your profit on that job. Track it across all your jobs and patterns jump out: this type of work is gold, that one's a trap, this client always blows the timeline.

It is not the same as checking the bank balance at the end of the month. The bank balance tells you whether the business made money overall. Job costing tells you which jobs made it and which ones ate it. Two jobs can invoice the same amount and leave you in very different places, and unless you cost each one you never find out which was which. Our guide on why your jobs are not as profitable as you think walks through the usual leaks.

Why it's worth the bother

• You quote better, because you know what similar jobs really cost last time
• You drop the work that never makes money and chase more of the work that does
• You spot a job going bad while you can still fix it
• You can prove your numbers when it's time to put prices up

None of that needs an accountant. It needs a value on every job and the habit of logging costs against it while they are fresh.

The simplest method that works

1. Give the job a value: the quote or invoice total
2. Log materials against it as you buy them (keep the receipts attached)
3. Log labour: hours worked times your true hourly cost
4. Add the extras: hire, tip fees, subbies
5. Compare cost to value - that gap is your profit

Do steps two to four as the costs happen, not at the end. A receipt logged on the day is a fact. A glovebox full of receipts sorted a month later is a guess, and the guess tends to land in the client's favour.

A worked example: a small deck

Say you quote a merbau deck at $14,000. Materials come in at $5,200. You and an apprentice put in 90 hours; at a true cost of $70/hr that's $6,300. Hire and tip fees add $400. Total cost: $11,900. Profit: $2,100, or about 15% (the profit calculator does these sums for you). Now the useful part - if the job actually takes 120 hours instead of 90, your cost jumps to $14,000 and your profit is gone. Job costing is what shows you that on day three, not at the end.

This is the same deck we price from scratch in how to quote a carpentry job. Over there the $14,000 is built up from a take-off, a waste allowance, an overhead share and a margin. Here we are looking the other way: the price is set, and the question is what the job actually cost. Both views matter. Quoting sets the number you hope to make. Job costing tells you the number you did make.

Markup vs margin, in one table

The deck made 15%. Is that a 15% markup or a 15% margin? They are different things, and mixing them up is an easy way to end up short. Markup is what you add on top of cost, as a percentage of the cost. Margin is the profit as a percentage of the price. The deck's $2,100 is 15% of the $14,000 price, so it is a 15% margin. Worked as a markup it is $2,100 on $11,900, which is about 17.6%. Same dollars, different percentage.

Read the last row against the deck. Add 20% to the $11,900 cost and you would quote $14,280 and think you had a 20% job. You would actually have 16.7%. To bank a real 20% margin you need to quote $14,875. That gap is nearly $600 on one deck, and it repeats on every job you price the same way. If you are wondering what margin you should be chasing, read what is a good profit margin. The short version is that it depends on your trade and your overhead, and the only way to know yours is to cost your jobs.

The four numbers to track on every job

You do not need a dozen categories. Track these four on every job and you always know where you stand.

1. Job value

The quote total, or the invoice total if you are charging by the hour. This is the line everything else is measured against. Set it the day the job is won and change it only when a variation is agreed in writing. If you never set it, you have a pile of costs with nothing to compare them to, which is bookkeeping, not job costing.

2. Labour hours times true cost

Hours are the number most likely to blow out. Log them per day, per person, against the job, and price them at your true hourly cost rather than your wage. Your true cost covers super (the ATO requires it for eligible employees; a sole trader does not have to pay it for themselves, but it is still worth setting aside), insurance, tool replacement, the ute and fuel, plus the hours you spend quoting and chasing money that nobody pays you for. In our experience, tradies who work it out properly are surprised by how far it sits above the wage figure. Price your hours too cheap and every job looks better than it is.

3. Materials and hire

Every supplier run, every hire docket, every tip fee, logged against the job on the day with the receipt attached. Materials get under-counted when the small stuff - fixings, adhesive, blades, the second tube of silicone - is bought on the way past and never makes it onto the job. On the deck the materials came to $5,200 and the hire and tip to $400, and both were only right because they were logged as they happened.

4. Variations

Anything outside the original scope is a variation. Price it, get a written yes, do the work, then add it to the job value. A variation done for free is a cost with no matching income, and it drags the whole job down. Variations are also the reason the job value moves after day one, so if you skip logging them the profit figure you are looking at is wrong.

Doing it by hand vs doing it live

You can do all of this in a spreadsheet. It is free, you already know how it works, and for a sole trader running one or two jobs at a time it is a fair option. One tab per job, the four numbers, a formula for the gap. If that is where you are, start there rather than not starting at all.

The problem is not the spreadsheet, it is the updating. It is easy to start a job-costing spreadsheet with good intentions and stop updating it by the second job. The costs happen on site, on a Tuesday, with dirty hands. The spreadsheet lives on a laptop at home. By the time you sit down to it there is a week of receipts in the glovebox and half the hours are a guess. The trick is to make logging costs take seconds and happen where the work does - on your phone, on site.

That is the case for a job costing app for tradies, and the trade-off is honest: it costs money each month and you have to set it up once. What you get is the log happening at the point of cost. Hours go on the job at knock-off. The receipt gets photographed at the counter. If you run a crew, everyone logs their own hours against the job instead of texting them to you on Sunday night. The profit figure stays current on its own, so you see the deck heading for 120 hours while there is still time to do something about it.

That's what TrackYaTradie does: set the job value once, log costs as you go, and see live profit on every job without touching a spreadsheet. It runs the same way for a one-person outfit as for a crew working stages and variations across several sites, which is why it is built for builders as much as for the sole trader.

Try it on your last job

Take the last job you finished. Put the quote total, the hours, your true hourly cost and the materials into the calculator below and see what it made. Then change the hours to what you first estimated and see what you thought it would make. The gap between those two numbers is the reason job costing is worth doing.

Not sure what your true hourly cost is? The charge-out rate calculator works it out from your yearly costs and billable hours. And if the table above made you wince, the markup and margin calculator converts between the two so you quote the number you actually mean.