Job costing for contractors: five buckets and the burden

Most contractors know what a job billed. Far fewer know what it cost, per cost type, while it was still running. The gap between those two states is where a busy year turns into a thin one.

Job costing is not accounting. It is five buckets, filled as the money leaves, and compared to what you said they would hold.

Five buckets, and the one that is always short

Labor, material, equipment, subcontractors, other. Four of them fill themselves from invoices. Labor does not.

Costing labor at the wage is the classic underestimate. The hourly cost of a crew member is the wage plus payroll taxes, workers' compensation, liability insurance, paid time off, and the hours that are paid but not billable — loading the truck, the supply house, the drive. Put that burden into the hourly cost rate, not into a general overhead line at the bottom, or every estimate you build on it is low by the same percentage.

Markup is not margin, and the difference is real money

Cost $1,000, markup 20 percent, price $1,200. Margin is $200 on $1,200 — 16.7 percent, not 20. To actually keep 20 percent on $1,000 of cost you price at $1,250, which is a 25 percent markup.

Quote "twenty percent" across a year of work and you will collect one of those two numbers. Decide which one the business runs on, and store it per cost type: material rarely carries the same markup as labor or subs.

Sales tax moves your material cost with the contract form

In Texas, a lump-sum contract makes you the consumer of the material: you pay sales tax at the supply house and it sits inside your material cost, invisible on the invoice. A separated contract makes you a seller: you buy on a resale certificate and charge tax to the customer as a line.

Same job, same materials, two different material costs — and the choice is often made by accident, through how somebody happened to write the invoice. Which property type and which contract form decide it is in one job, three states, three answers.

Federal work costs more per hour before you start

A federal construction contract over $2,000 brings prevailing wages and fringe benefits, payment not less often than weekly, and a certified payroll with a signed Statement of Compliance every week. That is an hourly cost and an administrative cost, and both belong in the estimate rather than in the surprise: Davis-Bacon, week by week.

Retainage is cost you have already paid

Five or ten percent of every progress payment, held for months, on labor and material you settled weeks ago. Texas requires the owner to reserve 10 percent; New York caps private retainage at 5 percent and requires release within 30 days of final approval of the work. Carry it as a receivable with a date on it, not as a rounding error: retainage limits by state.

Close the job against actuals, bucket by bucket

One total tells you nothing. A job that came in on budget with labor 18 percent over and material 15 percent under is two problems, not zero. Post supplier invoices to the bucket and the job as they arrive, and compare per bucket.

Two costs that reach the bucket late if nobody watches: change orders priced after the work, and a subcontractor with no W-9 on file — where a missing taxpayer identification number puts 24 percent backup withholding on you, the payer, rather than on the sub. Get the form before the first check: Form W-9, before the first payment.

For where a running job file sits alongside the estimate, see Zirko for general contractors.

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What Zirko does here: five cost types with a markup stored per type, contribution margin shown per line and per document, and a target-against-actual view on the finished project built from supplier invoices and recorded consumption. Zirko derives no hourly charge-out rate from your books and spreads no overhead — and for the United States it proposes no sales tax rate at all; you enter the rates that apply to you.