--- title: "Job Costing for Service Businesses and Contractors | MCC" description: "How to track revenue and costs by job: labor, materials, subcontractors, overhead allocation and comparing estimates to actuals." url: "https://mcc-solutionsnj.com/bookkeeping/guides/job-costing-for-service-businesses" --- Bookkeeping guide · Updated October 12, 2026 # Job Costing for Service Businesses and Contractors Knowing that the business made a profit is useful. Knowing which jobs made it, and which lost money, is far better. Job costing assigns revenue and direct costs to each project so you can price and manage with real evidence. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** Job costing assigns revenue and direct costs to each project. Direct costs for a job include materials bought for it, subcontractors, equipment rental and the labor hours of workers on it; overhead like office rent and general insurance is shared across jobs. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Trial balance explained](/bookkeeping/guides/trial-balance-explained) · [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) **Free tools:** [Credit card fee calculator](/bookkeeping/credit-card-fee-calculator) · [How many sales do I need to break even?](/bookkeeping/break-even-calculator) [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## What counts as a job cost Direct costs for a job include materials bought for it, subcontractors, equipment rental and the labor hours of workers on it. Overhead, such as office rent and general insurance, is shared across all jobs and is added separately if you allocate it. Decide in advance which costs you will track by job. Starting with materials and subcontractors is simple and useful. ## Set up the tracking Accounting software usually offers projects, jobs, customers with sub-customers, or classes for this. Pick one method and use it consistently. Tag each bill, expense and invoice with the job when you enter it. For labor, use timesheets that assign hours to jobs. The pay rate should include payroll taxes and benefits, called a burdened rate, so the cost is not understated. ## Estimates versus actuals Before the job, build an estimate with line items for materials, labor and subs. During and after, compare actual costs to each line. Variances show where estimates are weak: labor underestimated, material waste, change orders not billed. Update your estimating sheet with what you learn, so next quotes reflect reality. ## Billing and work in progress For long jobs with progress billing, billed amounts may differ from costs incurred. Track billed to date against percent complete. Costs ahead of billing are cash you have fronted. Billing ahead of costs means you hold customer money for work still to do, and that portion is not profit yet. Your CPA can advise on how to account for work in progress on long contracts. ## Allocating overhead To see true profit by job, spread overhead using a reasonable base such as labor hours or revenue. It does not have to be perfect. The goal is to find out whether a job at your usual markup covers all costs. Review profitability by job type, customer and size. You may find that small jobs consume disproportionate effort or that one trade is subsidizing another. ## Close out each job When a job finishes, run a job profit report, note lessons, and make sure all costs and invoices are in before you consider it closed. Late vendor bills often arrive weeks later, so check back. Keep a short summary file for each job with the estimate, final numbers and notes. It is a quick reference for pricing the next one and for resolving any disputes. A remodeler quotes a bathroom job with a target margin. Tracking shows materials came in on budget, subcontractors came in slightly over, and labor ran well over because of a design change that was never billed. Without job costing the owner would only have noticed that the month felt tight. With it, the owner learns to price change orders and to add a contingency, and the next bathroom quote is more realistic. ## Common questions **Is job costing only for contractors?** No. Agencies, consultants and repair businesses all benefit from tracking profit by project. **Do I need special software?** Mainstream accounting software handles basic job costing. Larger needs may use construction or project tools. **How detailed should I be?** Detailed enough to answer pricing questions without burying you in data entry. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Zoho Books Bookkeeping and reconciliation in Zoho Books for New Jersey businesses, especially those already using other Zoho apps. Zoho Books →](/bookkeeping/software/zoho-books) More guides - [Tracking Income Streams With Classes and Locations](/bookkeeping/guides/classes-and-locations-to-track-income-streams) - [Voiding vs Deleting Transactions in Accounting Software](/bookkeeping/guides/voiding-vs-deleting-transactions) - [How to Prepare Your Records for a Tax Preparer](/bookkeeping/guides/how-to-prepare-records-for-your-tax-preparer) - [Questions a Tax Preparer Will Ask About Your Books](/bookkeeping/guides/questions-a-tax-preparer-will-ask-your-bookkeeper) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Contractor Business Bundle Price jobs to a margin, put the terms in writing, know your break-even and have your records ready at tax time. [See what's inside ($89)](/toolkits/contractor-business-bundle)14-day full refund Excel workbook ### Contractor Job Costing Sheet Tag every cost and invoice to a job and see each job's margin, cost mix and balance owed, with a flag when costs are catching up to the contract. [See what is inside ($24)](/toolkits/contractor-job-costing-sheet) Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)