What is the difference between job costing and standard costing?

Job costing tracks the actual cost of one specific project or contract. Standard costing compares actual costs to a pre-set expected cost, which suits repetitive manufacturing more than one-off construction jobs where every project is different.

What is work in progress (WIP) in construction?

WIP is the value of work done but not yet certified or billed. Tracking it matters because a job can be spending heavily while the money it has earned has not yet been invoiced, which hides the real cash position.

How do I know a job's margin before it finishes?

By booking every cost to the job as it is committed, not when the invoice arrives, and comparing it to the value certified to date. If costs are recorded live against a budget, the margin is visible throughout, not only at the end.

Contracting

Construction job costing, explained

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Construction job costing means every cost, labour, materials, subcontractors and plant, lands on the specific job it belongs to as it happens, so you can see each project's margin while there is still time to protect it. Done well, the profit on a job is a live number. Done badly, it is a surprise you get at the end, when it is too late to do anything about it.

Most contractors know their turnover and their bank balance. Far fewer know, this week, whether the job they are pouring money into is still making a margin. The difference is job costing: the discipline of booking every cost to a job and a cost code, and comparing it to what that job has earned.

What lands on a job

Materials. Every purchase order and supplier invoice, coded to the job and ideally to a cost code within it (concrete, steel, glazing).
Labour. Hours from timesheets, costed and booked to the job, not left in a payroll total that never meets the project.
Subcontractors. Subcontract orders and their certificates, so committed cost is visible before the invoice arrives.
Plant and equipment. Hire, or an internal charge for owned plant, allocated to the jobs that used it.

Committed cost, not just invoiced cost

The single biggest improvement most contractors can make is to count cost when it is committed, not when the invoice lands. The moment you raise a purchase order or place a subcontract, that money is effectively spent, even though the bill may be weeks away. A job-cost view built only on invoices always looks better than reality, right up until the invoices arrive together. Counting commitments keeps the margin honest.

Job costing versus standard costing

Job costing tracks the actual cost of one specific contract. Standard costing, by contrast, compares actual costs to a pre-set expected cost and suits repetitive manufacturing, where you make the same thing many times. Construction is the opposite: every job is different, so the actual cost of this job against its own budget is what matters.

Work in progress

Job costing and work in progress go together. WIP is the value of work done but not yet certified or billed. A job can be spending heavily while the money it has earned has not yet been invoiced, so the cash position looks worse than the job's real health, or better, if billing is running ahead of cost. Seeing cost to date, value certified to date and WIP side by side is what tells you whether a job is actually making money.

How to know the margin before the end

The answer is not a cleverer end-of-year report. It is booking every cost to the job as it is committed, against a budget set from the tender, so the margin is visible throughout. When a cost code starts to run over, you see it in week three, when you can still do something, not in month nine, when you cannot.

Pulling labour, materials, subcontracts and plant onto one job cost by hand is where spreadsheets give up. This is the gap Orbit for contracting closes: every purchase order, subcontract and timesheet is booked to a cost code on the project, so the job cost and the project profit are live while you can still protect them.