Many construction business owners believe their jobs are profitable.
The reality is more uncomfortable.
“We only find out which jobs made money at the year end.”
By then, the damage is already done.
This is one of the most dangerous and overlooked problems in construction, poor job costing. It doesn’t cause sudden failure. It quietly erodes margins, drains cash, and leaves directors confused about where the money went.
This guide explains the construction job costing mistake that quietly destroys construction profits and how to fix it properly.
What Is Construction Job Costing?
Construction job costing is the process of tracking all costs and income for each project in real time, including labour, materials, subcontractors, plant, overheads, and variations, to measure true project profitability.
Without accurate construction job costing, businesses rely on assumptions instead of facts.
Why Construction Job Costing Fails in Most Businesses
Profitable construction companies rarely fail because of lack of work. They fail because they don’t see losses early enough.
The most common job costing mistake is this:
Tracking costs after the job is finished instead of while the job is running.
This single mistake destroys project profitability.
The Real Job Costing Mistakes in Construction
1. Labour Costs Are Not Tracked Accurately
Labour is the biggest cost in construction, and the most poorly tracked.
Common problems include:
- Labour hours not allocated to jobs
- Overtime not captured properly
- Site time vs non-chargeable time ignored
- Supervisory time missed
- CIS labour mixed with PAYE costs
If labour isn’t tracked by job, project profitability figures are meaningless.
2. Materials Are Not Allocated to the Correct Project
Many businesses record materials as a general cost.
This hides:
- Material wastage
- Theft or losses
- Price increases
- Poor purchasing decisions
When materials aren’t assigned to specific jobs, profitable projects subsidise loss-making ones.
3. Variations Are Not Costed Separately
Variations should improve margins.
Instead, they often:
- Absorb untracked labour
- Include unpriced materials
- Reduce overall project profitability
If variations aren’t costed and tracked separately, directors lose visibility over true margins.
4. Overheads Are Ignored in Job Costing
Overheads don’t disappear just because a job is running.
Commonly missed costs:
- Office salaries
- Vehicles and fuel
- Insurance
- Software
- Admin time
Without overhead allocation, jobs appear profitable, until cash runs out.
5. No Real-Time WIP Reporting
Many businesses only assess profitability at year-end.
By then:
- Loss-making jobs are complete
- Cash has already gone
- Pricing mistakes are repeated
Work in Progress (WIP) reporting is essential for live profitability analysis.
How Poor Job Costing Destroys Construction Profits
Poor construction job costing leads to:
- Underpricing future jobs
- Repeating the same mistakes
- Cash flow pressure
- Directors funding the business personally
- False confidence in growth decisions
This is why some of the busiest construction companies struggle financially.
How to Fix Construction Job Costing Properly
Step 1: Implement a Construction-Specific Job Costing System
A proper job costing system must track:
- Labour hours by job
- Subcontractor costs by project
- Materials per site
- Plant and equipment usage
- Variations separately
- Overheads allocation
Spreadsheets are not enough.
Step 2: Track Labour in Real Time
Accurate labour cost tracking means:
- Timesheets by job
- Separation of chargeable vs non-chargeable time
- PAYE and CIS alignment
- Visibility of labour overruns early
Labour visibility protects margins.
Step 3: Integrate Job Costing With Accounting Software
Job costing should integrate with:
- Xero
- Sage
- QuickBooks
This ensures:
- Real-time cost tracking
- Accurate WIP reporting
- Reliable project profitability data
- Better decision-making
Step 4: Use WIP Reporting to Protect Profit
WIP reporting shows:
- How far along each job is
- Profit recognised vs cash received
- Whether a job is over or underperforming
This prevents unpleasant surprises at year-end.
Expert Insight from Construction Accountants
In our experience working with UK construction businesses, most profitability problems are not pricing issues, they are visibility issues. Without real-time job costing, directors are managing blind.
How We Help Construction Businesses Improve Job Costing
At AccounTax Zone, we help construction businesses implement job costing systems that directors can actually trust.
We support contractors, subcontractors, and developers with:
- Construction job costing systems
- Labour and cost tracking
- WIP and profitability reporting
- Cash flow alignment
- VAT and CIS integration
Our goal is simple: no surprises, no guesswork, no hidden losses.
FAQs – Accountant for Construction cashflow problem
Because it shows whether projects are actually profitable while they are running, not after they finish.
When Should You Speak to a Construction Job Costing Specialist?
You should seek advice if:
- You don’t know which jobs make money
- Profits don’t match cash flow
- Labour overruns are common
- Year-end results are a surprise
- Growth feels risky
Speak to a Construction Job Costing Specialist
If you want clarity on:
- True project profitability
- Where margins are leaking
- How to price jobs accurately
- How to protect profits as you grow
Book a free construction strategy call
We’ll review your current systems and show you how to see profitability clearly, before it’s too late.
