Job Costing in Construction: The CFO’s Guide to Getting It Right

Introduction - Job Costing in Construction

In construction and engineering, every job tells its own financial story. Some projects deliver strong profit, others barely break even, and a few quietly drain cash without anyone noticing until it’s too late.

The problem is simple: too many businesses look only at their overall profit and loss but fail to track performance on a job-by-job basis. That means opportunities to improve margins are missed, cash leaks continue unchecked, and management ends up making decisions without the full picture.

At Jones Financial Accounts (JFA), we help SMEs in construction and engineering take control of their numbers by tracking financial performance at the project level. It’s not just about knowing whether you made money overall, it’s about knowing which jobs created value, which ones lost money, and why.

Once you have that level of detail, you can stop repeating mistakes, strengthen supplier negotiations, and price future work with confidence.

Why its important

Job performance tracking means breaking down your accounts so each contract, project, or job shows its own set of financial results. Instead of lumping all revenue and costs together, you track income, labour, materials, subcontractors, plant hire, and overhead allocations against each job.

Think of it like a scoreboard. If you only looked at the final league table, you’d know where your team stands but not why they won or lost. Job performance reporting gives you the play-by-play: which project managers controlled costs, which suppliers delivered value, and which clients were profitable to work with.

For a £1m-turnover construction business, even a 5% swing in job performance can make or break annual results.

If one project overruns by £25,000 in labour because hours aren’t tracked properly, the margin across the whole business shrinks significantly. Without visibility at job level, leadership may assume “we had a quiet year” when in reality one bad job cancelled out the profits of three good ones.

Job-level tracking is not just good practice, it’s essential for protecting cash flow, pricing future jobs accurately, and holding teams accountable. It also builds trust with lenders and investors, who want to see not only total profit but how consistent and predictable your project margins are.

Strategy to Get It Right

The strategy for tracking job performance comes down to three steps: setup, discipline, and review.

Setup 

First, make sure your accounting system is structured to handle job costing. That means setting up cost codes that separate labour, materials, subcontractors, and overheads by project. Most cloud accounting systems like Xero or Sage can do this, but it needs careful setup.

Discipline

Costs must be recorded against the correct job from day one. Timesheets should capture hours per project, invoices should be tagged correctly, and purchase orders must be linked to the relevant job. This requires clear processes and accountability, site managers, finance staff, and directors all need to follow the same rules.

Review

Data is only useful if reviewed regularly. Monthly management accounts should include job-by-job reporting: actual vs budget, variance analysis, and cash flow impact.

For jobs over £250k, a weekly review may even be necessary. If a project is going off-track, early warnings give leadership time to adjust, renegotiate with suppliers, reallocate labour, or push back on scope creep with the client.

At JFA, we build dashboards that bring all of this together, so directors can see in real time which jobs are healthy and which are at risk. The key is consistency: once the process is embedded, it becomes second nature and stops being an admin burden.

Example

Take a construction firm turning over £1.2m. They typically work on five large contracts a year, each worth around £250k. Without job tracking, they see an annual net profit of just £40k.

Once we implemented job performance reporting, the picture changed. One contract was losing £35k due to unbilled variations and subcontractor overtime. Another was showing lower margins because material wastage wasn’t being tracked.

By correcting these two issues alone, the business protected £70k in margin. Suddenly, their annual profit jumped from £40k to £110k, a near threefold improvement.

Job-level reporting gave management confidence to challenge costs, renegotiate supplier terms, and price the next contract with realistic labour allocations. Within 12 months, they also improved their credibility with lenders, securing better credit terms and freeing up cash flow for growth.

Misconceptions

• “We’re too small to need job costing.” Wrong. Even businesses under £1m turnover can lose thousands if one project goes wrong. Small jobs can sink big companies if unchecked.

  
  

• “It’s just extra admin.” Not if done right. With the right system setup, job costs flow naturally from timesheets and invoices. The admin is in the setup, not in the daily work.

• “We know our jobs are profitable.” Assumptions kill profit. Unless you’re tracking actual vs budget, you can’t be sure where your margins are going.

Key Takeaways

• Job performance tracking shows which projects make or lose money.

  
  

• Without it, a single bad job can wipe out profits from several good ones.

  
  

• The strategy is simple: setup, discipline, review, repeat consistently.

  
  

• Real-time reporting turns accounting into a decision-making tool, not just a compliance task.

Want to know which of your jobs are making you money and which are draining your cash? JFA can set up job-level reporting that gives you answers in weeks, not years.

Wrapping up today's insights, tomorrow we simplify another accounting challenge