Is the Job Actually Profitable? Here’s How to Know Before It’s Finished
Most owners find out whether a job made money the same way: it’s done, the invoice went out, and a month or two later they look at the P&L and either feel good or feel a pit in their stomach. By then it’s too late to do anything about it. The point of job costing while the job is still running is catching the losing job in week two, while there’s still time to do something about it.
Budget vs. Actual Isn’t Enough on Its Own
Comparing what you spent to what you budgeted tells you half the story. The other half is how much of the job is done. If you’ve spent 50% of the budgeted labor and materials but the job is only 30% complete, you’re headed for an overrun even though the budget report looks fine so far. That gap between percent of budget spent and percent of work finished is the early warning sign most shops never look at, since their books aren’t set up to show it.
The Math: Where Is This Job Going to Land?
There’s a simple formula that turns those two numbers into a forecast for the whole job:
Cost so far ÷ percent complete = projected total cost
Let’s say a job is bid at $40k with a targeted 35% gross margin, which means about $26k in budgeted direct cost. Two weeks in, we’ve spent $16k.
| If the job is 60% done | If the job is 35% done | |
|---|---|---|
| Cost so far | $16k | $16k |
| Projected total cost ($16k ÷ percent complete) | About $27k | About $46k |
| Contract price | $40k | $40k |
| Projected gross profit | About $13k (33%) | About a $6k loss |
Same $16k spent, completely different job. At 60% done, we’re roughly on pace and a little under the target margin. At 35% done, the job is on track to lose money, and week two is the time to figure out why, while there are still options.
Why Jobs Drift
The reasons are usually the same few things every time. The estimate missed material or labor that showed up once work started. The crew ran into something unexpected on-site, like weather, permitting, or a delivery delay, and burned hours without moving the job forward. Or material costs crept up between the bid date and the purchase date. Each of those has a different fix, but you can’t fix any of them if you don’t know a job is drifting until it’s closed out.
What to Track on Every Open Job
For this to work, you need three numbers per job, updated on some regular cadence (weekly for bigger jobs and at least monthly for everything else): budgeted cost, actual cost to date, and percent complete as reported by whoever’s running the job in the field. The field percent-complete number is the one most businesses skip, and it’s the one that makes the other two useful.
Track hours, not only dollars
Crew leads usually think in hours, and labor is where most jobs drift. If the bid assumed 120 labor hours and the crew has used 90 with half the job left, everyone understands that right away, even if they’ve never seen the job cost report. Putting the hours budget on the work order gives the field a number they can manage to.
Code costs to the job when they happen
The math only works if the costs land on the right job. That means putting a job number on every purchase order, supplier receipt, and timesheet at the time it happens, instead of sorting it out at the end of the month from a stack of receipts. If materials get bought in bulk and pulled for several jobs, somebody needs to record which job used what, or the busy job looks cheap and the small job looks expensive.
What to Do When a Job Is Drifting
Catching it early only helps if something changes. Depending on the reason, that might mean writing a change order for work the customer added, moving a more experienced crew onto the job, fixing a delivery or scheduling problem before it costs more days, or at least being upfront with the customer early if the timeline is going to slip. Sometimes the answer is that the job will lose a little money and there’s nothing to do about it this time, and then the fix goes into the next estimate.
Close Out Every Bigger Job
When a job wraps up, a quick look at the estimate next to the final actuals, line by line, is where the estimating gets better. If demo keeps taking 20% longer than bid, or one supplier’s prices keep coming in above the estimate, that shows up after three or four jobs and can be built into the next bid. It takes about 15 minutes per job and it’s one of the few things in this business that pays you back on every future job.
Where to Start
If you want one thing to do this week, pick your two biggest open jobs, pull the cost to date, and ask the crew lead what percent is done. Run the formula above, and you’ll know where both jobs are headed.
If you’re finding out a job lost money after the fact more often than you’d like, a free Cash Clarity Call is a good place to start figuring out where the gap is coming from.
