Mobile apps or other geolocation systems help accurately record employee hours worked. Laborers may be on location in Fort Lauderdale, Florida working on a job while the central office is located in Irving, Texas. Make sure that everyone in the company is informed of your cost code system and applies these codes consistently. Materials used by construction companies should also be categorized by type. Next, multiply the number of hours worked by the pay rate plus benefits, workers’ compensation, and overtime.

And employees in the office and in the field enjoy an accurate, up-to-date snapshot of every project. Unfortunately, as small businesses evolve and their accounting needs become more complex, entry-level accounting solutions can’t keep up. Project managers have visibility across project, finance, customer account, and inventory information and related business processes. Based on their requests, the construction firm creates a cost estimate and prepares a complete bid package. You’ll decide how to breakdown your jobs, you’ll identify a consistent set of cost codes, you’ll train your team, you’ll learn to analyze your reports.

Procore construction job cost accounting seemed like a significant step up in project management software for our growing, high end residential construction business. Procore automatically updates budgets every time labor and production timesheets are submitted, so you can control labor costs in real time. The software tracks budgeting with each project progress report and syncs changes with accounting systems. Even better than that I can get reports on the labor costs for each of my projects without any extra effort!

With a job cost structure, decisions can be made using real-time data, giving construction companies real opportunities to mitigate major losses. In a construction job cost structure, classes are the most specific cost breakdown available. Even for costs that occur at the same time or are the same material (for example, both Job A and Job B need lumber); they’re all sorted into their specific project. A traditional job cost structure supports the main intention of job costing — which is to determine the profitability of each project. Typically, job cost accounting functions within a job cost structure — a system in which each project is treated as standalone. If you don’t record every transaction, then job cost accounting is as good as regular budget estimating.

• By automating these tasks, the software helps reduce the risk of penalties, ensures that financial reports are up-to-date, and streamlines the audit process.
• The construction industry faces a wide range of challenges, from ongoing labor shortages to frequent cost overruns.
• Also, its pricing is unique, as it’s based on your predicted annual construction volume for the year, rather than a flat subscription fee.
• In this way, job costing helps you make better operational efficiency and financial health decisions.
• Every minute matters when you’re trying to control payroll costs.
• The total number of phases and what they’re called can vary depending on the type of job.
• Our 8-part scoring system was created to help you understand the potential value of any software we review simply and fairly.

Estimate Total Project Cost

The growing use of Enterprise Resource Planning (ERP) systems further enhances efficiency by integrating finance, human resources, and project management into one cohesive platform. Revenue recognition and retainage practices track with long-term contracts paid over time. Construction accounting methods have a steep learning curve, but you can climb it and put your company in a better financial position.

How Construction Bookkeeping Differs from Traditional Bookkeeping:

Construction job costing software gathers data from the field and maps them back to a job and an assigned cost code. Job costing software for construction measures costs at the job-level and turns that data into actionable reports. It also offers a robust accounting platform, but does not place as much emphasis on mobile-first time tracking needed for accurate payroll.

d. Revenue Recognition and Progress Billing:

• Ready to streamline your job cost accounting and take control of your projects?
• This approach not only helps businesses stay within budget but also maximizes profitability by providing a clear, detailed picture of all job-related expenses.
• In construction, production contracts can last years and have multiple extended payments over that time.
• Procore is an enterprise-grade construction management and project financial platform built to centralize project data.
• They also prepare important financial statements such as annual revenue reports, profit and loss statements, and so on.
• These systems offer functionalities like integrated accounting, project management, and reporting tools, significantly enhancing the efficiency of job cost tracking.

Union contractors face a similar situation as prevailing-wage contractors. Contractors must carefully track both base wage rates and total wage packages. So, a single employee might have multiple prevailing wage rates and fringe requirements on a single job, depending on what they’re doing each hour. Each jurisdiction may have particular determinations for what job functions qualify under which classification — and which level within that class.

Ready to run your business with the sameconfidence you have on the job site?

Workyard shows labor costs by job as soon as time is submitted. Time was captured with real-time GPS and assigned to the right jobs and cost codes, which fed live job cost views and made it easier to catch issues before labor spend got out of control. This guide breaks down the best construction job costing apps for 2026, focusing on what actually works in the field. Utilize well-rounded construction accounting software to help analyze granular costs and examine any cash flow discrepancies. A stellar job costing process for construction companies is important for positive cash flow and making sure profit margins are in an optimal range.

If the issue is because the estimator was just off on predicting how much labor they needed, Company Alpha can adjust their estimates for similar projects in the future. Company Alpha can now approach its managers to figure out why there is such a large discrepancy between the estimate for labor costs and the actual costs. Company Alpha can search deep into their spending, digging through the cost codes and classes to see the specific culprit that has already sent them $100 over budget. So far, their estimates have matched their actual costs through the first two phases of the project. But remember, the more in-depth you are with your tracking, the better financial data you’ll receive.

Kelsey is a seasoned content marketer with a wealth of experience in the construction and engineering industries. Manual entry is also likely to lead to mistakes and errors, which, if not rectified, can significantly affect the productivity and profitability of jobs. If you don’t bill for the missing 20%, this could affect your job revenue and leave you liable to fund the rest of the job.

Phases are broken down into cost codes and these codes are considered the tasks needed to move through a phase. The total number of phases and what they’re called can vary depending on the type of job. Phases involve the major milestones of a project — they’re the necessary steps taken to complete a project. Phases are the highest level of breakdown, and they happen after the jobs are all separated. Knowing you spent $115,000 on an excavation project, although still important, doesn’t provide you with enough information to make impactful adjustments to future estimates. It does so by first separating a company’s expenditures into each correlating job.

Real-Time Job Costing: A Game-Changer

Without question, equipment-intensive construction is a data-intensive business. To help save time and reduce data-entry errors even further, users can define multiple costing rates and set defaults for each piece of equipment. For that reason, construction accounting systems should have even greater appeal to contractors. This data is crucial because it allows contractors to help make certain that equipment dedicated to a job is, in fact, being used and providing revenue for that job. The formulas used to calculate these costs are typically a percentage of the equipment rate in order to account for the lack of wear and tear on the equipment.

At Construction Cost Accounting (CCA), we specialize in helping contractors master their finances. This helps ensure accuracy, maintain control, and make informed decisions throughout the project lifecycle. First, break the project into major phases such as Groundwork, Rough-in, and Trim-out.

Workyard’s time tracking software simplifies labor cost tracking by allowing you to define and use cost codes to categorize project expenses. While some construction businesses track their costs independently, many engage construction CPA services to help them prepare accurate job cost reports. Accounting software and innovations like time-tracking technology can help improve job costing accuracy. When it comes to job cost accounting—particularly in the construction industry—hiring a reliable and experienced project management team is crucial. Job costing tracks individual expenses (labor, materials, equipment) assigned to specific projects and cost codes.

b. Managing Subcontractor Payments and Invoices:

Do you struggle with tracking construction costs or managing your job costing effectively? Accurate job costing in construction relies heavily on the ability to track project progress in real time. Construction accounting software has become an indispensable tool for job costing in the construction industry. Ultimately, understanding and managing committed costs is essential for keeping construction projects on track and ensuring the financial success of each specific project. This method is crucial for ensuring accurate project bidding, effective job cost accounting construction, and improved financial decision-making.

For instance, the cost of transporting materials can be divided among projects based on the quantity of materials used in each one. Indirect costs are usually allocated based on their direct relationship or proportional use in each project. Start learning today with industry expert Hugh Seaton and discover how AI can boost efficiency, reduce risk, and transform your projects. ✔ Track labor, material, and overhead costs efficiently

Such hand-journaling is mandatory for companies that continue to use general accounting software to do job costing. Of course, in the days of computerized job costing software, journaling costs manually is an obsolete process. For a typical job, direct material, labor, subcontract costs, equipment, and other direct costs are tracked at their actual values. For an accounting system to support job costing, it must allow job numbers to be assigned to individual items of expenses and revenues. Ready to streamline your job cost accounting and take control of your projects?

If any cost exceeds what you planned, you can immediately identify and rectify the problem. Even one small oversight can disrupt the entire project workflow and chip away at your profits. Learn about our software more in depth with product overviews, demos, and much more! Remember, a cost structure can be as basic or as in-depth as you require it to be. Cash flow reports require information that details how much money a company is receiving throughout a project, like

Under the completed contract method (CCM), contract income and expenses aren’t reported until the project finishes. According to the IRS, only construction businesses with less than a set average annual revenue can use the cash basis method for tax purposes. Under cash accounting, if money hasn’t changed hands yet, there are no financial transactions to account for. However, contractors now must consider guidance from the ASC 606 revenue recognition standards with their construction CPA. That leaves contractors and construction accountants with a choice of revenue recognition methods.

Choose one specific way to order your numbers and then train your team with that method. That way when you’re looking at a cost code you know which phase, code and class the cost is from. If, for example, workers are earning too much overtime, then Company Alpha can mandate a cutback.