Introduction

Job costing trips up a lot of good trades. You price a job, graft hard, then the profit you expected just isn’t there. Sound familiar? Job costing gives you a clear way to price, track, and learn so your next job is better than your last. In this guide, we’ll strip job costing down to the essentials: what it is, why it matters, and exactly how to set it up without bloated software. You’ll get a proven, simple process you can run on a phone and a clipboard — or streamline with tools like Donizo when you’re ready.

Quick Answer: Job costing is the process of pricing and tracking each job’s labour, materials, plant, subs, and overheads so you know your true cost and profit. The simplest setup is 5–7 cost codes, daily time capture in 15-minute blocks, material receipts logged to the job, a 5–10% contingency, and a short review within 7 days of completion.

Table of Contents

• Quick Answer
• Key Takeaways
• Job Costing Basics: What It Is and Why It Matters
• 5 Steps to Build Your Job Costing System
• Pricing and Margin: From Estimate to Reality
• Tools and Templates That Work On Site
• Common Job Costing Mistakes to Avoid
• FAQ
• Conclusion

Key Takeaways

• Use 5–7 core cost codes and keep them consistent across jobs.
• Log labour daily in 15-minute blocks; it takes less than 2 minutes per person.
• Add a 5–10% contingency for unknowns; document assumptions in the proposal.
• Review every job within 7 days: estimated, actual, variance, lessons.
• Donizo can cut admin by 2–3 hours per week with voice capture, templates, e-sign, and one-click invoicing.

Job Costing Basics: What It Is and Why It Matters

Job costing is simply the method of breaking a project into cost buckets so you can price accurately and track performance as you go. If you’re guessing how long first fix will take, or estimating tiles by eye, that’s where profit leaks begin.

Why it matters:

• It tells you which work types actually make money.
• It exposes scope creep early, not after handover.
• It builds your pricing database so next month’s quote takes half the time.

Start with lean, consistent cost codes. Keep it simple so the team actually uses it.

Use at least 5 cost codes; 6 or 7 gives enough detail without becoming admin-heavy.

5 Steps to Build Your Job Costing System

Step 1: Set Your Cost Codes and Templates

• Create a one-page pricing sheet with your 5–7 cost codes.
• Add three columns per line: Estimated, Actual, Variance.
• Include a notes column for assumptions (e.g., “client supplies tiles”).

Example: For a bathroom refurb, break labour into demolition, plumbing, electrical, tiling, and finishing rather than one big “labour” line. It adds 2–3 minutes to estimating and saves hours later.

Action: Save this as your default estimating template. If you use Donizo, start with basic templates (Ascension) or advanced templates (Autopilot) so every proposal follows the same structure.

Step 2: Capture Labour in 15-Minute Blocks

Many contractors struggle because hours are written “from memory” on Friday. That’s when 6 hours becomes 4.5 on paper.

• Record start/stop times daily in 0.25-hour increments (15 minutes).
• Foreman signs off hours at the end of each shift; takes less than 2 minutes.
• Log supervision time separately; it’s real cost.

Example: Two-person crew, 7.5 hours each on tiling = 15 labour hours to “Tiling Labour”. That’s clearer than a single 1-day entry.

Outcome: Labour variance becomes visible early. If first fix overruns by 6 hours, you can adjust the plan on day 2, not week 3.

Step 3: Track Materials and Plant to the Job

• Staple or snap a photo of every receipt with the job name written on it.
• Allocate hired plant to the correct job code on delivery.
• For owned kit, add a modest daily rate to reflect wear and tear (e.g., £12 per day for a mixer across 5 days = £60 to Plant/Equipment).

Tip: On Donizo, attach photos and notes via Voice to Proposal while you’re on site. It keeps the paper trail tidy and tied to the scope you priced.

Step 4: Apply Overheads, Markup, and Contingency

Overheads: Allocate a simple daily overhead per crew (e.g., £45–£65 per working day covering fuel, insurance, small tools). Keep it consistent for 30 days, then review.

Markup: Choose your markup on cost based on risk and complexity. Many small works price comfortably at cost plus 15–30% when scope is tight and access is good. For high-risk work or tight timeframes, increase markup.

Contingency: Add 5–10% for unknowns, especially in renovations where hidden issues are common. State exactly what it covers.

If you’re on Donizo Autopilot, run your numbers through the margin estimator to pressure-test different markups before you hit send.

Step 5: Review Within 7 Days of Completion

• Compare Estimated vs Actual for each cost code.
• Note 3 wins and 3 lessons learned.
• Update your pricing sheet with the new real-world times and costs.

Schedule a recurring 30-minute slot every Friday for job reviews. A simple rhythm like this compounds into better pricing within 4–6 weeks.

Pricing and Margin: From Estimate to Reality

Let’s turn the numbers into a clear process you can run every time.

• Build up your rate: Base labour rate per hour (e.g., £25), add on-costs (NI, holiday), then your overhead allocation (e.g., £7 per hour), then your desired profit. Your selling rate might end up at £40–£48 per labour hour.
• Materials: Use supplier quotes plus a handling allowance (e.g., 2–5% for wastage and runs to merchants). Round to sensible numbers.
• Subs and plant: Pass-through plus your coordination time.
• Add contingency: 5% on simpler works, up to 10% where access or existing conditions are uncertain.

Example: Small patio job

• Labour: 32 hours at £44 = £1,408
• Materials: £1,120 + 5% wastage = £1,176
• Plant: Mini-digger hire 2 days = £220
• Overheads: 2 days crew overhead = £110
• Subtotal cost: £2,914
• Markup: 20% = £583
• Price before VAT: £3,497

State exclusions: “Price excludes unexpected drainage redesign. If required, we’ll provide a separate proposal.” This protects your margin when surprises pop up.

On Donizo Autopilot, the margin estimator helps you see the effect of changing markup from 18% to 22% in seconds. The analytics dashboard (Ascension and above) then shows acceptance rates over time so you can balance price and win rate.

Tools and Templates That Work On Site

Keep it practical. You need tools your team will actually use between dust sheets and tight deadlines.

• One-page cost sheet per job: Estimated, Actual, Variance, Notes.
• Photo log: Before, during, after. Photos settle 80% of “that wasn’t included” debates.
• Proposal template: Same structure every time; clients understand you, and your team can price faster.

How Donizo helps when you’re ready to streamline:

• Voice to Proposal: Speak scope and measurements on site, add photos, and generate a clean, branded proposal in minutes.
• E-signature Integration: Get a clear, legally binding acceptance. No more “we thought it was ok” texts.
• Send Proposal: Email a branded PDF with client portal access so clients can view, approve, and ask questions in one place.
• Invoice Management: Convert accepted proposals to invoices in one click and track payments. Great for keeping your cash flow honest. [learn more about invoicing]
• Templates and Branding: Basic templates and custom branding (Ascension) or advanced templates (Autopilot) so your job costing structure appears consistently to clients.

Contractors often report this cuts admin by 2–3 hours per week and halves the back-and-forth during approvals.

Common Job Costing Mistakes to Avoid

• Vague scope: “Make good as required” is a margin killer. Be specific and show photos.
• No daily time capture: If hours are guessed weekly, you’ll bleed. Lock in the 15-minute rule.
• Zero overhead allowance: Fuel, insurance, and small tools are real costs. Add a daily overhead.
• No contingency: Renovations hide surprises. 5–10% is sensible.
• Not reviewing: Without a 7-day post-job review, you repeat the same errors. Make it a habit.

FAQ

What Is Job Costing in Construction?

Job costing is the method of estimating and tracking all costs for a specific project, usually split into labour, materials, plant, subcontractors, overheads, and compliance. The goal is to know your real cost and profit per job, improve pricing accuracy, and spot issues like scope creep early. It’s essential for small contractors who want consistent margins.

How Do I Set a Markup for Job Costing?

Pick a markup that reflects risk, complexity, and your overheads. A common starting point is 15–30% on total cost for straightforward work, with a higher markup for high-risk or time-critical jobs. Pressure-test your markup by modelling labour and overheads. On Donizo Autopilot, the margin estimator shows profit effects instantly.

What’s the Easiest Way to Track Labour on Small Jobs?

Use daily capture in 15-minute blocks. The foreman signs off at day’s end. Keep a simple sheet with names, start/stop, and task code (e.g., “Tiling Labour”). This takes less than 2 minutes per person and gives you accurate job costing. Photos of progress help if you need to justify hours to a client.

How Often Should I Review Job Costs?

Review each job within 7 days of completion while details are fresh. Compare Estimated vs Actual for each cost code, list 3 wins and 3 lessons, and update your pricing sheet. Do a deeper 30-day review across all jobs to adjust overhead rates or standard times if needed.

Do I Need Software for Job Costing?

No. You can run job costing with a one-page sheet, receipts, and daily time logs. Software helps when you want speed and consistency. Donizo streamlines proposals, e-signatures, and invoices, and offers templates and a margin estimator so your pricing and documentation stay tight as you scale.

Conclusion

Keep job costing simple and consistent. Use 5–7 cost codes, log labour in 15-minute blocks, add a 5–10% contingency, and review within 7 days of completion. Do this for 4–6 weeks and your pricing accuracy jumps, rework drops, and margins stabilise. When you’re ready to save more time, try Donizo: capture scope with voice and photos, send branded proposals, secure e-signatures, and convert approvals to invoices in one click. Start free on Discover, then step up to Ascension or Autopilot when templates, analytics, and margin tools will pay for themselves.