“The #1 Reason Contractors Lose Money: Broken Job Costing Systems” - Seth Godin

Introduction:

Job costing is the single strongest predictor of contractor profitability. When it’s wrong—or missing—your projects “look” profitable right up until they aren’t. This is why contractors struggle with margin fade, surprise losses, and inconsistent cash flow. In this guide, you’ll learn exactly how job costing breaks, how to fix it, and how Salisbury Bookkeeping builds job costing systems that keep contractors profitable year-round.

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1. The Hidden Problem With Job Costing Today

Most contractors think they’re job costing—but they’re really just categorizing expenses. Without standardized cost codes, accurate labor allocation, or real-time tracking, you never see the true health of a job until the project is nearly finished—and the money is already gone.

2. How Bad Coding Destroys Job Profit

Poor coding equals poor reporting.
When materials, subs, equipment, and labor aren’t coded to the correct job or phase, your P&L lies to you. You don’t just lose accuracy—you lose the ability to run a profitable production schedule.

3. The Fix — QBO Projects + Standardized Cost Codes

At Salisbury Bookkeeping, we fix job costing by:

• Turning on QBO Projects

• Standardizing cost codes by phase (labor, subs, materials, equipment, overhead)

• Setting rules so cost codes are ALWAYS applied

• Mapping items to services for clean reporting

• Enforcing coding at the PO and bill-entry levels

This creates consistent, predictable job cost data—every time.

4. Why WIP Reporting Matters More Than Month-End Reports

Month-end P&Ls only tell you what happened, not what’s happening.
WIP reporting reveals:

• percent complete

• profit fade

• overbilling / underbilling

• labor inefficiencies

• upcoming cash constraints

This is how contractors catch problems early instead of losing margin late.

5. The KPIs Every Contractor Should Track

• Actual vs. budget cost variance

• Committed cost and open POs

• Over/under billing

• Labor efficiency

• Projected final margin

• Backlog and pipeline value

Conclusion

Contractors who master job costing master profitability. Contractors who don’t… gamble. Salisbury Bookkeeping gives you a system you can trust.