7 Mistakes You’re Making with Job Costing (and How to Fix Them Before They Kill Your Margins)
The $273 Billion Problem Most Contractors Ignore
Until it’s too late to save the business
When Ian McCarthy built his landscape company from $0 to $12+ million in revenue over six and a half years, he didn’t do it by accident. He did it by obsessively tracking one thing most contractors get catastrophically wrong: job costing.
lost annually by the construction industry to avoidable job costing mistakes
Even more alarming? Twenty-five percent of construction companies face bankruptcy after just two or three incorrect estimates.
Mistake #1: You’re Tracking Costs After the Job Finishes
The problem: You wait until invoices pile up and the job closes to run your numbers. By then, you’ve already lost money.
The fix: Set a weekly review cadence. Every Monday, sit down and review actual costs against estimates on active jobs.
Mistake #2: You’re Guessing on Material Quantities
The problem: You’re “estimating” material needs instead of calculating them precisely.
The fix: Move from estimating to “exactimating.” Use smart tools that pull real-time pricing data.
Mistake #3: You’re Underestimating True Labor Costs
The problem: You miss the labor burden: payroll taxes, workers’ comp, and insurance. You think you’re paying $25/hr, but it’s actually $38/hr.
The fix: Calculate your true labor burden rate and bake it into every estimate.
Mistake #4: Your Cost Code Structure Is a Mess
The problem: You’re either too broad or too granular.
The fix: Build a clean structure with 50–100 codes max. Group them by major categories like “Hardscape Materials” or “Irrigation Install.”
Mistake #5: Field Receipts Disappear Into Truck Consoles
The problem: Crumpled receipts in glove boxes mean your “actual” costs are fiction.
The fix: Implement a systematic receipt capture process (like a mobile app) immediately.
Mistake #6: You’re Misallocating Overhead
The problem: You confuse project-specific overhead with company-wide expenses.
The fix: Review your allocation formulas quarterly to keep them relevant.
Mistake #7: You’re Absorbing Change Order Costs
The problem: Scope changes happen, but you aren’t documenting them or getting paid for the extra work.
The fix: Track changes in real time and submit change orders with backup data while you still have leverage.
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