Job Cost Management in Construction: Are You Actually Making Money on Each Job?
A profitable company can still be quietly losing money on individual jobs: because job cost management, not the company P&L, is what actually shows you whether a project is making money. In this episode of Construction Hot Takes, Greg Gorman breaks down why looking at your business’s bottom line alone can hide a bleeding job, even when nine out of ten projects are performing well.
Gorman, a former full-time construction CFO now working as a construction consultant, walks through the three fundamentals every job cost system needs: accurate data flowing in from accounting and the field, a project budget broken down by cost code you can actually track against, and one WIP (Work in Progress) report, not five, owned by accounting and updated regularly. He’s blunt about the alternative: a “gut feeling” that a job is making money isn’t a financial statement, and by the time a job is 75-80% complete, any profit fade is already locked in.
The core takeaway is timing. Gorman’s rule is to start reviewing job cost reports at around 40% complete, while there’s still room to adjust crew mix, push subcontractors, or catch a budget problem before it becomes an unrecoverable loss. Skip that discipline, he argues, and you’re not managing a construction company… you’re flying blind.
Watch the Episode
In This Episode
Why a healthy company P&L can still hide a job that’s quietly losing money
The three fundamentals every job cost system needs: accurate data, a trackable budget, and one WIP report
Why a “gut feeling” that a job is profitable isn’t a financial statement
Why 40% complete is the moment to start reviewing job costs — and why 75-80% is often too late
How to stop relying on year-end hindsight to learn how a job actually performed
Job cost management is the practice of tracking every dollar spent on a specific construction job — labor, materials, and subcontractors — against a budget, cost code by cost code. It shows whether an individual project is profitable, not just whether the company as a whole is making money.
Why isn’t my company’s P&L enough to know if a job is profitable?
A healthy company-level P&L can hide a job that’s losing money, especially if it’s offset by other profitable projects. Because construction companies run off individual projects rather than one combined revenue stream, job cost management is what reveals how each specific job is actually performing.
What are the three fundamentals of good job cost management?
The three fundamentals are accurate data flowing in from accounting and the field, a project budget broken into cost codes you can track spending against, and one WIP (Work in Progress) report per company, owned by accounting and updated consistently.
What is a WIP report and why does a construction company need one?
A WIP report — short for Work in Progress — is a single, ongoing report tracking billed, spent, and expected costs across every active job. It gives leadership real-time visibility into whether jobs are overbilled or underbilled long before year-end financials would reveal it.
When should I start reviewing job cost reports on an active project?
Start reviewing job cost data at around 40% project completion. At that stage there’s still time to adjust crew mix, renegotiate with subcontractors, or fix a budget problem — by 75-80% complete, most profit fade is already locked in and can’t be recovered.
Can a construction company still fix a job that’s losing money?
Yes, if it’s caught early enough. Jobs reviewed at 40-50% complete still have room for corrective action, but once a project reaches 75-80% complete, crews are demobilizing and there’s little left to adjust — the margin outcome is essentially locked in.
Not Sure Where Your Job Costs Are Slipping?
If your job cost reports aren’t giving you a clear, job-by-job picture — or you don’t have a single WIP report you trust — that’s exactly the kind of gap Ascent Consulting helps construction owners and CFOs close.
About the Hosts
Greg Gorman
Gregory Gorman is Principal Senior Consultant at Ascent Consulting. He spent years as a full-time construction CFO before moving into consulting, and focuses on financial reporting, WIP analysis, and job cost management for construction companies.
Not Sure How Your Jobs Are Actually Performing?
If you’re relying on your gut, or a single year-end P&L, to know whether your projects are profitable, that’s exactly the kind of visibility gap Ascent Consulting helps construction owners and CFOs close, with a job cost system built on accurate data, real budgets, and one WIP report you can trust.
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Episode Transcript
[00:00] Greg Gorman: Welcome to the Construction Hot Takes podcast. I’m Greg Gorman, and today we’re going to do a deep dive into something that I think is extremely important: job costs and job cost management, and what that means and why that matters. I’m flying solo today, but it’s a really important topic, and I’m really excited to share my insight with you guys about how important job cost management is.
[00:22] Greg Gorman: If you have it, then you know what it is and hopefully you’re maximizing it — you’re using it well, you’re understanding what it is and you’re getting all the value out of it. If you’re watching today’s podcast and you don’t have job cost management, or you don’t have good job cost management, then this will be for you.
[00:41] Greg Gorman: So stick around until the end and I’ll try to give you some facts and some good data about how to have better job cost management and why it matters. I think job costs are one of the top three most important things that you can have in a construction company — not because it’s anything special, not because it’s trendy, and not because someone tells you that you need it.
[01:12] Greg Gorman: Job costs are very specific to our industry — meaning we’re looking at the cost of a job as an individual thing. The reason it matters is because if you own a company that does not work off of projects, you’re looking at your company P&L, how the company is doing as a whole. In construction, we run off of projects — project A, project B, project C — and we need to know how each one of those projects is doing.
[01:49] Greg Gorman: And the way to do that is through job cost management. As you may know if you’ve watched this podcast before, I was a full-time construction CFO for a long time. Now I’m a construction consultant, and I have this conversation pretty much every day with clients.
[02:08] Greg Gorman: Why it matters, and what it is. So.
[02:13] Greg Gorman: I think the top line thing to know is this: if you do not have good job cost management, then you do not know how your projects are doing. I’ll give you a quick example. You may know how your company is doing — at the company level, your business is doing well and you have ten jobs that are active right now, and nine of them are going well.
[02:39] Greg Gorman: But one of them — hopefully not your biggest job, but it could be — is actually not doing so well. You might have a company-level P&L that looks okay, you’re making money, but don’t you want to know how that one job is doing? Maybe it’s your biggest client, or maybe a new client.
[03:02] Greg Gorman: It could be any reason why you want to know how a job is going. That one job might not be going well, and if you don’t have good job cost management, you don’t know that. So you come to the end of the year, you follow your financial statements, and you never know how that job did, what happened, or how to avoid it in the future.
[03:24] Greg Gorman: So the point of this podcast today is not to scare anybody into getting job cost management. The point is for us to talk a little bit about the mechanics of it — what it is and how you bring it into your business. So let’s start with some definitions.
[03:45] Greg Gorman: Job costs are nothing more than tracking dollars — which could be labor, which could be materials, which could be subcontractors. Anything that’s going to your job that you want to charge to a specific job, that’s a job cost. And job cost management is the ability to track every single dollar that you spend on a certain job, across all your jobs.
[04:15] Greg Gorman: Because you have it for all your jobs, you want to track that against a budget or an estimate. What number did you use to get that job? And then what are you tracking dollar by dollar, so you know if you’re making money — if you have a margin on a job? A big gross margin, you’re going to make 30% on your job, but you’re going to spend X amount of dollars.
[04:39] Greg Gorman: In order to know if you’re holding that 30% margin, you need to know where your dollars are going, dollar by dollar, cost code by cost code. That’s all it is — tracking your job costs dollar by dollar, cost code by cost code, on every single job that you have. And it’s important to talk about definitions because we don’t want this to be anything scary.
[05:01] Greg Gorman: We don’t want you to have the wrong idea about what job cost is, or what job cost management is. It is the management of your job costs on a job-by-job basis — straightforward. So I said this before and I’m going to reiterate it: the reason that job costs are important.
[05:20] Greg Gorman: The first reason is because if you’re looking at your company’s bottom line, your company’s P&L, you’re not getting the whole picture of how your jobs are going. If you want to know whether you’re in the right scopes of work, whether you’re working for the right clients, whether you have the right crew mix — there’s a million things you might want to know about how your jobs are going.
[05:44] Greg Gorman: Then you need better job cost management. I’m going to stop here and tell you a quick story, because I’m working with a client right now, in the Midwest. The reason this topic came up is because I’m helping them build an SOP for how to have better job cost management. And what struck me is: it’s a huge company, a big GC, and they know exactly what they’re doing.
[06:09] Greg Gorman: But their job cost management is frankly a little bit unknown to them. They don’t know where they’re spending every dollar, they don’t know how they’re spending every dollar, and they have a lot of jobs. So they go back through their list at the end of the year and say, yeah, okay, we did well here, we didn’t do so well there.
[06:29] Greg Gorman: But our gut is that we did well this year — and their bottom line says they did well, they made money. But what about job number 53? What about job number 85? What about job number four? They want better job cost management in order to go back and look at every job and say, should we have taken that job?
[06:46] Greg Gorman: Is that a good client to work for in the future? Was our subcontractor good on that job? Was our crew mix right? Did we go fast enough? Was our schedule good? Was our budget right? I think it’s a pretty basic concept, but it’s important to talk about it just in case it’s not.
[07:07] Greg Gorman: That’s what we do at Ascent — we want to help you break down things and make sure you understand the importance behind what we talk about. Just because you know the definition of job costs, I want to make sure you know the why behind it. So, like I said before, if you’re just looking at your company-level data, you are really missing a lot about your construction company.
[07:29] Greg Gorman: If you think about your company-level profit and a job is not doing well and you don’t know that, at that point you have no mechanism to go back and fix it. Well, that’s not true — you do have one mechanism: job cost management. And that’s kind of why I think it’s really important to know it is never too late to have better job costing.
[07:53] Greg Gorman: It’s never too late to have a job cost system, and it’s never too late to have job cost management, which is what we’re talking about here today. We do this a lot in construction — “my gut says I’m making money on that job.” In my former life as a CFO, that used to terrify me.
[08:18] Greg Gorman: I’d have a PM say, “well, my gut says I’m making money on this job.” Okay, well, if the job is over — you had a budget, you had an estimate, you have actual costs, the job is over, you got paid, you got your retainage — and if you made more money than you spent, then you have profit.
[08:41] Greg Gorman: What about if that job is 40% done? What about if it’s 50% done? Do you know in real time if you’re making money? Are you on track to make money on that job? That’s really why “my gut says I’m making money” doesn’t really hold water. What I’d love you to take away from this podcast today is: stop relying on your gut, because a gut is a feeling.
[09:05] Greg Gorman: A gut feeling is not a financial statement. You need tangible data — an actual narrative to say, look, on job number five, this year we made money, we made exactly the amount I thought. Hopefully more — you went into that job thinking you’d make 30% gross margin, and you ended at 29.5%.
[09:28] Greg Gorman: Fantastic. But on job 16, you went in at a 30% margin and made 12%. Not so great. You want to know that, because you want to know the next time you bid job number 16, or a job like it, what you did wrong and how to fix it. So this whole job cost management thing is not something intangible.
[09:54] Greg Gorman: It’s real. It’s buildable. It’s something you probably already have some version of — if you have a construction management system, if you have an ERP that focuses on construction, you have job cost management. Are you using it? Is your data accurate? What’s really important about job cost management is not the mechanics of what it is.
[10:22] Greg Gorman: What’s important is the mechanics of whether you’re using it accurately. Do you have accurate data, and are you getting out of it what you need? So I’m going to give you what I think are the three most important things you need when talking about job cost management. The very first one is accurate data.
[10:42] Greg Gorman: Anyone following this podcast for the last couple of months, we’ve probably said “accurate data” a hundred times — we’ve said it a lot when we talk about whether your business is ready for AI. If you’re using AI or some version of it, you need accurate data, because if you put bad data into your AI, you’re going to get bad data out.
[11:04] Greg Gorman: It’s exactly the same thing here in job cost management. If you don’t have good actual costs, good subcontractor costs, good payroll records, good timesheets for your labor, then you don’t have accurate job costs. So maybe you’re tracking it — maybe you have a payroll system that’s actually paying people.
[11:27] Greg Gorman: They’re getting paid, but are they going to the right job? Are they going to overhead when they should be? Are they hitting the right job cost code? For me, accurate data is probably the most important thing. Data going into your system and coming out of your system has to be accurate.
[11:50] Greg Gorman: It’s got to run through a combination of your accounting team and your operations team — they need to work together to have the most accurate data possible. So that’s first. Second is: do you have a budget you can track against? A project budget is nothing more and nothing less than how you bid the job.
[12:12] Greg Gorman: The number you went to your client with — say $1 million. How was that million dollars broken down? What is the budget for that job? Hopefully it’s in cost codes so you can track each line. A budget is how you measure against what you’re spending. If you have a ten-cost-code budget, each line item might be $100,000 across ten line items, and that’s $1 million.
[12:40] Greg Gorman: If you don’t have a budget, you have no way to track your job costs against anything meaningful. You can say we spent $150,000 on this cost code, but you were supposed to spend $100,000 — if your field team or project manager doesn’t know that, you might have job costs, but you’re not measuring against the thing that matters.
[13:06] Greg Gorman: That’s number two. Number three is a little more complicated — those of you who’ve been doing this a long time will know what this is, and I did a podcast a few months ago about it. You need a WIP report. WIP stands for Work in Progress.
[13:26] Greg Gorman: It’s one WIP report — not five, not one for every job, not one done by the estimator or the super in the field. You need one WIP report, line by line, every project you have, tracking all the important data points. That WIP report is going to give you the best level of data you’re going to have.
[13:50] Greg Gorman: It’s going to be job cost data. It’s going to be accurate. It’s going to be tracked against the budget. You’re going to know what you’ve billed, what you’ve spent, what you expect to spend, and whether you’re overbilled or underbilled. So let me recap those three things: accurate data, a budget you can track against, and a basic WIP report.
[14:11] Greg Gorman: When I say basic, this is not some 50-column report — this can be 7 or 8 columns. Use what you have, make sure it makes sense to you. But one WIP report, owned by your accounting team, tracked with accurate data from the field — then you’re good. Those three things are really important. The next thing I want to talk about is how important it is to actually use your job cost data.
[14:37] Greg Gorman: I hope I’ve made that point. But what’s more important: let’s say you have a perfect job cost system, all three of those things — are you looking at it? Are you using it? Some of you are.
[14:55] Greg Gorman: Some of you are at very sophisticated companies where you have a WIP, you have accurate data, you have good budgets, and people are tracking that data daily or weekly. I want to speak to those of you who don’t have that — if you have a job cost system but you’re not looking at it daily, and you’re not sitting down between accounting and operations at least every month to talk about those job cost reports,
[15:31] Greg Gorman: then you might have a job cost system, but it’s not doing you any favors. I want to make sure we talk about how important it is not only to have good job costs and a good WIP and a good budget, but to actually use those job cost reports.
[15:51] Greg Gorman: You want to know how your business is doing on a job-by-job basis. Your field team needs to know. Your accounting team needs to know. Your ops team needs to know. Everyone wants to know: is the job going well? And you don’t want to rely on your gut to tell you that.
[16:10] Greg Gorman: More importantly, something called budget adjustments — or budget modifications. If you’re looking at job costs in real time, daily or weekly, my rule is you should start looking at your job costs at about 40% complete. When your job is about 40% complete, you need to be looking at that job every single chance you have.
[16:39] Greg Gorman: Let me tell you why. If your job is 90% done, or let’s say 70-75% done, you’re so far down the road that there’s not much you can do to bring back lost margin. If you have profit fade and the job is 75-80% done, most things are done.
[17:03] Greg Gorman: You’re starting to demobilize, your crews are winding up, there’s nothing left really for you to do. If that was a 30-point job and the margin is 12, and you’re 80% done, it’s locked in — you don’t have much more you can do. So if you start looking at a job at about 40% complete, maybe 50, but I prefer 40%, using your job cost system with the three things I just told you about, you can do something about it.
[17:35] Greg Gorman: If you start to see profit fade in some of your cost code lines, if your WIP starts flashing red — wait a minute, there’s a problem here — you have time to fix things. You can change your crew mix, work on your schedule, push your subs a little harder.
[17:52] Greg Gorman: You can do lots of things to make sure that where you thought you’d have margin, you keep that margin. Things go badly on job sites, we all know that. But where you can make a difference, I think you should — where you can pull things back from the edge of losing money.
[18:14] Greg Gorman: You should pull things back from the edge, and the way to do that is by looking at your job cost reports — if they’re accurate, if you’re using a WIP.
[18:36] Greg Gorman: So, if you have accurate job cost reports and you’re using them, and you’re using one WIP and a budget to track against it, and all your data is accurate and well-informed and going into your system regularly, then if you come to a job at 40% or 50% complete,
[19:04] Greg Gorman: you now have the tools in your tool belt to make a difference on that job. It seems basic, it seems straightforward, but I see a lot of clients — in my career as a CFO and now as a consultant — who finish a job they never really thought to check on.
[19:23] Greg Gorman: They didn’t have good data, or their accounting team didn’t give it to them, or their operations team wasn’t involved. It comes to the end of the job and they’re like, why did this job go from here to here? Well, because this happened, and that happened — but the job’s over, we’re demobilized, we’re waiting on retainage.
[19:42] Greg Gorman: Those losses are locked in. For me, the most important thing you can take away from a good job cost system is understanding why it’s important. Job costs are valid — or when they’re accurate, they’re valid. And as anyone who works in construction knows, a job’s loss is usually not just one big mistake.
[20:13] Greg Gorman: You don’t lose all your money in one big fell swoop — you lose money on jobs every single day. Hundreds of small little things happen on a job that erode margin. A job cost management system, cost code by cost code, line by line, gives you the ability to see those small mistakes in as close to real time as you get with invoicing and payroll — before they add up into hundreds of mistakes — so you’re holding your margin.
[20:51] Greg Gorman: Once you start looking at things that way, the sooner you get into a job, the better. You never want it to be too late to look at a job — and that’s what job costing gives you. So I’d like to bring it back to where we started.
[21:10] Greg Gorman: The whole point of job costs is so you’re not flying blind. That’s another phrase we say a lot in construction — “I’m flying blind on this job.” My gut tells me we’re making money, but I’m really flying blind. I don’t have access to data, I don’t have the numbers, accounting is backed up.
[21:28] Greg Gorman: My field guys aren’t reporting in, our timesheets aren’t in a good place. Imagine flying on a plane and your pilot is literally flying blind, eyes closed — that’s literally what it’s like to be on a job with no insight into how you’re doing.
[21:50] Greg Gorman: If the job is over, it’s too late. If the job is 40-50% done, it’s not too late. But if you’re not taking those blinders off, diving into your reports, looking at the data, fully understanding how you’re doing — and let me caveat, sometimes it’s uncomfortable. Sometimes you don’t want to see the losses.
[22:10] Greg Gorman: Sometimes you don’t want to see that you’ve blown your budget at 40% — it’s not great, but there’s a chance you can still pull it back. But let’s say you do blow the budget, and there’s just no way around it — it’s construction, things happen.
[22:30] Greg Gorman: You need the most accurate historical data you have for the next time. You don’t want to fly blind on a job. In fact, the only thing worse than flying blind on a job and losing money is then flying blind on the next ten jobs that look or feel the same, and losing the same money in the same places. That is not a good place to be.
[22:55] Greg Gorman: So take your blinders off, get better job costs, do whatever you can to get accurate data. Track every job on a WIP, and make sure you understand what you’re looking at. Read your reports. Make sure your field team is involved. Make sure your accounting team is involved, and make sure you understand how you’re doing on every job.
[23:22] Greg Gorman: Because, like I said at the beginning, you don’t want to be only looking at your baseline — how your company is doing overall. Every job has its own P&L, if you think about it that way. Your company has a P&L, you made money for the year, but every job you have has its own P&L.
[23:43] Greg Gorman: Every job is its own little microcosm. Did you make money on every job? Did you look at every job? Did you do everything you could to make money on that job? So at the end of the year, your company’s bottom line is even better.
[24:04] Greg Gorman: All of you who have job cost management systems — great, keep doing the good work. All of you who have job cost systems but maybe aren’t maximizing them, it’s time to start. And all of you not yet using job costs to their maximum effect, hopefully this podcast helped you understand why you need it.
[24:26] Greg Gorman: We talk about job costs a lot, and that’s what I have for today. So this was a deep dive on job costs. I really appreciate you listening. I’m Greg Gorman, and thanks for joining us today.
