What Is Job Costing?
Job costing is a financial accounting method used to track the expenses and revenue associated with a specific job, task, or project. This method assigns direct and indirect costs—such as labour, materials, and overhead, to individual jobs rather than spreading them evenly across all operations. Job costing enables businesses to measure profitability, control costs, and improve project planning and resource allocation.
This system is particularly valuable in industries like construction, manufacturing, professional services, and trades, where each job or contract may have unique cost structures.
ATO – Keeping business records
Why Job Costing Matters
Effective job costing gives businesses a detailed understanding of where time and money are being spent, helping them:
- Quote more accurately for future work
- Identify profitable vs unprofitable jobs
- Manage labour and material costs in real time
- Improve budget planning and forecasting
- Increase accountability and transparency
By tracking these costs at a granular level, companies can boost efficiency and profitability while making data-driven decisions about pricing, staffing, and resource management.
Key Components of Job Costing
- Direct Labour Costs
Wages paid to employees who work directly on a job. This includes hourly rates, overtime, superannuation, and any other wage-related expenses that can be attributed to a specific task. - Direct Material Costs
All raw materials and components consumed specifically for a job, including delivery charges, tools, or parts. - Overhead Costs
Indirect expenses like rent, electricity, depreciation, and administrative salaries. These are often allocated to jobs using cost drivers such as hours worked or machine usage. - Time Tracking Data
Accurate timesheets are crucial. By knowing how long each employee worked on a specific task, businesses can assign precise labour costs to each job.
Job Costing vs Process Costing
| Feature |
Job Costing |
Process Costing |
| Used For |
Custom jobs, projects, and tasks |
Mass production, identical units |
| Cost Tracking |
Per job or task |
Per department or production stage |
| Example Industries |
Construction, trades, consulting |
Food manufacturing, chemical processing |
| Cost Variability |
High – unique for each job |
Low – consistent across production |
Job costing provides a tailored view into unique jobs, while process costing suits repetitive manufacturing environments.
Benefits of Job Costing
- Accurate Quoting and Estimating: Use real data from past jobs to quote more accurately and competitively.
- Budget Control: Monitor and adjust expenses mid-project to avoid overruns.
- Profitability Analysis: Compare expected vs actual margins to identify where projects succeed or fall short.
- Improved Project Management: Know where delays or bottlenecks occur so you can improve processes over time.
- Employee Accountability: Track individual or team contributions to each job for better performance analysis.
Common Challenges with Job Costing
- Manual Entry Errors: Relying on paper timesheets or spreadsheets can introduce inaccuracies.
- Complexity of Cost Allocation: It’s not always straightforward to allocate overheads or shared resources.
- Lack of Real-Time Data: Delays in recording hours or expenses can affect decision-making.
- Disjointed Systems: If payroll, rostering, and invoicing systems don’t integrate, reporting becomes fragmented.
How Microkeeper Simplifies Job Costing
Microkeeper’s all-in-one payroll and workforce management platform offers integrated job costing features for Australian businesses. These include:
- Clock-in by Job: Employees can clock in and out using job-specific codes or cost centres
- Automatic Labour Cost Allocation: Pay rates, overtime, and super are tracked against each job in real time
- Award Interpretation: Built-in Fair Work award interpretation ensures compliance and cost accuracy
- Live Timesheet Integration: Job data flows into payroll and invoicing systems, minimising admin
Discover Microkeeper’s Job Tracking Features
Industries That Rely on Job Costing
- Construction & Trades: Track each building site, task, or contract
- Manufacturing: Understand labour costs per batch or unit
- Healthcare & Aged Care: Allocate staff time to different care programs
- Event Management: Monitor costs per client, event, or location
- Consulting & Agencies: Bill clients based on specific project hours
FAQs About Job Costing
What’s the difference between job costing and budgeting?
Budgeting is the plan; job costing is the tracking. Budgeting sets expectations, while job costing records actuals for comparison.
Do small businesses need job costing?
Yes. Even small contractors, consultants, and trade businesses can gain clarity and profitability from implementing basic job costing practices.
Can I automate job costing?
Yes. Tools like Microkeeper automate much of the process, syncing timesheets, payroll, and job tracking in one system.
Final Thoughts
Job costing is a powerful method for controlling costs, increasing visibility, and maximising profitability, especially in labour-intensive industries. By understanding the true cost of every job, businesses can make smarter decisions and grow with confidence.
With the right digital tools in place, job costing becomes seamless, accurate, and easy to maintain.
Disclaimer: This content is provided for informational purposes only and does not constitute financial advice. For detailed accounting guidance, consult a qualified financial advisor.
