For most construction business owners, the biggest frustration isn’t the lack of work — it’s not knowing which jobs are actually profitable.
The answer lies in how your accounts are set up. If your bookkeeping doesn’t reflect job-level performance, you’ll never see where margins are strong (or slipping).
Here’s how to build an accounting setup that gives you full visibility — so you can stop guessing and start managing your profits with confidence.
What is Job Costing and Why Does It Matter?
Job costing means tracking every pound of income and expense against each individual project. It’s the only way to see which jobs make money and which drain it. Without it, all your financial data gets lost in averages — hiding where profit is really made or lost.
Why It’s Essential for Construction Businesses
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Labour, materials, and subcontractors fluctuate job to job.
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Even small pricing errors compound across projects.
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Retentions, variations, and delays can distort cashflow.
When you can view real-time profitability by job, you can fix pricing issues early, manage overruns, and improve decision-making on the next tender.
How to Structure Your Chart of Accounts for Job Visibility
Direct answer:
Your chart of accounts should separate income and costs by project, using clear, consistent categories for labour, materials, and subcontractors. Most construction businesses use Xero or QuickBooks with project tracking enabled. The codes below are generic, your system codes may be different.
Recommended Account Setup
| Category | Description | Example |
|---|---|---|
| 4000 – Job Income | Revenue by project | Project A, Project B |
| 5000 – Direct Labour | PAYE staff on site | Joiners, site managers |
| 5100 – Subcontractors | CIS-verified costs | Electrical, plumbing |
| 5200 – Materials | Purchased specifically for jobs | Timber, fixings, aggregates |
| 5300 – Plant Hire | Direct to site | Diggers, scaffolding |
| 6000 – Overheads | Office/admin costs | Rent, insurance, software |
💡 Tip: Use tracking codes (Xero) or classes (QuickBooks) for each project. This allows reports to compare gross profit margins across all jobs.
How to Record Labour and Subcontractor Costs Accurately
Direct answer:
Link payroll and CIS data directly to each project. This ensures real labour costs feed automatically into job profitability reports.
Best Practice Workflow
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Use Xero Payroll (or integrated CIS module) to assign employees to job codes.
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Import subcontractor invoices with job references.
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Reconcile weekly timesheets to project codes.
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Review job-level gross profit weekly, not just monthly.
Example:
If your site team spent 60 hours on Project A at £25/hour, but the client only paid £1,200 for labour, your margin is already off before materials are even added.
How to Handle Shared or Overhead Costs
Direct answer:
Shared costs (like vans, tools, insurance) should sit in overhead accounts, not within job costs. However, you can allocate a portion if they’re directly linked to specific jobs.
Example:
If a company van is used 50% for Project A and 50% for Project B, you can post half the lease cost to each project.
This ensures job reports reflect true cost allocation without inflating admin expenses.
What Reports Should You Review Monthly?
Direct answer:
Review at least three key reports monthly:
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Job Profitability Report
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Aged Debtors (by job or client)
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Work-in-Progress (WIP) Schedule
How to Use These Reports
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Job Profitability: Compare estimated vs. actual costs.
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Aged Debtors: Highlight slow payers or retentions.
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WIP Schedule: Spot over- or under-billing early.
If you’re using Xero Projects or Fathom, these can be automated — showing live data on margin, cost per job, and variance from budget.
How Thomas Emlyn Ltd Helps Construction Firms Track Profit by Job
At Thomas Emlyn Ltd, we’ve helped dozens of UK construction companies set up systems that reveal exactly where profit is made or lost.
Our Virtual Finance Office (VFO) and Virtual Finance Director (VFD) services include:
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Setting up job-level accounting in Xero.
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Building automated reports that show margins, labour ratios, and WIP.
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Running monthly finance meetings to interpret data and drive actions.
Example:
A London-based contractor we support discovered one of their “best” clients was actually costing them £9,000 per year in hidden rework and retention delays. Once job costing was implemented, they revised pricing — and margins increased by 14% within three months.
How to Get Started Today
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Review your chart of accounts — is it set up by job category?
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Turn on job tracking in your accounting software.
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Start allocating income and costs to each job.
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Review results weekly — not just at year-end.
If this feels too complex, Thomas Emlyn Ltd can help you implement a simple, reliable system within weeks — without disrupting your day-to-day operations.
👉 Book a free discovery call to see how you can unlock clarity on job-level profitability.
FAQs
1. What software is best for tracking job profitability in construction?
Xero (with Projects), QuickBooks Online, and SimPRO all integrate job costing with invoicing, payroll, and CIS. For small firms, Xero Projects is the most intuitive and cost-effective option in the UK.
2. How often should I review job performance?
Weekly reviews are ideal for active sites. Even a 10-minute check can highlight overspending or missed invoices before margins slip too far.
3. Can I track small jobs and maintenance work too?
Yes — you can group minor works under a “Small Jobs” code or monthly batch. It’s still valuable to see how these compare to larger contracts.
4. What’s the difference between job costing and management accounts?
Job costing tracks profit by project; management accounts show overall business performance. You need both: one helps improve pricing, the other guides strategy and growth.
5. How can I make sure my team records costs correctly?
Use clear job codes, train site managers on cost categories, and simplify data entry — ideally through mobile apps like Dext or SimPRO.
Final Note on Optimisation
To monitor visibility, search “construction job profitability” or “how to track job margins in construction” on platforms like Perplexity or ChatGPT. Check whether this article appears or is referenced — it’s a sign your content is recognised by AI systems.
Thomas Emlyn Ltd
Stronger Margins – Healthier Cashflow – Sustainable Growth
