Job costing for service businesses: find out what each job really made

What is job costing?

Job costing is working out what a single job cost you to do and comparing it with what you charged. Revenue minus direct costs is the job's gross profit. Gross profit divided by revenue is its margin.

Most owners know their year. They know roughly what came in and what went out. What they often can't say is which jobs paid for the year and which quietly lost money. A house wash that took twice as long as quoted, a recurring customer whose yard has grown every season without a price change, a commercial account with a long drive and slow payments: each looks fine on its invoice and shows its real shape only when costs are attached.

What costs belong on a job?

Direct costs are the ones that exist because this job happened. A practical list:

Overhead (the office, insurance, software, the owner's salary, marketing) is real but not caused by any one job. Keep it out of job cost and look at it separately. If you want a single "net" figure per job, spread overhead as a rate per crew hour, but don't let that blur the gross margin, which is the number you can act on job by job.

What is a loaded labor rate?

The wage on a paycheck is not what an hour of labor costs you. A loaded rate adds the costs that ride on top of every wage dollar. Some are set by federal law:

• Social Security and Medicare. The employer pays 6.2% for Social Security (up to the annual wage base, $184,500 for 2026) and 1.45% for Medicare, matching what is withheld from the employee (IRS Topic 751).
• FUTA. The federal unemployment rate is 6.0%, applied to each worker's first $7,000 of wages in the year, and employers that pay their state unemployment tax fully and by the deadline can get a credit of up to 5.4%, which brings the effective rate to 0.6% (IRS Topic 759).

Others depend on your state and your business: state unemployment tax, workers' compensation premiums, paid time off, health benefits, uniforms and phone stipends. Your accountant and insurance agent can give you the actual rates.

Here is an illustrative calculation with made-up numbers. Suppose a technician earns $22 an hour. Employer Social Security and Medicare add 7.65%, about $1.68. Say your workers' comp, state unemployment, and paid time off together add another $3.30 an hour in your situation. The loaded rate is about $27 an hour. A three-hour job for a two-person crew is then about $162 in labor, before materials or drive time. Price from the loaded rate and margins stop surprising you. Our hourly rate calculator helps you work out your own.

How should drive time and vehicle cost be handled?

Drive time is the cost owners most often leave out, and for route businesses it can be large. Federal wage rules treat driving between job sites during the workday as hours worked (DOL Fact Sheet 22), so it is paid labor whether or not you put it on the job.

Two common ways to attach it:

• To the job you drove to. Simple and honest. Far-flung customers show their real cost.
• Spread across the day. Total drive time divided across all the day's jobs. Smoother, but it hides the customer who is twenty minutes from everyone else.

For vehicle cost, use your actual cost per mile if you track it. If you don't, the IRS business standard mileage rate is a reasonable placeholder: 72.5 cents a mile through June 30, 2026, rising to 76 cents a mile on July 1 (IRS). Our route optimization guide covers how to cut the drive time itself.

How do you capture costs without slowing crews down?

Job costing fails when it depends on someone remembering. Build it into what the crew already does:

1. Clock to the job, not just the day. When the crew starts a job on the phone, their clock switches to that job. When they finish, it stops. The same clock feeds payroll, so there is one record of time; see our guide to timesheets and payroll for field crews.
2. Log materials as they are used. A short list of common items per service, with quantities, beats free text. For cheap consumables, set a standard amount per service instead.
3. Snap receipts to the job. Dump fees, rentals, parts bought on the way.
4. Pull payment fees automatically from your processor, so the fee on each payment lands on the right invoice.

Why compare estimated cost with actual cost?

Every quote is a prediction. Job costing tells you how good the prediction was. If you estimated four crew hours and it took six, either the quote was wrong, the scope changed, or something went wrong on site. Each answer leads to a different fix: a new price for that job type, a change order process, or a training conversation.

Use the comparison to improve pricing first. Crews quickly learn whether costing is a tool or a stick, and if they think it is a stick, the time entries get less honest. Turning these numbers into prices is the subject of our service pricing guide.

What reports make job costing useful?

• Margin by job type. Which services make money and which are loss leaders you didn't choose.
• Margin by customer. Recurring customers whose price hasn't kept up with their property or your costs.
• Margin by crew. Differences in speed or materials use, read carefully, since crews get different kinds of work.
• Margin by area. The cost of serving the edges of your territory.
• Callbacks. The cost of returning to fix work, attached to the original job so it lowers that job's margin.
• Trend over time. The same job type this season against last season, which shows when rising wages, fuel or materials have eaten a price you haven't changed.

What are the common job costing mistakes?

• Using the wage instead of the loaded rate. Every job looks better than it is.
• Ignoring drive time. Distant customers look as profitable as close ones.
• Costing in a spreadsheet after the fact. If someone types it in later, it gets done for a few weeks and then stops.
• Recurring work costed only in total. Each visit is a job; cost each one, so a property that has gotten harder shows up.
• Counting sales tax as revenue. Tax collected belongs to the state, not to the job's margin.

When is custom job costing worth building?

Several field-service products offer job costing, often on higher plans. Custom is worth considering when your costs have a shape those tools don't capture: per-visit costing on recurring plans, crews that switch jobs many times a day, materials that matter for some services and not others, or more than one company sharing crews and trucks. Inside our own companies, the system we built works out profit and margin on each job from clocked time and logged materials, using the same time records that feed the payroll export. Our custom CRM service builds costing around how your jobs actually run.

Frequently asked questions