It's one of the most common — and most confusing — situations in construction: the year-end P&L shows a healthy profit, but the bank account tells a different story. The gap almost always traces back to job costing that isn't structured to show real-time project profitability, only company-wide profitability after the fact.
A contractor running five projects can be losing money on two of them and still show a profit overall, because the other three are carrying the business. Without job-level costing, there's no way to see which projects are the problem until the whole portfolio is totaled up at year-end — by which point the losing jobs are long finished and the lesson learned too late to change anything on that specific project.
A work-in-progress (WIP) schedule tracks, for every active job, costs incurred to date against the percentage of the project actually completed, and compares that to what's been billed. This surfaces two critical warning signs early: "over-billing," where you've billed more than the work justifies (a cash flow trap waiting to happen when the project catches up), and "under-billing," where completed work hasn't been billed yet, meaning cash is tied up that should already be in your account. Most of the surprise cash crunches contractors experience are under-billing situations that a current WIP schedule would have flagged weeks earlier.
Direct job costs — materials, labor, subcontractor payments — are usually tracked reasonably well. Overhead allocation is where job costing often breaks down: equipment depreciation, insurance, office staff time, and general administrative costs need to be allocated to specific jobs in a consistent, defensible way, or the "profit" on any individual project is really just direct margin, not true profitability. A contractor that doesn't allocate overhead by job is essentially guessing at which types of work are actually worth pursuing.
If you can't pull up a single job's current cost-to-complete and billing status today, your job costing system is reporting history, not managing the business. See Bookkeeping & Accounting.
Job costing done right turns your books from a rearview mirror into a live dashboard — one that flags a losing job while there's still time to do something about it, not after the final invoice is sent.
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