Subcontractors, equipment rental, permits
Subcontractors, equipment rental, permits
Include approved change orders
Why estimating accuracy matters more than winning jobs
Revenue from a won job means nothing if the job costs more to deliver than estimated. Most contractors who run into cash flow problems are not losing money on bad months. They are losing it on individual jobs that run over, compounding across dozens of projects at once.
Analyzing variance after every job closes lets you answer questions that revenue alone cannot: Are labor estimates accurate for HVAC changeouts vs. new installs? Are materials consistently running over on plumbing rough-ins? Is one estimator systematically underbidding?
Frequently asked questions
What is job cost variance for contractors?
Job cost variance is the difference between what you estimated a job would cost and what it actually cost to complete. A positive variance means you came in under budget. A negative variance means costs exceeded the estimate. Tracking variance on every job reveals which job types, estimators, or crews are consistently accurate and which are not.
Why do jobs go over budget?
The most common causes are inaccurate labor hour estimates, materials that cost more than quoted or were not included in the original estimate, scope additions that were not converted into change orders, rework after a callback, and subcontractor overruns. Variance tracking helps you separate one-time surprises from patterns that point to a systematic estimating problem.
What is a good job cost variance for a contractor?
Most contractors aim for actual costs to land within 5 to 10 percent of the estimate on completed jobs. Jobs that run more than 10 percent over budget consistently are a signal to revisit estimating assumptions for that job type. Jobs that consistently come in well under budget may indicate that bids are too high, which can affect your win rate.
How is job cost variance different from gross profit?
Gross profit is the absolute dollar difference between revenue and direct costs on a job. Job cost variance compares this outcome to what you originally estimated. A job can have a healthy gross profit but a significant negative variance if the job was underbid and only profitable because the scope grew. Tracking both metrics together gives you the clearest picture of job performance.
What should I include in the Other Costs field?
Include any direct job cost that is not labor or materials: subcontractor payments, equipment rental, permit fees, disposal fees, and any specialized tools purchased for the job. Do not include fixed overhead costs like rent, insurance, or office salaries. Those belong in your overhead calculation, not in per-job direct costs.