A Job Isn't Profitable Just Because You Got Paid

The money hit your bank account. Now ask yourself: how much of it did you actually make?

This is one of the biggest traps in a project-based business.

You complete a job.

You send the invoice.

The customer pays.

The money hits your bank account.

Success, right?

Not necessarily.

Revenue isn't profit

Let's say you invoice a customer $50,000 for a project.

They pay the invoice, so your bank account increases by $50,000.

But that doesn't mean you made $50,000.

You still had to pay for the costs of completing the job.

• $15,000 in materials
• $12,000 in labour
• $8,000 in subcontractors
• $3,000 in equipment and other direct costs

That leaves you with $12,000 of gross profit.

And it gets more complicated

Even that $12,000 isn't necessarily what you take home.

The business still has overhead.

Insurance.

Vehicles.

Rent.

Office expenses.

Software.

Accounting.

Interest.

Administration.

And everything else required to keep the company operating.

That's why understanding the profitability of individual jobs matters.

Did the job actually make what you expected?

This is where job costing becomes incredibly valuable.

When you quoted the job, you probably had an estimate for:

• labour hours
• material costs
• subcontractors
• equipment
• other direct costs

Once the job is complete, you can compare those estimates with reality.

Maybe you estimated 400 labour hours.

The job actually took 525.

Maybe materials were expected to cost $10,000.

They actually cost $14,000.

Maybe a change order wasn't billed.

Suddenly, the job that looked great on paper doesn't look quite so great.

The best time to discover a problem is before the job is finished

This is why monthly—or even real-time—job costing is so useful.

If you wait until the job is finished to discover that labour is significantly over budget, there's not much you can do.

But if you know halfway through the project that you're burning through labour hours faster than expected, you can investigate.

Maybe the estimate was wrong.

Maybe the crew is running into an unexpected issue.

Maybe the scope has changed.

Maybe a change order needs to be issued.

The earlier you know, the more options you have.

Cash tells you what happened. Job costing helps explain why.

Your bank account can tell you whether money came in.

Your financial statements can tell you whether the business is profitable.

Job costing can help you understand which work is actually making you money.

That's a much more useful conversation.

The takeaway

Don't measure the success of a job by whether the customer paid the invoice.

Measure it by whether the project produced the return you expected.

Because a job isn't profitable just because you got paid.