YOU KNOW WHAT IT BILLED. NOT WHAT IT EARNED.
Almost every subcontractor under $12M can tell you what a job invoiced and can't tell you what it made. The cost codes in the accounting system don't line up with the way the work was estimated, so the two numbers can never be compared. Job Profitability is the CFOS module that rebuilds job costing against your estimating structure and reports cost to complete every month, so a losing job is caught at 40 percent complete instead of at closeout.
The reason job costing fails at this size is structural. An estimator bids by assembly and crew production, a bookkeeper codes by vendor and expense type, and nobody translates between them. What you get is a profit and loss that's accurate for taxes and useless for running work, because it can tell you that you spent $412,000 on labor and not which phase lost the money. When the cost codes match the estimate, every job becomes a test of your bidding, and a bad assumption gets corrected on the next bid rather than repeated for two years.
WHAT HAPPENS WITHOUT THIS SYSTEM.
Material makes money and labor loses it
A job can carry a 30 percent margin on material and a negative margin on labor and still finish close to the bid, so nothing looks wrong. On the next job the mix changes slightly and the same crew productivity wipes out the whole margin. Owners see one good job and one bad job when both jobs had the same problem.
Overhead gets absorbed by accident
If overhead isn't loaded into the estimate at a rate that reflects your current volume, every job either carries too much of it or none of it. A slow month spikes your overhead percentage while a busy month hides it, so a rate set 18 months ago is wrong in both directions. The result is a company with healthy gross profit on every job and no net profit at the end of the year.
The loss is discovered at closeout
Without a monthly cost to complete, the first reliable read on a job is the day it finishes, which is the one day nothing can be done. Change orders that were performed but never approved, quantities that ran over, and productivity that never held all become visible at the same time. By then the money is spent and the argument with the general contractor is much harder to win.
WHAT OWNERS THINK IS WRONG. WHAT IS CAUSING IT.
What owners think: Owners conclude they bid the job too low, so they add points to the next bid and start losing work they used to win.
What's causing it: The bid is usually closer to right than the execution, and without job costing tied to the estimate there's no way to tell which one failed. A 3 percent labor productivity miss and a 3 percent bidding error look identical on a closeout report, and they call for opposite fixes. Raising the bid to cover an execution problem prices you out of the market while the execution problem continues.
WHAT THIS MODULE DELIVERS.
WHERE IT HITS HARDEST.
Labor is the whole margin
On flatwork the material is a commodity and the money is made or lost on crew production per square foot. A crew running 15 percent under the estimated rate turns a bid margin into a loss without anyone noticing until the pour count is done. Coding labor to the phase rather than to a single job number is what makes that visible in week three.
Shop hours and field hours are different businesses
Fabrication and erection have separate production rates, separate risk, and separate margins, and most steel subs report them as one job. When the shop runs efficiently and the field runs over, the job still finishes near the bid and the erection problem gets carried into the next three jobs. Splitting the cost structure at that line is usually the single largest correction we make.
Change order work performed before it's priced
Electrical crews get asked for additional work daily and perform it to hold the schedule, and the cost hits the job whether or not a change order was written. Without cost coding at the phase level, that unbilled work is invisible until closeout, when it looks like poor productivity. Catching it monthly turns an unrecoverable loss into a billable change order.
THE OUTCOME IN PLAIN NUMBERS.
The first month of real cost to complete reporting is usually uncomfortable, because it points at the two or three jobs that are underwater while they're still running. That's the point. A job caught at 40 percent complete still has 60 percent of its cost left to manage, and the recovery is a change order conversation and a production correction rather than a write off.
Over a full year the compounding effect is in the estimate. Every closed job feeds a real production rate back into bidding, so the assumptions get tighter and the bids get more competitive rather than more padded. Contractors running the full system hold a gross margin five points above their own trade's average at their revenue and clear at least 10 percent net at the company level, and the reason is that they're bidding from their own history and not from a guess.
FREQUENTLY ASKED.
