The Importance & Scope of Job Costing for Service-Based Businesses

Job costing is a method for monitoring costs of materials, labor, and overhead for a particular job. It is an excellent approach for tracking expenses incurred to individual jobs; this further makes cost assessment easier. 


Most businesses produce or offer multiple products or services. When the prices of various products and services are compared, it is possible to see which jobs may be done for less money in the future and which ones will require more investment.


What is it used for?


Just as monthly or quarterly cash flow and profit statements are essential to determine a company’s financial health, knowing the effectiveness of individual jobs done within the company can provide a more comprehensive view of its financial transactions.


Scope of Job Costing for the Service Sector


It is also useful for service-based companies. Accountants or project managers, using this method, can track the overall cost per job done or service delivered. This detailed picture of whether the company is succeeding financially or not. It helps determine how to manage expenditure or how to adjust service fees to cover increased costs.


It is a part of accounting that can help generate detailed profitability reports. These reports give detailed information on specific jobs, tasks, services, etc., individually.


Benefits of Job Costing


The prime benefit of this is that it enables you to see if the jobs you are doing or services you are providing are generating profits for your business or not.


Profit Identification


It helps calculate the profit you earned per job or service. On the other hand, if you find some loss, you can fix it for the next time as you would know where to cut costs. Identifying profit can also help you determine if your fee is worth the time and effort; for instance, if there is any need to increase your service charges.


Cost Assessment


Tracking cost-per-job allows you to spot transactional patterns that might be affecting your company’s bottom line. With this, you can plan and build strategies for cutting costs and driving profits. Besides, you can also find if there are additional charges that your clients should ultimately pay.


Service Fee Estimation


Another way it helps you is that you prepare closely accurate quotes for your clients. For example, in construction, providing accurately estimated costs is a tough deal due to having multiple jobs. But, if you break down elements using job costing, you will be able to provide better quotes to your clients.


Importance of Job Costing for Small Business Owners


With proper job costing, small business owners can record costs per contract and reveal the profitability of each job. These profits can then be compared to the profit forecasted at the start.


It plays a crucial role in management accounting. Determining profitability helps your management find positive and negative aspects of projects. For instance, if a job has a loss despite perfectly coded costs, the management can make decisions for the future based on this information.


There are various reasons profitability might not match with the estimate. For example, days after submitting a quote, the cost of materials has climbed significantly, or the demand for a highly qualified labor has increased the cost far beyond the estimate.


If your management can figure out why a job not completed as planned, then in the future they can make changes to their estimating method, especially for similar jobs, or find another cost-effective way to handle problems that may come up again. All of this requires accurate cost allocation, which can become easier with job costing.


Since it is all about ensuring you have saved enough money and time, why not reduce the time it takes for the calculations. Also, being a business owner, if you lack accounting knowledge or expertise, you might want to acquire small business accountant or subscribe to accounting software (SaaS).


Top Software for Job Costing


Many accounting applications available in the market have job costing built-in. These applications enable you to create services/projects, add estimates/budgets, time, and costs to those projects. This way, you can conveniently compare between the project’s estimated cost and the actual cost.


Not all software offer the same these features; therefore, you need to search for the one that suits best with your requirements. Some of the most common job costing accounting software are Xero, QuickBooks Desktop, and QuickBooks Online. Let’s discuss them in brief.




Xero, cloud-based accounting software launched in 2006., has a position among the big players in the software accounting industry. It offers various project management features, reporting options, and allows more than 700 integrations. However, features vary as per the plan you choose. Its Established Plan offers basic job costing features that enable you to create projects, monitor budgets, attach time and expenses, etc.


QuickBooks Online 


QuickBooks Online is serving more than 2 million active users, and this number is growing as QuickBooks adds advanced, new features from time to time. Inventory capabilities and customizable invoices are the features that make QuickBooks standout accounting software.


QuickBooks Online also offers project management features, allowing you to create projects, add billable/unbillable time and expenses, generate reports, and track job profitability.


QuickBooks Desktop


Millions of accountants and small business owners are using QuickBooks since 1992. Although you need to learn about utilizing it to the fullest, it will offer highly useful features for your business, like inventory tracking, budgeting, contract management, etc. Similar to the previous ones, this software also offers project management features, but you may find them being less than others.


Apart from these, project management software applications, like Workflow Max and Smartsheet, also provide this features.


Software is not the only way out for job costing; you may find a reliable accountant in your locality or look out for accounting firms that can provide you customized accounting services as per your requirement. If you are not having an accountant or not even using software for business accounting, you may start looking for a reliable software accounting service provider that provides job costing services as an added service with the bundle. It is recommended to look for that ensures meeting your needs at cost-effective prices.

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