How to Calculate Job Cost in a Finished-Job Review

The van has left, but a fitter booked the final afternoon to the wrong job and a supplier credit is still missing. If you need to know how to calculate job cost, fix those records before trusting the estimate.

Match the completed scope to the right revenue. Collect the actual costs. Do not sign off the job cost while time, invoices, returns or credits are missing.

Match completed scope to the right revenue

Start with the accepted quote, job sheet, approved variations and final invoice. Check that they all carry the same customer, address and job reference.

Then separate the original work from additional work. The revenue and cost in each comparison must cover the same scope. Do not compare the cost of the original work with an invoice that also includes a variation.

If the scope changed on site, stop and check the paperwork. The variation should state what changed, what was excluded before the change and what the customer approved. Use the guide to writing a clear trade quote when exclusions or scope lines are causing disputes during the finished-job review.

A finished site is not automatically a finished cost record. Make an open-items list for anything still missing:

• Labour time not submitted or approved
• Supplier invoices not received
• Stock withdrawals not recorded
• Unused materials awaiting return
• Supplier credits not posted
• Subcontractor or plant hire invoices still due

Do not sign off the job cost until those records arrive. A missing cost does not become zero because the customer has been invoiced.

How to calculate job cost from actual records

Start with the direct work cost:

Direct work cost = actual direct labour + actual materials + subcontractors and plant hire + other direct expenses

Then calculate the fully loaded result:

Fully loaded job cost = direct work cost + allocated overhead

Each amount needs a source. Use timesheets, payroll records, supplier purchases, stock movements, invoices, receipts and your documented overhead method.

That is how to calculate job cost without replaying the estimate. Compare the direct subtotal with an estimate of direct costs. Compare the fully loaded total only when the estimate includes overhead on the same basis.

Use the same buckets in both records. Fancy categories make the actual vs estimated cost comparison harder to read.

Do not mark the total final while any required bucket says yes under open item.

Rebuild actual labour from time and payroll records

Check every time entry against the person, date, hours, task and job reference. Correct entries posted to the wrong job. One misplaced afternoon distorts the job profitability of two jobs at once.

Use your internal labour cost. Do not substitute the hourly rate charged to the customer. The customer rate is revenue. It may contain overhead and markup, so it cannot prove what the labour cost the business.

Use this calculation for each person who worked on the job:

Actual direct labour cost = recorded job hours × documented internal hourly employment cost

Build the internal hourly employment cost from your own payroll and employment-cost records. Calculate each person separately when their costs differ, then add the results. Do not use the customer charge-out rate or add a guessed allowance because the result looks too low.

Treat owner and supervisor time consistently. Time spent installing or solving a problem for one job can be assigned to that job under your method. Shared supervision may belong in overhead instead. Never put the same time in both places.

Ask one question for each entry: did this time arise because of this job? If it did, assign it here. If it supported the wider business or several jobs, handle it through the chosen overhead method.

Reconcile materials and outside costs line by line

Start with supplier purchases and stock taken from stores. Then follow what happened to each item.

Remove materials transferred to another job. Record unused items returned to stock under your normal stock method. Subtract returns and supplier credits when they have been confirmed in the records.

Do not sign off material cost while a return is sitting in the van or a credit is expected but missing. Put it on the open-items list and follow it through.

Add subcontractor bills, plant hire, disposal charges and other job-specific expenses when their records are complete. If a subcontractor has finished but has not invoiced, the site may be complete while the cost record remains open.

Keep outside labour, plant hire and other direct expenses separate when that detail will improve the next estimate. A single miscellaneous bucket tells you nothing useful.

Assign shared overhead once

Direct costs happen because of the particular job. Shared overhead supports several jobs or the whole business.

Plant hired only for one site is a direct cost. A shared van, office cost or general supervision may sit in overhead under your documented method. Use the method consistently so completed jobs can be compared.

Then check for double counting. Employment costs may already be included in internal labour cost. Vehicle cost may already sit in overhead. Equipment may already be recorded through a direct hire invoice.

Every cost gets one home. If you cannot show where it entered the calculation, trace it before signing off the job cost.

Explain actual vs estimated cost by bucket

Calculate variance separately for labour, materials, outside costs and overhead:

Cost variance = actual bucket cost − estimated bucket cost

A result above zero means the bucket used more cost than estimated. A result below zero means it used less. The total tells you whether the job moved. The buckets tell you why.

Read the site record before changing the next price. Extra labour could be an access problem, rework, a missed task or time posted from another job. Extra materials could be waste, an omitted fitting, an unrecorded transfer or a variation.

Write one blunt review note against each meaningful difference. Use notes such as “allow for lined-ceiling access”, “add missing fitting” or “correct time entry”. Do not write “charge more”. Record the cause and decide whether it will repeat.

Check the method against the Oak Street job

Oak Street is the house electrical example. All figures are sample currency units, not rates or a price list.

R. Chen at 14 Oak Street received Estimate E-1847 with a range of 900–1,400. Quote Q-1847 was 1,105 for a 150mm bathroom exhaust fan ducted through the roof and four LED downlights.

The ceiling was lined, and the quote excluded chasing. Extra cable and chasing were approved on site as a 160 variation. Invoice INV-1847 was therefore 1,265.

The supplied job cost of 850 is measured against the original quote of 1,105. Keep those figures together:

• Original quote: 1,105
• Job cost against the original quote: 850
• Profit: 1,105 − 850 = 255
• Margin: 255 ÷ 1,105 ≈ 23%
• Markup: 255 ÷ 850 = 30%

Markup is added to cost to build a selling price. Margin is profit as a share of that selling price. Check your own figures with the profit margin calculator.

Do not subtract 850 from the invoice total of 1,265. The revenue from the 160 variation is known, but its costs are not supplied. The variation cost review remains open, so combined profit cannot be calculated.

That is the finished-job rule. Original-scope revenue stays with original-scope cost. Variation revenue stays with variation cost. Combine them only when both sides are complete.

Keep VAT and CIS records out of the wrong buckets

For a VAT-registered business, recoverable VAT is normally excluded from job revenue and job cost. Irrecoverable VAT may form part of cost, depending on the business’s current VAT treatment. Confirm the treatment with HMRC or your accountant before signing off the figures.

Use that treatment consistently across the customer invoice, supplier invoices and cost records. Do not compare revenue excluding recoverable VAT with costs that include it. Keep invoice value, VAT, cash and job profit in separate fields.

For CIS deductions suffered from customer payments, keep the underlying invoice value as revenue on the chosen VAT basis. Record the deduction separately from the cash received. The deduction changes the payment movement, not the completed scope.

For CIS deductions withheld when paying subcontractors, keep the subcontractor’s underlying job cost separate from the deduction and the cash paid. Reconcile the invoice value, deduction and payment as distinct records. Check current CIS requirements with HMRC before finalising either type of deduction.

Turn the finished-job note into the next quote

A completed job is evidence about one scope, crew and site. It is not a blanket rate card.

Correct the underlying assumption first. Adjust labour when a repeatable task took longer. Add a material that was missed. Keep a useful access exclusion. Fix an overhead cost that was omitted or counted twice.

Then apply markup to the corrected cost and build the next selling price. The job-pricing framework for labour, materials, overhead and markup covers that next step.

Do not change every quote because one job went badly. Decide whether the cause will repeat. Carry forward the proven correction, not the frustration.

If you use Yes Foreman, keep the quote, job records, approved variations and invoice under the same job reference. The quoting tools for turning scope into a recorded price follow the work at the point where the corrected cost becomes the next quote.

Sign off the job cost

When you review how to calculate job cost on a recently completed job, check three things before approving the result:

• Revenue and cost cover the same scope.
• No time, invoice, return or credit remains unresolved.
• The estimate and actual total use the same overhead and VAT basis.

Pick one finished job today. Clear its open items, record the bucket variances and put the first proven correction into the next similar quote.