A quote is a forecast; job costing is the feedback
An estimate records what the contractor believed before work started. Actual job costing records what the job consumed. Comparing the two shows whether the estimating assumptions were reliable and where future quotes should change.
Why this matters
Without an estimate-versus-actual review, the same estimating mistake repeats on every similar job. The review is how a contractor turns one lost job into a more accurate template for the next ten.
Track the same categories on both sides
Use consistent categories for estimated and actual materials, burdened labor, subcontractors, equipment, permits, disposal, travel, and other direct cost. If estimated labor is recorded in hours but actual labor is recorded only as a lump sum, the comparison will not explain whether the difference came from hours, wage rate, or burden.
Useful variances
- Cost variance: actual cost minus estimated cost.
- Hour variance: actual labor hours minus estimated hours.
- Price variance: final approved revenue minus original price.
- Margin variance: actual margin minus estimated margin.
Example variance review
A job estimated at 80 labor hours finishes at 96 hours at the same $40 burdened rate; materials and price held.
| Category | Estimate | Actual | Variance |
|---|---|---|---|
| Labor hours | 80 | 96 | +16 h |
| Labor cost ($40/h) | $3,200 | $3,840 | +$640 |
| Materials | $2,000 | $2,000 | $0 |
| Total cost | $5,200 | $5,840 | +$640 |
| Price | $7,000 | $7,000 | $0 |
| Profit | $1,800 | $1,160 | −$640 |
| Margin | 25.7% | 16.6% | −9.1 pts |
The wage rate did not change, but site access added two days of setup and cleanup. The correct response is not to raise every labor rate blindly. Record the cause and add a site-access allowance when similar conditions appear in future work.
A practical closeout routine
- Freeze the original estimate.
- Add approved change orders as separate revenue and cost.
- Enter invoices and labor from source records.
- Explain the largest variances in one sentence each.
- Carry the lesson into the next estimate template.
Reading a labor-hour overrun
A labor overrun has two very different causes. Either the estimate assumed too few hours, or the crew executed slower than a fair estimate expected. The first is fixed in the estimate template; the second is a production or scheduling issue. Recording which one occurred keeps you from raising every future rate to cover a one-time site problem.
Turning one review into a better template
The value of a job-costing review is the next estimate, not the last invoice. When a variance repeats across similar jobs — access time, disposal, a particular material — add it to the estimate template as a standard line so the next quote starts more accurate than the last.
Frequently asked questions
What is estimate-versus-actual job costing?
It compares the estimated cost of a job with what the job actually consumed, category by category, to improve future estimates.
Which variances are most useful?
Cost variance, labor hour variance, price variance, and margin variance. Hour variance often explains why a job missed its target margin.
How should categories be tracked?
Use the same categories on both sides. If the estimate is in labor hours but actuals are a lump sum, the variance cannot be explained.
What do I do with a large variance?
Record the cause in one sentence and adjust the estimate template, rather than blindly raising every rate on future jobs.