Did that job actually make money?

How job profitability is worked out

Two halves. What the job earned — what you invoiced, which is rarely what you quoted once variations and day-work are in. And what it cost — the labour at what it costs you rather than what you charge, plus everything the job made you buy. The difference is the gross profit; take off a share of overhead and you have what the job left towards keeping the business open.

What each input means

Quoted and invoiced

What you priced it at, and what you finally billed. Both excluding VAT. The gap is the first thing worth looking at: a job that grew on variations is a different story from one that was discounted to get signed.

Labour, by role

The time each person actually spent, at what their time costs the business. Enter hours or days — the rate follows the unit, so two days at £160 a day is £320, not two days at an hourly rate.

Planned time and planned cost

Optional. What you allowed for when you priced the work. Fill them in and you get the variance per category; leave them empty and everything else still works. An empty box means you did not estimate it; a zero means you expected it to cost nothing.

Everything else

One row per cost, in the same six categories job costing uses, so the two pages line up when you compare them.

Overhead

The share of premises, insurance, software, the van and the admin that this job should carry. Per labour hour is usually the most honest, because most overhead is a function of time rather than of what was bought.

A worked example

The figures the page opens with: a domestic rewire quoted at £2,400 and invoiced at £2,600 after a variation.

1. 1.An electrician at 16 hours × £28 and a mate at 2 days × £160 come to £768 of labour, and 32 hours on site.
2. 2.Cable and fittings at £540 and a skip at £90 bring the direct cost to £1,398.
3. 3.Overhead recovered at £8 a labour hour adds £256, so the job cost £1,654 all in.
4. 4.Against £2,600 invoiced, that leaves £1,202 gross and £946 after overhead.
5. 5.The plan allowed 14 hours and 1.5 days of labour and £540 of materials and skip, so labour overran by £136 — the biggest single overrun, and the thing to price differently next time.

£946 after overhead on £2,600 invoiced, £37.56 of gross profit per labour hour — and a labour overrun that explains where the rest went.

Where this stops

• —It prices one job. A business is the sum of the jobs it won, the jobs it quoted and lost, and the months in between — none of which are in here.
• —The variance is only as honest as the plan you type. No plan, no variance; a partial plan, a partial variance, and the page says so rather than totalling the two together.
• —It is not accounting. Nothing here is a substitute for your books, and no figure on the page has been through a tax calculation.
• —Labour cost is an input, not a derivation. If you are guessing at what an hour of someone's time costs, the answer will be as good as the guess.

Where to go next

The pages either side of this one in the life of a job.

• →Job costing calculator — the same job before the quote goes out
• →Labour charge-out rate calculator — what an employee's hour really costs
• →Markup and margin calculator — the difference between the two, and why it matters
• →Job management — how the costs get recorded as the job runs