Tracking revenue alone isn’t enough. Without job-level profitability insights, businesses risk underpricing work, missing cost overruns, and taking on unprofitable projects. A structured approach to project profitability helps companies to pinpoint where they’re making or losing money, avoid financial blind spots, and make confident decisions.
In this podcast episode, Tony Harcourt, co-founder at WorkGuru, and Chris Walsh, principal consultant and director at Red Arrow Consulting, unpack why businesses think they’re making a profit until cash flow problems reveal the gaps and how they can fix them.
The Cost of Not Knowing
Chris Walsh has worked with businesses that assumed they were profitable—only to discover major gaps in their job-level tracking.
I had a consulting client losing money but couldn’t figure out where. I asked them a simple question: ‘Which jobs are profitable and which are not?’ And they had absolutely no idea.
Chris Walsh
Director at Red Arrow Consulting
A contractor believed they had strong margins, yet cash flow was always tight. Without tracking job-level profitability, they couldn’t pinpoint which projects were profitable. Once they dug deeper, they saw that smaller, recurring jobs had significant margins due to lower overhead costs than their biggest contracts.
One major factor often unnoticed is landed costs—expenses like freight, duties, and handling fees that impact job cost tracking. If these costs aren’t accounted for, businesses might think they’re making money when breaking even or worse. Check out our user guide for fabricators and manufacturers to learn more about landed costs.
Why Revenue isn't the Full Picture
Many businesses assume that if their books balance, they must be profitable. However, relying solely on accounting software provides only a surface-level view. What looks good on paper doesn’t always translate to profitability at the job level.
Chris shared another case study that proves this point. A construction company believed they were running a profitable operation because its accounting software showed positive revenue. However, when they examined individual project margins, they found that one particular client consistently pushed their profits into the red. For years, they had been underpricing jobs for that client without recognising the financial impact.
Without tracking job-level profitability, businesses may continue accepting projects that look beneficial on the surface but drain resources in reality.
💡 Quick Takeaway: High revenue doesn’t guarantee strong margins. If you’re not tracking costs at the job level, you could be doubling down on the wrong types of work.
Job-Level Profitability: Common Mistakes That Hurt Your Buttom Line
So, where do businesses go wrong when tracking earnings? Here are some of the biggest (and most costly) mistakes and how to fix them:
1. Overlooking Indirrect and Admin Costs
Many businesses track labor and materials but forget about indirect costs—things like equipment downtime, project delays, or rework.
For example: a construction business discovered it was losing thousands of dollars every month on unbilled site preparation work that wasn’t factored into job estimates.
✅ How to Fix It: Build all indirect costs into your job pricing and use job management software to allocate overheads accurately.
2. Understimating Labor Costs
Labour overruns can kill gains faster than anything else. Chris shared an example of a fabrication project that required 1,000 labour hours across ten tasks. Nine tasks were under budget, but one took 80 extra hours—completely wiping out the project’s profit.
Chris Walsh puts it:
“That 80 hours was profit that could have been in the owner's back pocket. We analysed why it happened and found that the wrong person had been assigned and they lacked the right skill set. The company should have outsourced that part of the job, but without proper tracking, they didn't see the issue until it was too late.”
✅ How to Fix It: Track labor costs at the task level, not just the project level. Ensure skilled labor is assigned correctly, and analyse past jobs to refine future estimates.
3. Guesswork in Quoting
Most businesses start with estimates when quoting jobs, but how often do they compare those estimates to actual costs? You always eat into your margins if you underestimate labor, materials, or overhead.
Tony Harcourt explains:
“Optimism in quoting is a real issue. We always underestimate how long a task will take, and without tracking that reality, we keep making the same mistake.”
A fabrication company noticed that they consistently underestimated how long welding took by about 20%. After looking into their past jobs, they updated their quoting process and immediately saw a 15% boost in profit margins.
✅ How to Fix It: Refine your quoting process using historical job data. Build in buffer time for unforeseen challenges.
4. The Spreadsheet Trap
Spreadsheets may seem like a simple solution, but they create hidden risks—errors, outdated data, and a lack of real-time visibility.
For example, one business managing $700,000 projects relied on spreadsheets to track costs. When they reconciled estimates vs. actuals, they found that multiple teams input data inconsistently—some tracking materials, others only labor, and some not updating costs.
Chris Walsh adds:
“I reviewed a company’s financials, and they were running projects worth hundreds of thousands of dollars on spreadsheets. The numbers didn’t match because different teams were tracking costs differently. When we tried to verify if they were making a profit, we couldn’t. They were essentially flying blind."
✅ How to Fix It: Switch to a centralised job management system that tracks costs in real time, ensuring all data stays accurate and current.
Check out the full conversation 👀👇
How to Get a Clearer Picture of Profitability
Understanding job-level profitability isn’t just about identifying problems—it’s about taking action. Here’s how to make smarter, data-driven decisions:
1. Review Job Costs Regularly
Tracking profitability shouldn’t be an afterthought. Many businesses wait until the end of a project to review financials, but by then, it’s too late to make adjustments. Instead, conduct weekly or monthly job cost reviews. This lets you catch cost overruns early and make necessary course corrections before profits disappear.
For example, a fabrication company noticed material costs creeping up mid-project. By spotting the trend early, they renegotiated supplier rates and kept the job within budget. Regular reviews help prevent surprises and keep margins intact.
2. Refine Your Quoting Process
Accurate quoting is critical for profitability. If your estimates don’t reflect actual job costs, you’re either losing money or overpricing jobs and losing bids. Many businesses underestimate labor and materials, leading to profit erosion.
A construction company that switched to a data-driven quoting system saw a 10% increase in revenue simply by adjusting their estimates to reflect real-world job costs. Using historical job data helps refine your process, improving accuracy over time.
3. Track Labour and Materials in Real Time
One of the biggest profitability killers is failing to track job costs as they happen. Logging labor and material usage in real time prevents gaps in project profitability analysis and ensures accurate billing.
For instance, an engineering company implemented real-time tracking and discovered that specific tasks consistently took longer than estimated. Adjusting workflows helped them recover 5% in lost labor costs across multiple projects.
Not all jobs are equally profitable, and some may not be worth taking on. Establish clear profit margins per job type and use them as benchmarks. If a project falls below the threshold, investigate why and adjust your approach. Tracking profitability at this level allows you to prioritise the most lucrative projects.
5. Use Job Management Software
Manual tracking and spreadsheets leave too much room for error. Switching to an integrated job management system helped them align quotes, timesheets, inventory, and cost tracking in one place, reducing inefficiencies.
6. Evaluate Client Profitability
Not all clients are good for business. Some consistently push projects over budget, demand excessive revisions, or delay payments. If a client regularly drains your margins, it may be time to renegotiate terms or walk away. Evaluating client profitability ensures you’re focusing on the right partnerships.
A construction business reviewed its client portfolio and identified a customer who consistently demanded additional work outside of scope. Restructuring their pricing and contract terms eliminated unnecessary losses and improved profitability.
7. Plan for Downtime and Delays
Unexpected delays can impact profits. Construction firms, for instance, face unpredictable setbacks such as weather disruptions or supply chain issues. Without a buffer, these delays can turn a profitable job into a financial burden. Protect your construction profitability by accounting for potential downtime.
Final Thoughts
Every business wants to be more profitable—but without tracking job-level numbers, you’re making decisions based on guesswork. By analysing where you’re making and losing money, you gain the power to fix inefficiencies, focus on high-margin work, and ultimately increase profitability.
It may be time to reconsider your approach if you still use spreadsheets, manual tracking, or basic financial statements to measure success. Take control of your profitability today. See how WorkGuru job management software can help your business today.
