If your business delivers custom projects—whether you’re in construction, manufacturing, design, or professional services—how do you ensure your pricing actually covers your costs and delivers a healthy profit?
The answer lies in job order costing. This method allows businesses to track every penny spent on each individual job—so you’re not guessing at prices, you’re calculating them.
Let’s take a closer look at what job order costing is, why it matters, and how to start using it effectively in your business.
What Is Job Order Costing?
Job order costing is a detailed method of assigning costs to specific jobs or projects. Unlike broader cost accounting methods that average expenses across all work, job order costing focuses on the individual costs associated with each job.
It’s ideal for UK businesses delivering bespoke or made-to-order services, such as:
- Custom furniture makers
- Construction and renovation firms
- Creative agencies
- Legal or consultancy practices
- Small manufacturers producing one-off runs
Key Components of Job Order Costing
There are three core elements:
- Direct Materials – The raw materials used for a particular job (e.g., timber, paint, components).
- Direct Labour – The hours worked by employees specifically on that job (e.g., joiners, designers, or engineers).
- Overheads – A share of indirect costs such as rent, utilities, software, and admin support.
Each job is tracked using a unique identifier, allowing you to record costs individually and calculate the total cost of completing it.
How It Works in Practice
Imagine you’re a bespoke kitchen fitter. You take on a job for a client in Surrey:
- Materials: Oak cabinets, granite worktops, hardware (£5,200)
- Labour: 40 hours at £25/hour (£1,000)
- Overheads: Applied at 20% of direct costs (£1,240)
Your total job cost: £7,440
You quote the client: £9,500
Profit margin: Over £2,000 once costs are covered
By understanding exactly what went into that project, you can confidently quote future jobs and identify where your margins are strongest.
Why It Matters
✅ Accurate Pricing
No more guesswork—your quotes reflect actual costs and realistic margins.
✅ Better Decisions
Know which jobs are most profitable. Understand your true breakeven point. Plan your pricing strategy with confidence.
✅ Custom Work, Custom Costs
If your services are tailored, your costing should be too. Job order costing ensures each quote reflects the real cost of delivery.
Common Challenges – and How to Overcome Them
Yes, job order costing requires more tracking than flat-rate pricing, and that can be tricky without systems in place. Here are the most common challenges—and some practical fixes:
| Challenge | Solution |
|---|---|
| Tracking materials and time per job | Use job sheets, timesheets, or project management software |
| Applying overhead fairly | Use a consistent allocation method, such as % of direct labour or materials |
| Record-keeping complexity | Invest in accounting software with job costing functionality |
| Staff buy-in | Train your team on the why and how of accurate cost recording |
Real-World Examples
- Construction firm in Kent: Tracks all materials and subcontractor time per home build. Result: increased margins and fewer under-quoted jobs.
- Creative agency in Manchester: Allocates design time and project management per client. Result: better client profitability insights and more strategic project selection.
These businesses now price smarter and make better decisions, thanks to job order costing.
How to Get Started
- Define Your Jobs Clearly – Use job numbers or project IDs.
- Track Costs in Real Time – Don’t wait until month-end.
- Apply Overheads Consistently – Choose a logical, repeatable method.
- Use the Right Tools – Even basic accounting software (like Xero or QuickBooks) can support job costing with the right setup.
Start small—perhaps with one service or product line—and refine your approach as you go.
Final Thought
In a competitive market, understanding the real cost of delivering your services can be the difference between profit and loss. Job order costing offers a structured, practical way to achieve this clarity—empowering you to quote confidently, manage projects efficiently, and grow your business sustainably.
Need Help Implementing Job Costing in Your Business?
We work with small and medium-sized businesses across the UK to help implement practical financial systems—including job costing processes that actually work. Whether you’re just getting started or want to improve your existing setup, we’re here to help.
Get in touch today to see how we can support you.
Looking for a Fulham accountant to help you manage your business finances? Reach out to our team today to get started – we’d love to help.
e: office@londonaccountants.co t: 0203 137 9791
Kind Regards,
The Team at London Accountants
