Job and project margins: finding where you make money
Jamee White, CPA6 min readA tradie we could be describing right now is having a great year on paper: the phone doesn't stop, the crew's flat out, revenue's up on last year. Then the accountant asks which jobs actually made money, and it turns out nobody's ever separated one job's numbers from another's. Job and project margin tracking fixes that: record the income and direct costs of each job on its own, and you see the gross profit each one actually delivered instead of one blended figure for the whole business. Most businesses that start doing this discover the same uncomfortable thing, a handful of jobs generate most of the profit, and a few are quietly losing money. Finding out which is which changes how you quote, who you hire, and sometimes which customers you keep.
Why the blended margin hides the truth
A profit and loss shows one gross margin for everything you did in the period. See 35 percent and it feels like every job made 35 percent. In reality it might be a mix of jobs at 55 percent and jobs at 8 percent, and the average hides both. The profitable work ends up subsidising the unprofitable work, and because nobody can see it happening, the unprofitable work keeps getting quoted the exact same way.
The pattern turns up everywhere: trades, agencies, consultancies, manufacturers, even medical practices comparing service lines. Anywhere revenue arrives through distinct jobs, projects or engagements, a per job view is available, and it's usually revealing.
What to capture against each job
- Income: every invoice, progress claim and variation billed for the job.
- Materials and direct purchases: supplier bills coded to the job as they're entered, not reconstructed later from memory.
- Direct labour: hours worked on the job at a loaded cost rate that includes super and leave loadings, not just the base hourly wage.
- Subcontractors and outsourced work tied to the job.
- Job specific costs: equipment hire, freight, travel, permit fees.
Overheads like rent and office wages stay out of the job margin entirely. The question at this level is simple: did the direct income exceed the direct cost of doing the work, and by how much? Whether the whole pool of job margins covers your overheads is the break-even question, and it's worth keeping that separate.
A worked example of what the numbers reveal
Here are four illustrative jobs from an example building and maintenance business, each of which looked fine at quoting time.
| Job | Invoiced | Direct costs | Gross margin | Margin % |
|---|---|---|---|---|
| Office fit out | $84,000 | $61,000 | $23,000 | 27% |
| School maintenance contract | $36,000 | $19,500 | $16,500 | 46% |
| Custom residential reno | $127,000 | $118,000 | $9,000 | 7% |
| Insurance repair panel work | $22,000 | $13,000 | $9,000 | 41% |
The renovation was the biggest job by a mile and felt like the flagship project of the year. It produced less gross profit than a $22,000 insurance job, and ate up months of the team's best labour doing it. Without job level tracking, the owner remembers the reno as a good year's work. With it, next year's quoting on custom renovations changes, or the business stops chasing them altogether.
Setting it up without drowning in admin
In Xero, tracking categories give a light job level view that suits businesses running a modest number of concurrent jobs. Dedicated job costing add-ons suit builders and firms juggling many projects with progress claims. The tool matters less than the discipline behind it: every sales invoice and supplier bill gets a job code on entry, timesheets get filled in honestly, and someone actually reviews a margin by job report each month while the jobs are still fresh enough to learn from.
Start with your five biggest current jobs rather than trying to code the whole business at once. One month of real data on real jobs teaches more than a quarter spent designing the perfect structure.
Turning job data into better decisions
NextEra sets up job and project tracking as part of client bookkeeping and builds margin by job reporting into the monthly management pack, so the learning happens every month instead of at year end. Suspect some of your work is quietly subsidising the rest? A Strategic Finance Review is a sensible way to test the hunch against actual numbers.
Quick answers
It varies too widely by industry and job type for a universal number to mean much. The more useful comparison is internal: rank your own jobs by margin percentage and look at the spread between your best and worst.
This article is general information for Australian businesses, current at the published date. It is not financial, tax or legal advice. Speak to a registered agent or adviser about your circumstances before acting.
Jamee White, CPA
Founder of NextEra Bookkeeping. Jamee leads a team supporting established Australian businesses with strategic bookkeeping, reporting, payroll and Xero, and is a multiple national awards finalist across bookkeeping and finance.