May 1, 2026
What is job costing in restoration? Job costing is the practice of tracking every cost — labor, materials, subcontractors, equipment, and overhead allocation — at the individual job level, allowing a restoration company to calculate true gross margin per job rather than only at the company level.
Let me tell you about a conversation I had inside a $5M restoration company.
The owner had good revenue, decent AR, and a bookkeeper who produced a monthly P&L that showed a 22% gross margin. When I asked to see his job-level cost reports, he looked at me like I’d asked to see his personal diary. His P&L was accurate. It was also useless for the decision he needed to make.
When we built job-level cost reports for the prior 18 months, we found that his residential water work was running 31% gross margin and his commercial reconstruction was running 9%. He’d been unconsciously subsidizing his least profitable work with his most profitable work for three years. That’s what a P&L does. It tells you the average. Job costing tells you the truth.
A proper job cost report tracks four categories: Direct Labor (fully-loaded burden including payroll taxes, workers’ comp, benefits — typically 30-45% above base wages). Direct Materials (actual invoiced cost per job, not budget allocation). Subcontractors (actual invoiced cost from every sub — often 40-60% of reconstruction revenue). Equipment and Overhead Allocation (the category most companies skip, and where large-loss jobs quietly lose money).
Xactimate is an estimating tool designed to produce invoices adjusters will approve — not to accurately predict your real cost. Restoration companies that use their Xactimate estimate as their job budget are measuring cost against a benchmark that wasn’t designed for their business.
The most common bookkeeping failure: costs are posted at the company level instead of the job level. Payroll as payroll expense. Equipment rental as equipment expense. All technically correct and completely useless for job-level analysis. Fix: every invoice, every payroll entry needs a job number attached.
Job costs accumulate for weeks after completion — final sub invoices, equipment retrieval, last materials delivery. Establish a 30-day hold for final cost posting before marking any job closed.
The gap between wages and fully-loaded labor cost is 30-45% above wages. Restoration is high-risk for workers’ comp, meaning your burden rate is likely at the high end. If you track labor at wages, you think you’re making more money than you are.
With 12-18 months of accurate job-level cost data, you can answer: Which job types are most profitable? Which project managers run the most profitable jobs? What is your actual margin on program vs. non-program work? Is large-loss commercial actually profitable after overhead allocation? These are the decisions that determine whether your company grows or stagnates.
Days 1-14: Audit your accounting setup — can your software post costs by job? Days 15-30: Set up job cost coding for all new jobs. Days 31-45: Run your first job cost report on closed jobs — use it to find gaps. Days 46-60: Close the gaps. By day 60 you should have your first real picture of where margin actually lives.
What software is best for job costing in restoration? QuickBooks with job tracking is the most common starting point. Dedicated restoration software like Jonas or Xactibid can provide more integration if properly configured. The software matters less than the discipline of posting every cost to a job code.
What is a good gross margin for a restoration company? Water mitigation typically runs 60-75% gross margin when job costed correctly. Reconstruction runs 30-45%. Blended company gross margins of 45-55% are achievable in well-run operations.
How long does it take to implement job costing? Basic job costing can be operational within 30-60 days. Accurate, decision-quality data typically requires 90 days of clean posting.
What is labor burden in restoration? Labor burden is the total employer cost beyond base wage — payroll taxes, workers’ compensation, health benefits, paid time off. In restoration, fully-loaded burden typically runs 30-45% above base wages.
Mike McCabe is The Profit Detective — a 36-year restoration industry veteran who has consulted 150+ companies across North America on operations, profitability, and job costing discipline.
Most engagements pay for themselves within the first week.