The Bidding Problem Nobody Talks About
Here's a scenario we see constantly at APX: a general contractor in the GTA wins a $1.2M residential build. They estimated the job at a 15% margin based on historical intuition and a rough spreadsheet. Six months later, the project is complete and the actual margin was 4%. The contractor doesn't understand what went wrong because their accounting system doesn't track costs at the job level — everything is dumped into a single "Cost of Goods Sold" line item.
This isn't a rare story. It's the default state of most construction companies under $10M in revenue. And it's not just costing them margin on completed projects — it's costing them future bids.
What Real Job Costing Looks Like
1. Every Dollar Flows to a Specific Job
Materials purchased at Rona? Tagged to Job #1247. Subcontractor invoice from the electrician? Tagged to Job #1247. The project manager's salary for the 3 days they spent supervising that site? Allocated to Job #1247 based on their timesheet.
In Xero, we use tracking categories mapped to each active project. In QBO, we use the Projects feature combined with Classes for department-level overhead allocation.
2. Work-In-Progress (WIP) Is Reconciled Monthly
WIP is the construction industry's version of inventory. It represents costs you've incurred on a project that haven't yet been billed to the client. For progress-billing contracts, WIP reconciliation tells you:
- Over-billed jobs: You've billed ahead of actual costs. This looks great for cash flow today but creates a liability.
- Under-billed jobs: You've incurred costs beyond what you've billed. If you don't catch this, you're financing the project out of your own pocket.
The WIP schedule should be reviewed on the 10th of every month.
3. Change Orders Are Tracked and Billed Immediately
This is where most contractors leak the most profit. The homeowner asks to upgrade the kitchen countertops mid-build. The site super says "sure, no problem" and the work gets done. But nobody issues a formal change order, and the additional $8,000 in materials and labour gets absorbed into the original job cost — destroying the margin.
The Holdback Problem
Ontario's Construction Act requires a 10% holdback on all progress payments, held for 60 days after substantial completion. For a $1M project, that's $100,000 in receivables that aren't collectible for at least two months after the project wraps up.
At APX, we build holdback aging directly into the 13-week cash flow forecast. We track the substantial completion date for each job, calculate the expected holdback release date, and plug it into the forecast so you always know exactly when that cash is arriving.
Payroll Complexity: Unions, WSIB, and T4s
Construction payroll in Ontario is uniquely complex. If you have unionized workers, you're dealing with multiple union locals, each with their own benefit contribution rates, training fund levies, and vacation pay calculations. WSIB premiums vary dramatically by trade classification.
Our approach is to implement specialized construction payroll software that natively handles union deductions and WSIB classifications. This feeds directly into Xero/QBO so the GL stays clean and the trade-level cost allocations are accurate for job costing.
Ready to Fix Your Job Costing?
If you're a contractor or trades company in Ontario doing over $500k in annual revenue and you can't pull a report showing the actual margin on each completed job, book a free 15-minute construction finance audit — we'll review your current chart of accounts and tell you exactly what needs to change.