Job costing in restoration means tracking every dollar of revenue and direct cost to the specific job that generated it — not to a general income or expense bucket. The result is a gross margin calculation per job that tells you which work is profitable, which job types to price up, and which TPA channels are actually worth keeping.
Most restoration companies report job-level revenue but bundle costs into general COGS accounts. The job P&L is incomplete — you can see what each job earned but not what each job cost. This produces an illusion of margin that collapses when you look at individual jobs.
The Restoration Job Costing Framework described in this guide defines five tiers of job costing maturity and gives you a clear path from basic job tracking to margin optimization.
By Cat3 Books · Restoration Bookkeeping Specialists. Updated May 2026.
Introduction
This guide is the canonical reference for job costing in insurance restoration. It covers the mechanics of setting up job costing in QuickBooks Online, the specific cost categories that matter in restoration, how to reconcile Xactimate estimates to actual costs, and how to use job costing data to make better business decisions.
Who this is for: Restoration company owners and finance leads managing water damage, fire restoration, mold remediation, contents restoration, and reconstruction operations. This guide assumes QuickBooks Online (QBO) as the accounting platform and Xactimate as the primary estimating tool.
Original framework included: The Restoration Job Costing Framework — a five-tier maturity model specific to this industry — is introduced in this guide as a diagnostic and improvement tool.
What this does not cover: Insurance receivables accounting (see the insurance billing guide) or full financial management (see the financial management guide).
The difference between a restoration company that runs on data and one that runs on gut feeling is almost always job costing. Companies with complete job-level P&L make different pricing decisions, different TPA program decisions, and different hiring decisions — and they make them on evidence.
Why Restoration Job Costing Differs from General Construction
Restoration job costing differs from general construction in three key ways: equipment-day revenue (billed per-day to insurance carriers) creates a reconciliation requirement that construction doesn't have; the multi-party payment cycle (carrier, insured, TPA) makes revenue tracking more complex; and the insurance estimate (Xactimate or Symbility) functions as both the price agreement and the cost reference, creating a built-in comparison point that construction estimating doesn't provide.
General construction job costing tracks costs against a bid. The bid is negotiated with the owner; the job runs; you compare actuals to the bid. Straightforward.
Restoration is more complex in four ways:
1. Equipment Is a Revenue Stream, Not Just a Cost
In mitigation work, equipment (air movers, dehumidifiers, air scrubbers) is billed to the insurance carrier as a daily revenue item, not just tracked as a cost. The revenue is generated by the day the equipment runs on the job site. This creates a reconciliation requirement — the days equipment ran must match the days billed in Xactimate — that has no equivalent in general construction.
2. Revenue Has Multiple Sources and Timelines
A single restoration job can generate revenue from four distinct sources: the initial scope (labor and materials), equipment days, overhead-and-profit (O&P) markup, and supplements. Each has a different payment timeline and a different billing trigger. A construction job's payment schedule is typically tied to milestone completions; restoration payments depend on carrier approval timelines, depreciation holdback release, and supplement negotiation.
3. The Estimate IS the Price Agreement
In restoration, the Xactimate estimate is not just a cost estimate — it's the document the insurance carrier uses to authorize the repair. The approved Xactimate amount is the revenue ceiling for the job (absent supplements). This means the Xactimate-to-actual comparison is both a cost management tool and a revenue verification tool. If your actual labor cost is lower than Xactimate estimated, great — that's margin. If your actual equipment days are higher than Xactimate billed, that's revenue you left on the table (and a supplement opportunity).
4. TPA Programs Add a Cost Layer at the Job Level
When a job is routed through a TPA program, the TPA charges a referral fee (5–15% of job revenue) that applies specifically to that job. This job-level cost has no equivalent in general construction. It must be tracked per job, not just aggregated across the company.
General construction job costing answers "did we build within budget?" Restoration job costing answers "did we bill everything we were entitled to bill, collect it all, and spend less than the estimate to complete it?" The second question is more complex and requires more specific tooling.
QBO Setup for Job Costing
QBO job costing requires: Projects enabled (or sub-customer hierarchy), Items configured to post to correct income and cost accounts, a custom field for TPA program name, and a mandatory job-coding workflow for all direct-cost transactions. The Project Profitability report is your job P&L. The Class tracking layer adds service-line filtering.
Step 1: Enable QBO Projects
Projects is the dedicated QBO feature for job tracking. Requirements:
- QBO Plus or Advanced tier (not Simple Start or Essentials)
- Navigate to Settings → Advanced → Projects → Enable
Each Project represents one insurance job. Name convention: [Address] — [Claim #] — [Service Type] (e.g., "1234 Oak St — CC-2026-0891 — Water Mitigation")
Alternatively: Sub-customers (any QBO tier) For QBO Essentials users, use the sub-customer hierarchy: Parent Customer = property owner's name, Sub-customer = individual job. The sub-customer structure supports the same transaction assignment as Projects, but the reporting is less native. You'll use filtered P&L reports rather than the Projects dashboard.
Step 2: Configure Items
Items are the link between transactions and the chart of accounts. Every income line, every expense category needs a corresponding Item.
Income Items (examples):
| Item | Type | Income account | Note | |---|---|---|---| | WTR — Labor | Service | Water Mitigation Revenue — Labor | | | WTR — Equipment | Service | Water Mitigation Revenue — Equipment | | | WTR — Materials | Service | Water Mitigation Revenue — Materials | | | FIRE — Labor | Service | Fire Restoration Revenue — Labor | | | MOLD — Labor | Service | Mold Remediation Revenue — Labor | | | REBUILD — Labor | Service | Reconstruction Revenue — Labor | | | O&P | Service | Overhead and Profit Revenue | Add 10/10 O&P to applicable jobs | | Subcontract (pass-through) | Service | Pass-Through Revenue | 0-margin pass-through for managed subs |
Cost Items / Expense Products (for Purchase Orders and Bills):
| Item | Type | COGS account | |---|---|---| | Direct Labor | Service | Labor — Field (Direct) | | Subcontract Work | Service | Subcontractor — Direct | | Job Materials | Non-inventory | Materials — Direct | | Equipment Rental | Service | Equipment — Rental (Direct) | | TPA Fee | Service | TPA Program Fees (Direct) |
Step 3: Add Custom Fields
Add custom fields to each Project for:
- TPA Program (dropdown: Contractor Connection, Alacrity, Code Blue, Sedgwick, Gallagher Bassett, Direct, Other)
- Adjuster Name (text)
- Claim Number (text)
- Service Type (dropdown: Water, Fire, Mold, Contents, Rebuild)
These fields enable filtered reporting by TPA program or service type even without full Class tracking.
Step 4: Class Tracking for Service-Line P&L
Enable Classes (Settings → Advanced → Categories → Track Classes). Create one Class per service line:
- Water Mitigation
- Fire Restoration
- Mold Remediation
- Contents
- Reconstruction
Assign a Class to every transaction. This creates a second axis of reporting: you can see P&L by job (via Projects) AND by service line (via Classes).
Step 5: Require Job Assignment on All Direct Costs
Create a workflow rule (or accounting policy) that no direct cost can be posted without a Project/job assignment. Common failure point: material purchases and subcontractor invoices are posted to general expense accounts without job assignment. This breaks the job P&L.
The Four Direct Cost Categories
Every restoration job P&L has exactly four direct cost categories: Direct Labor (employee hours at loaded rate), Direct Materials (job-specific materials consumed), Subcontractor Costs (1099 payments for job-specific work), and Direct Equipment (owned equipment cost allocation or rental fees). TPA referral fees are a fifth category for TPA-routed jobs. Everything else is overhead.
Category 1: Direct Labor
Direct labor is the cost of field employee time on a specific job. It must be charged at the loaded rate (see Calculating Loaded Labor Rates below).
Time tracking methods:
- Time cards by job (paper or digital): field techs record hours per job per day
- Job management platform time tracking: Albi, Dash, JobNimbus all have time tracking that syncs to QBO
- QBO Time (TSheets): QBO's native time tracking add-on, assigns hours to Projects
The loaded labor rate is applied when the time entry is converted to a cost in QBO — either through a payroll journal entry allocated to jobs, or through the time-tracking-to-cost workflow in Projects.
Typical direct labor as % of revenue by service line:
| Service Line | Direct Labor % of Revenue | |---|---| | Water mitigation | 15–25% | | Fire restoration | 25–35% | | Mold remediation | 20–30% | | Contents restoration | 25–40% | | Reconstruction | 30–45% |
Category 2: Direct Materials
Direct materials are materials purchased specifically for and consumed on a specific job — not general shop supplies or inventory held for multiple uses.
Tracking methods:
- Purchase Orders linked to jobs: Create a PO in QBO for each materials purchase, assign to the job. When the bill is received, it matches the PO and the cost is already job-coded.
- Debit card purchases with job reference: Require field techs to note the job number on every materials purchase receipt. Code in QBO by job at transaction entry.
- Job materials requisition form: For operations with a materials inventory, require a requisition that pulls materials from inventory and assigns them to a job.
Typical direct materials as % of revenue:
| Service Line | Direct Materials % of Revenue | |---|---| | Water mitigation | 8–15% | | Fire restoration | 10–20% | | Mold remediation | 10–18% | | Reconstruction | 20–35% |
Category 3: Subcontractor Costs
Subcontractor costs are payments to 1099 contractors for work on a specific job — HVAC, structural repair, specialty cleaning, testing labs, industrial hygienists.
These must be coded to the job, not to a general "Subcontractor" expense account. The subcontractor invoice arrives; you code it to the specific job before posting.
Subcontractor % of revenue varies widely by business model:
- Mitigation-only: 5–15% (primarily specialty testing and abatement)
- Full-service restoration: 20–35% (structural subs, HVAC, roofing)
- Reconstruction-heavy: 35–55% (high sub-out model)
Category 4: Direct Equipment Cost
Equipment cost is the cost to own and operate the equipment that generates equipment revenue. Two approaches:
Approach A: Depreciation Allocation (owned equipment) Calculate an annual depreciation cost for your equipment fleet. Allocate to jobs based on equipment-days deployed. Example: LGR dehumidifier costs $5,000, 5-year life = $1,000/year. If this unit runs 200 days/year, the cost per day is $5.00. Charge $5.00/day to each job it runs on.
Approach B: Standard Rate Allocation (simpler) Use a fixed allocation rate per equipment-day (e.g., $8/day for air movers, $15/day for dehumidifiers) that represents estimated repair, maintenance, and depreciation. Apply this rate to every equipment-day on every job.
Most $500K–$5M restoration companies use Approach B — it's simpler and close enough for management decisions. Above $5M with a large fleet, Approach A provides more accuracy.
The Fifth Category: TPA Referral Fees
For jobs routed through TPA programs, the referral fee is a direct cost of that job. Code the monthly TPA invoice to individual jobs using an allocation based on job revenue (the fee structure is typically a flat percentage of job revenue).
Calculating Loaded Labor Rates
The loaded labor rate is base wage × (1 + burden factor). For restoration field technicians, the burden factor runs 30–55%, producing a loaded rate of $26–$40/hour for a technician earning $20/hour. The dominant cost drivers are workers' compensation insurance (8–18% of wages, the highest classification in the industry) and health benefits if employer-paid.
| Component | Low estimate | High estimate | Notes | |---|---|---|---| | Base hourly wage | $18/hr | $28/hr | Varies by market and role | | Employer FICA | 7.65% | 7.65% | Fixed by law | | FUTA | 0.60% | 0.60% | Federal unemployment | | SUTA | 1.0% | 4.0% | State unemployment — varies | | Workers' compensation | 8.0% | 18.0% | NCCI code 9519 (water damage) NCCI, 2024 | | Health insurance | 0% | 14.0% | If employer-paid | | Paid time off | 5.0% | 10.0% | Vacation, holiday, sick | | Total burden factor | 22.3% | 54.3% | | | Loaded rate at $22/hr base | $26.90/hr | $33.95/hr | |
Calculating Your Company's Actual Burden Rate
Step 1: Pull total employer-side payroll costs for the last 12 months: FICA, FUTA, SUTA, workers' comp premiums, health insurance, and PTO cost (estimated as a percentage of wages based on your policy).
Step 2: Divide by total gross wages paid to field staff over the same period.
Step 3: The result is your actual burden rate.
Example: $380,000 in gross field wages. $158,000 in total employer-side costs (FICA $29,100, SUTA $12,000, WC $68,400, health $34,800, PTO $13,700). Burden rate = $158,000 / $380,000 = 41.6%. Loaded rate = 1.416 × base wage.
Update this calculation annually, or whenever there's a significant change in workers' comp rates or benefits costs.
Why This Matters for Estimating
Most restoration owners use the base wage when estimating labor cost for a job bid or budget. This means every job estimate understates actual labor cost by 30–55%.
Impact on a water mitigation job:
- Estimated: 8 hours × $22/hr = $176 labor cost
- Actual (at 1.42 burden): 8 hours × $31.24/hr = $249.92 labor cost
- Understatement: $73.92/job
- At 200 jobs/year: $14,784/year in understated labor cost appearing as "margin"
At $1M revenue with 200 annual jobs, the misstatement is meaningful. At $5M with 1,000 jobs, it's material.
Overhead Allocation Approaches
Most restoration companies use contribution margin accounting — calculating gross margin per job before overhead, then managing overhead as a company-level cost. This is simpler and more useful for job-level decisions. Fully-loaded job cost accounting (allocating overhead to each job) is only necessary above $5M or when preparing for a sale and needing fully-absorbed financials.
Contribution Margin Approach (Recommended for $500K–$5M)
Under this approach:
- Job P&L: Revenue − direct costs (labor, materials, subs, equipment, TPA fees) = Gross Profit per Job
- Company P&L: Total gross profit − total operating expenses = Net Operating Income
The job P&L tells you which jobs are most profitable relative to their direct costs. The company P&L tells you whether the business is profitable after overhead. These are two distinct questions — keep them separate.
Overhead categories for a typical restoration company:
| Category | % of Revenue (typical) | |---|---| | Owner / management salaries | 5–10% | | Office staff | 3–6% | | Vehicles (non-direct) | 2–4% | | Software stack | 1–3% | | Insurance (GL, E&O) | 1–2% | | Occupancy | 1–3% | | Training / certification | 0.5–1% | | Marketing / advertising | 1–4% | | Total overhead | 15–30% |
RIA Cost of Doing Business Report, 2024Fully-Loaded Approach (for $5M+ or exit preparation)
If you need fully-absorbed job cost data — for lender reporting, buyer due diligence, or department-level profitability — allocate overhead using a predetermined rate.
Common allocation bases:
- % of direct labor dollars (simplest): Overhead rate = total overhead ÷ total direct labor. Apply this % to the direct labor cost on each job.
- Per job-hour (more precise): Overhead per hour = total overhead ÷ total field labor hours. Apply per field hour worked on each job.
The key is consistency across all jobs in the period. Whichever method you choose, apply it uniformly.
Xactimate-to-Actual Reconciliation
Xactimate-to-actual reconciliation compares the approved estimate to actual job costs at close. The comparison reveals whether scope was properly billed, whether labor was efficient, and whether equipment billing captured all deployed days. Gaps over 10% in any category warrant investigation — they represent either billing opportunity (equipment gaps) or execution issues (labor overrun).
The Xactimate estimate is the price agreement. Your actual job costs are the spend. The reconciliation tells you whether the margin you expected materialized — and if not, why.
The Reconciliation Process
Step 1: Export Xactimate by category. Most adjusters provide an estimate printout organized by line item. Group line items into: Labor (all labor operations), Materials (all material items), Equipment (all equipment line items), O&P (overhead and profit), and Other (specialty items).
Step 2: Pull the QBO job P&L. Run the Project Profitability report for the closed job. Export to Excel or view in-screen.
Step 3: Compare line by line:
| Category | Xactimate estimate | Actual (QBO) | Variance | Analysis | |---|---|---|---|---| | Labor | $8,400 | $9,200 | +$800 (10%) | Labor overrun — investigate hours | | Materials | $3,200 | $2,900 | −$300 (9%) | Minor favorable — acceptable | | Equipment | $4,800 | $4,200 | −$600 (13%) | Equipment billing gap — possible supplement | | Subcontractor | $2,100 | $2,100 | $0 | Clean | | O&P | $1,840 | — | — | Revenue only, no cost | | Total | $20,340 | $18,400 | −$1,940 | |
In this example, the equipment gap of $600 warrants an equipment-day review. If 8 unreported equipment days were deployed (at $75/day dehumidifier rate), that's a $600 supplement opportunity.
Common Reconciliation Findings
Labor overrun (actual > estimated): Usually indicates scope creep that wasn't captured in a supplement, or labor inefficiency on a specific phase. The right response is either a scope supplement (if work was genuinely beyond the estimate) or a root-cause review of the efficiency gap.
Materials underrun (actual < estimated): Usually favorable — materials saved. Verify that all materials were actually used and not returned without credit to the job.
Equipment gap (estimated > actual billing): Almost always a billing opportunity. The equipment ran; the question is whether every day is captured. Run the equipment log reconciliation before concluding the gap is acceptable.
Revenue vs. cost gap (estimated revenue > actual revenue collected): Usually a collections issue, not a cost issue. Compare approved estimate to invoices posted in QBO to identify if any scope hasn't been invoiced.
The Restoration Job Costing Framework
The Restoration Job Costing Framework defines five tiers of job costing maturity. Most restoration companies enter at Tier 1 (jobs are tracked, revenue is assigned) and plateau at Tier 2 (costs are categorized). The progression to Tiers 3–5 — where margin data drives actual business decisions — is what separates high-margin operations from average ones.
Tier 1: Track
What it means: Every job has an identifier in QBO. Revenue is assigned to jobs. You can see how much revenue each job generated.
What's missing: Direct costs are not assigned to jobs. No job P&L — only job revenue.
Who's here: Many restoration companies at $500K–$1.5M with basic QBO setups.
What it costs: Without job costs, you can't calculate gross margin per job. You're flying on revenue data only — which tells you nothing about profitability.
Tier 2: Code
What it means: Revenue AND direct costs are assigned to jobs. The four cost categories (labor, materials, subs, equipment) are separated. Job P&L shows gross margin per job.
What's missing: Direct costs may use base wage instead of loaded rate. Equipment days may not be reconciled. TPA fees may not be assigned to individual jobs.
Who's here: Companies that have done a chart-of-accounts rebuild and require job coding on all transactions.
The step up from Tier 1: Establish the four cost categories. Require job assignment on all direct costs. Calculate and start using loaded labor rates.
Tier 3: Close
What it means: Before a job is marked closed, the job P&L is reconciled against the Xactimate estimate. Equipment days are confirmed. Supplements are checked. The final job margin is reviewed and explained.
What's added: Job-close checklist. Equipment-day reconciliation habit. Systematic supplement review on every job close.
Who's here: Companies with a bookkeeper or controller who has implemented a job-close protocol.
The step up from Tier 2: Create and enforce a job-close checklist. See the equipment reconciliation guide for the checklist template.
Tier 4: Analyze
What it means: Monthly job review — all closed jobs in the month are reviewed for margin. Outliers are flagged. Patterns are identified across job types, job sizes, or TPA programs.
What's added: Monthly management meeting or report that surfaces margin anomalies and trends. Comparison of actual vs. estimated margin by job type.
Who's here: Companies with a fractional CFO or strong bookkeeper who produces a monthly package with job-level analysis.
The step up from Tier 3: Schedule a monthly job review. Define what "outlier" means (below 20% margin? below 10% of average for that job type?). Create a template for the monthly job review report.
Tier 5: Optimize
What it means: Job costing data directly informs business decisions. TPA programs with consistently below-average margins are renegotiated or dropped. Labor-heavy job types get estimating adjustments. Equipment utilization is maximized based on deployment data.
What's added: Data flows from job-level P&L to operational decisions. The job costing system is a competitive tool, not just a reporting function.
Who's here: Top-quartile restoration companies — typically $3M+ with professional financial management.
The step up from Tier 4: Define the decision rules that job costing data should inform. Start with TPA program review: what's the minimum acceptable gross margin for a TPA program to remain active? Review quarterly.
Assess Your Job Costing Maturity
Not sure which tier you're at? We'll review your current QBO setup, check whether job costs are properly assigned, and tell you what it would take to reach the next tier.
Service-Line Profitability Analysis
Service-line profitability compares gross margin across water mitigation, fire restoration, mold remediation, contents, and reconstruction. The analysis reveals which service lines to invest in, which need pricing adjustment, and whether your mix of work is moving toward or away from your highest-margin capabilities.
Once you have job-level P&L (Tier 2 or above), aggregate it by service line using QBO Classes or custom fields. Here's what to expect:
| Service Line | Gross Margin — Low | Gross Margin — High | Margin driver | |---|---|---|---| | Water mitigation | 35% | 50% | Equipment revenue ratio; fast cycle | | Fire restoration | 30% | 45% | Scope complexity; content items | | Mold remediation | 35% | 55% | IICRC expertise premium; specialty subs | | Contents restoration | 40% | 55% | Value-add services; storage revenue | | Reconstruction | 18% | 28% | Sub-intensive; lower markup | | Storm (CAT response) | 25% | 45% | Volume × speed tradeoff |
Interpreting the Comparison
If your water mitigation margin is below 30%: The most likely causes are equipment billing gaps (reconcile equipment days), supplement underperformance (check supplement attachment rate), or loaded labor rates not in use.
If your reconstruction margin is below 18%: Investigate subcontractor cost concentration. If a single sub or two subs account for >60% of reconstruction revenue and are charging high rates, that's driving margin down. Compare your sub rates to alternative bids.
If mold is your highest-margin line but you're not growing it: Consider whether IICRC AMRT certification gaps are limiting scope. Mold margins are high partly because the barrier to entry (certification, specialized equipment) is high.
If contents is below 40%: Storage revenue may not be billed or tracked. Item-by-item cleaning is labor-intensive — check whether labor rate is accurate. Replacement vs. restoration decisions may be defaulting to replacement (lower margin) when restoration is appropriate.
The TPA Channel Comparison
Compare margin by service line AND by whether the job was TPA-routed or direct:
| | Direct Job | TPA-Routed Job | |---|---|---| | Water mitigation gross margin | 42% | 35% | | Effective margin difference | — | −7% | | Source of difference | — | TPA fee (9%) + potential scope restrictions |
If your TPA-routed water mitigation margin is more than 10 points below your direct margin, that gap exceeds the TPA fee and suggests the TPA program is also restricting your scope or rate in some way. That's a contract review conversation.
The Monthly Job Review Process
The monthly job review is a 30–60 minute process where all jobs closed in the month are reviewed for gross margin — sorted from lowest to highest, with outliers discussed and categorized as estimating issues, execution issues, or collection issues. This is the mechanism that turns job costing data into management action.
The Review Template
For each closed job in the month:
- Job identifier: Address, claim number, job type, TPA or direct
- Revenue: Total invoiced and collected
- Gross margin %: From job P&L
- vs. job-type target: Is it above or below the service-line benchmark?
- Flag: Yes / No (flag if more than 8 points below benchmark)
- Root cause (flagged jobs only): Estimating gap? Labor overrun? Equipment billing gap? Supplement gap? Collection shortfall?
- Action item (if any): Supplement to submit? Pricing adjustment for next estimate? Process change?
Categorizing Margin Variances
When a job's margin is below expectation, the root cause is always in one of three buckets:
Estimating gap: The Xactimate estimate was too tight, didn't include enough labor hours, or missed scope. The fix is to adjust your estimating templates or approach for that job type going forward.
Execution gap: The estimate was fine, but the job cost more to complete than estimated — too many labor hours, materials overrun, extra subcontractor cost. The fix is operational — labor efficiency, materials management, or subcontractor pricing.
Collection gap: The work was done and the scope was right, but not all of it is invoiced or collected yet. Open AR, unapproved supplement, or an uncollected holdback. The fix is in the billing and collections workflow.
Frequency and Format
- Monthly: Full review of all closed jobs
- Weekly (optional for high-volume operations): Quick scan of jobs closed in the past week for any immediate flags
- Quarterly: Trend analysis — is average margin by job type moving up or down? Is a specific TPA program's margin trending below your threshold?
KPI Tracking
Job costing data supports five core KPIs: gross margin by job type, revenue per field tech per day, estimated vs. actual margin variance, equipment revenue as a percentage of mitigation revenue, and supplement attachment rate. Track these monthly and compare to prior periods.
| KPI | How to calculate | Target range | Red flag | |---|---|---|---| | Gross margin by job type | Job revenue − direct costs ÷ revenue | Water: 35–50%; Fire: 30–45% | Below floor for job type | | Revenue per tech per day | Total revenue ÷ total field tech-days | $800–$1,500 | Under $600 | | Estimated vs. actual variance | (Actual margin − estimated margin) | Within ±5% | Over −10% consistently | | Equipment revenue % | Equipment revenue ÷ total mitigation revenue | 25–40% | Under 20% | | Supplement attach rate | Jobs with supplement ÷ total jobs | 35–60% | Under 25% | | Labor efficiency | Actual hours ÷ estimated hours | 0.85–1.05 | Over 1.20 | | Sub cost % of reconstruction | Sub invoices ÷ reconstruction revenue | 40–55% | Over 65% |
Reading the KPIs Together
Equipment revenue % is low AND estimated vs. actual variance is negative: Equipment days are being deployed but not billed. Classic equipment reconciliation gap. Check the drying logs.
Labor efficiency > 1.20 AND estimated vs. actual variance is negative: Jobs consistently take more labor than estimated. Either estimates are systematically tight, or field efficiency is below expectation.
Supplement attach rate < 25%: Either your scope is consistently complete in the original estimate (unlikely for most jobs with hidden damage or code requirements) or supplements are being missed. Compare your attach rate to the industry average of 35–60% for insurance-driven work.
Key Takeaways
- Job costing is the most important financial practice in restoration — it answers which jobs, job types, and channels are actually profitable.
- Restoration job costing differs from construction because equipment is a revenue stream, payment cycles are multi-stage, and the Xactimate estimate is both the price agreement and the cost reference.
- QBO Projects or sub-customers — one record per job — is the foundation. Every transaction must have a job assignment.
- Four direct cost categories: Labor (at loaded rate), Materials, Subcontractors, Equipment. TPA fees are a fifth category for TPA-routed jobs.
- Loaded labor rate = base wage × 1.30–1.55. Workers' comp in restoration runs 8–18%, the highest in the industry. Using base wage understates labor cost by 30–55%.
- Xactimate-to-actual reconciliation before job close catches equipment billing gaps and scope supplement opportunities.
- The Restoration Job Costing Framework has five tiers: Track → Code → Close → Analyze → Optimize. Most companies are at Tier 1 or 2. Tier 3+ is where margin improves.
- Gross margin benchmarks by service line: Water 35–50%, Fire 30–45%, Mold 35–55%, Contents 40–55%, Rebuild 18–28%.
- Monthly job review — 30–60 minutes reviewing all closed jobs — converts job P&L data into management action.
- Track five KPIs: Gross margin by job type, revenue per tech per day, estimated vs. actual variance, equipment revenue %, supplement attach rate.
- TPA vs. direct margin comparison reveals whether TPA programs are profitable after fees — or whether they're subsidized by direct work.
Frequently Asked Questions
What is job costing in restoration?
Job costing tracks every dollar of revenue and direct cost to the specific job that generated it, producing a gross margin per job. Unlike company-level P&L — which shows aggregate margins — job costing reveals which specific jobs, job types, and revenue channels are profitable. It's the tool that answers "which jobs made money?"
How do you set up job costing in QuickBooks Online?
Enable Projects (QBO Plus or Advanced), create one Project per job, configure Items to post to correct income and cost accounts, add custom fields for TPA program and service type, enable Classes for service-line tracking, and require job assignment on all direct-cost transactions. The Project Profitability report is your job P&L.
What is a loaded labor rate and why does it matter?
A loaded labor rate is base wage × (1 + burden factor). The burden factor for restoration runs 30–55%, covering FICA (7.65%), workers' comp (8–18%), health insurance, and PTO. Using base wage understates labor cost by 30–55% and overstates job margins proportionally. At 200 jobs/year, the misstatement can exceed $15,000.
What gross margin should a restoration job have?
By service line: water mitigation 35–50%, fire restoration 30–45%, mold remediation 35–55%, contents 40–55%, reconstruction 18–28%. Jobs below these ranges typically have equipment billing gaps, supplement shortfalls, labor overruns, or TPA fee misclassification. Jobs above these ranges should be verified for complete cost posting.
What is the Restoration Job Costing Framework?
A five-tier maturity model: Tier 1 (Track) — revenue assigned to jobs; Tier 2 (Code) — costs properly categorized; Tier 3 (Close) — Xactimate reconciliation before job close; Tier 4 (Analyze) — monthly job review identifies outliers; Tier 5 (Optimize) — margin data drives estimating, TPA, and hiring decisions. Most companies operate at Tier 1 or 2.
How do you reconcile Xactimate to actual costs?
Export the Xactimate estimate by category (labor, materials, equipment). Compare to the QBO job P&L at close. Investigate variances over 10% in any category. Equipment gaps (Xactimate billed more than deployed, or deployed more than billed) are supplement opportunities. Labor overruns are efficiency investigations.
Sources and Further Reading
Primary Sources:- Restoration Industry Association (RIA), Cost of Doing Business Report, 2024
- National Council on Compensation Insurance (NCCI), Scopes Manual and Classification Rates, 2024
- Cat3 Books, Client Margin Analysis Dataset, 2024–2025
Cat3 Books Field Notes — Related Guides:
- How to Read a Job-Level P&L Like a Restoration Owner
- The Four Cost Categories Every Restoration Job P&L Must Split
- Class Tracking for Restoration Jobs in QuickBooks Online
- Equipment-Day Reconciliation: The 15-Minute Weekly Habit
- Why Your Supplements Disappear Between Xactimate and QuickBooks
- The Complete Guide to Bookkeeping for Restoration Companies
- The Complete Guide to Insurance Billing Accounting
- The Complete Guide to Restoration Company Financial Management
Last updated May 2026. Cat3 Books is a restoration-exclusive bookkeeping firm serving water, fire, mold, and reconstruction companies nationwide.