Cost Centres: The Secret to Knowing Which Jobs Actually Make You Money

You finish a job. The customer pays. Money lands in the bank.

But here is the question that keeps smart engineering business owners awake at night: Did that job actually make you money?

Not "did we get paid?" but "after all the hours, materials, subcontractors, and overheads—was there anything left?"

Most businesses cannot answer this question with confidence. They know their overall profit margin. They have a rough sense of which jobs "went well." But they do not have the granular visibility to know exactly where their money is being made—and where it is being lost.

This is where cost centres come in.

SectionWhat Is a Cost Centre?

A cost centre is simply a way of breaking down a job into its component parts so you can track costs against each one separately.

Instead of treating a job as one big bucket of costs, you split it into logical sections. For a fabrication job, this might look like:

Each cost centre has its own estimated cost (from the quote) and actual cost (tracked as the job progresses). The difference between them tells you exactly where you are making or losing money.

SectionWhy Most Businesses Do Not Use Cost Centres

If cost centres are so powerful, why do most engineering businesses not use them?

"It is too much admin." This is the most common objection. Tracking costs at this level feels like paperwork for paperwork's sake. But the reality is that modern job management software makes this almost automatic—if you set it up correctly.

"We do not have time to quote that way." True, detailed quotes take longer. But a detailed quote is not just for the customer—it is your roadmap for delivering the job profitably. The time you invest upfront saves you multiples in avoided losses.

"We know roughly how jobs go." Roughly is not good enough. "Roughly" is how you end up with a 15% margin on paper and 5% in the bank. The businesses that win are the ones that know precisely.

SectionThe Hidden Profit Leaks Cost Centres Reveal

When you start tracking by cost centre, you will discover things you never knew about your business. Here are the most common revelations:

1. Your Estimates Are Consistently Wrong in the Same Places

You might find that your fabrication estimates are spot-on, but your installation costs are always 30% over. This is not random—it is a systematic problem with how you estimate installation work. Fix the estimating, fix the margin.

2. Certain Job Types Are Unprofitable

That "bread and butter" work you have been doing for years? Cost centre analysis might reveal it has been losing you money all along. The volume made it feel important, but the margins were never there.

3. Some Customers Cost More to Serve

When you track project management time by job, you will quickly see which customers require endless hand-holding and which are efficient to work with. This should inform your pricing—or your customer selection.

4. Scope Creep Is Killing Your Margins

Without cost centres, scope creep is invisible. With them, you can see exactly when a job starts going over budget and in which area. This gives you the ammunition to have the conversation with the customer before it is too late.

SectionHow to Implement Cost Centres (Without Drowning in Admin)

The key to successful cost centre implementation is starting simple and building up. Here is a practical approach:

Step 1: Define Your Standard Cost Centres

Create a template of 4-6 cost centres that apply to most of your jobs. Keep it simple. You can always add more detail later.

For most engineering businesses, a good starting point is:

• •Materials
• •Labour (shop)
• •Labour (site)
• •Subcontractors
• •Project management

Step 2: Build Cost Centres Into Your Quoting Process

When you quote a job, break down your estimate by cost centre. This forces you to think through each element and creates the baseline for tracking.

Step 3: Track Actual Costs as They Happen

This is where most businesses fail. They set up cost centres but never populate them with actual data. The key is to capture costs at the point they occur:

• •Time logged against specific cost centres, not just "the job"
• •Purchase orders linked to cost centres
• •Subcontractor invoices allocated correctly

Step 4: Review Weekly, Not Monthly

Do not wait until the job is finished to discover you have lost money. Review cost centre performance weekly. If a cost centre is trending over budget, you can take action—adjust the approach, have a conversation with the customer, or at least understand why.

Step 5: Use the Data to Improve

The real value of cost centres is not just knowing what happened—it is using that knowledge to improve. After every significant job, ask:

• •Which cost centres were over/under budget?
• •Why?
• •What will we do differently next time?

SectionThe Payoff: Clarity and Control

Businesses that implement cost centre tracking properly report:

• •Improved margins of 10-20% within the first year
• •Better quoting accuracy as estimates are refined based on real data
• •Earlier warning when jobs are going off track
• •Clearer conversations with customers about variations and extras
• •Confidence in knowing exactly where the business makes money

SectionTake Action

If you are not tracking costs at the cost centre level, you are flying blind. You might be profitable overall, but you do not know which parts of your business are carrying which.

Start simple. Pick your next significant job and break it down into 4-5 cost centres. Track the actuals against the estimates. See what you learn.

Want help setting up cost centre tracking in your business? Book a discovery call to discuss your specific situation.

Or download our Job Costing Spreadsheet Template—a ready-to-use tool for tracking costs against quotes on every job.