Full disclosure: this is mostly an accounting question, and I'm not an accountant, so take my advice with a heavy grain of salt and at your own risk. Definitely consult a real accountant if you have any doubts. However, I am a Sage employee and have worked with the software for many years.

In my opinion, with that setup, you'd likely have to constantly adjust your costing. The only way I see that working for you is that your accounting is really at the super-basic level, where your last cost for codes is constantly updated in the Inventory item list. Set it up properly, and you'll have a much clearer idea of your profitability at the report level.

I'm assuming that the cost codes converted as non-stock or maybe service items, but not as stock items. In that case the main difference is that inventory items control which GL account a transaction post to, but they don't show up on job reports. On the other hand, cost codes appear on job reports but they don't affect which GL account a transaction posts to.

Many job reports can be sorted by GL account, so if your reporting needs aren't very complex using Item IDs might give you the reporting you need. However cost codes provide a further level of breakdown with phases (you can't use cost codes if you don't use phases) allowing you to get more detailed reports that you can just with GL accounts.

Take a look at some of the job reports in one of the sample companies to get an idea of what's possible. Be sure look at each report's options to see how it can be sorted and summarized. That should help you decide if you want to take the time to set up cost codes.

Thanks so much, I appreciate the reply.  We're setting up the cost codes.  I need to model our phases to understand the best structure for reporting.