Contractor Bookkeeping: What a Specialized Contractor Bookkeeper Does (and When You Need One)

Contractors can hire a general bookkeeper, and the books will usually balance. The problem is that balanced books don't answer the questions contractors actually ask: Which jobs made money? Are we over-billed or under-billed on the big project? Why did last month show a profit when the bank account says otherwise? Contractor bookkeeping is built around those questions, and that's the difference between a bookkeeper who records what happened and one who can tell you how each job is going.

Why contractors need a different kind of bookkeeping

Most small businesses sell something, collect for it and pay their overhead. A contracting business runs a set of projects at the same time, each with its own contract value, budget, crew, materials, subcontractors and billing schedule. Money comes in on draws or progress billings that don't line up with when the costs hit. Retainage sits unpaid until a project closes. Labor, usually the biggest cost, is spread across several jobs in the same week. A chart of accounts built for a retail shop or a consultant can't show any of that, so the profit and loss looks fine while individual jobs quietly lose money.

The foundation: monthly bookkeeping done properly

• Categorizing bank and credit card activity
• Reconciling every bank, card and loan account to its statement
• A structured month-end close, done the same way every month
• Reviewing accounts receivable and accounts payable
• Reviewing the balance sheet, not just the profit and loss

Job costing

Job costing ties direct costs (labor, materials, subcontractors and equipment) to the job that incurred them, so job gross profit is a real number instead of an estimate. Most job costing fails in the monthly work rather than the setup: a materials receipt coded to general expenses, or a supplier bill split across jobs incorrectly, moves profit from one job to another. A contractor bookkeeper reviews job cost coding every month, before the reports go out.

Labor allocated to jobs

Labor is often the largest job cost, and it's the one most often left unallocated. A contractor bookkeeper uses hours or crew data from your payroll provider or job software to allocate labor to each job, so job reports reflect what the work really cost. If payroll isn't set up yet, we handle the setup turnkey and assist as needed after that, so labor lands in the books the way job costing needs it.

Work-in-progress (WIP), draws and retainage

On projects that span more than a month, billing and costs rarely move together. A WIP schedule compares costs incurred and billings against the contract to show whether each job is over- or under-billed, which keeps profit from being overstated early or understated late. Draws are tied to contract value, and retainage receivable and payable are tracked until they're collected or paid. Lenders and bonding companies often ask for this, and it's much easier to produce when it's kept up every month.

Subcontractor costs

Subcontractor bills are coded to the job they belong to, and retainage you're holding on subs is tracked. Keeping subcontractor records organized also makes year-end reporting easier for you and your CPA. If you're the subcontractor rather than the GC, the picture flips: you're billing on someone else's pay schedule and waiting on retainage they hold. We cover that side in our article on bookkeeping for subcontractors and specialty contractors.

Keeping job software and QuickBooks in agreement

Most contractors run on job management or estimating software such as Knowify or Jobber. That software and QuickBooks need to agree on customers, invoices, payments and job costs. A contractor bookkeeper checks that what reaches QuickBooks, whether by built-in sync or monthly entries, matches what actually happened on the job.

Reporting you can act on

The payoff is reporting by job: contract value, revenue and costs to date, job gross profit, budget remaining and forecast profit, while the project is still open and you can still do something about it. Alongside that, a cash view that shows what's coming in from draws and retainage against what's going out for payroll, materials and subs.

Signs you've outgrown your current bookkeeper

• Your books balance, but nobody can tell you which jobs made money
• Labor and materials go to general expense accounts instead of jobs
• You don't know how much retainage you're owed or holding across open jobs
• Your job software and QuickBooks show different numbers for the same customer or job
• A lender, surety or bonding company asked for a WIP schedule and it took weeks to build
• Your CPA spends the start of every tax season fixing the books before they can begin
• You're bidding new work off gut feel because past job results aren't reliable

What a contractor bookkeeper doesn't do

A bookkeeper keeps your records accurate and reconciled all year. Tax preparation and tax planning stay with your CPA or EA. A good contractor bookkeeper works alongside them, answers their questions during the year and hands over clean, reconciled books at year end.

Questions to ask before you hire

• How would you set up jobs, cost codes or classes in my QuickBooks file?
• How do you allocate labor to jobs each month?
• Do you track WIP, draws and retainage, and can I see an example of the report?
• How do you keep my job software and QuickBooks in agreement?
• How do you work with my CPA at year end?
• How is pricing structured? (A flat monthly fee based on agreed scope is easier to plan around than hourly billing.)
• How do you get access to my QuickBooks file? (The answer should be QuickBooks' accountant invitation, never your password.)

How Bookkeepers Lane works with contractors

We work with general contractors, home-service companies and specialty trades in metro Atlanta and remotely across the US. We set up job-level structure in QuickBooks Online, close the books every month with a review of job cost coding, track WIP, draws and retainage where they apply, and build job-profitability dashboards on your QuickBooks data. Open our contractor demo to click through an example built on fictional data. Every engagement starts with a free Books Review; after that, pricing is a flat monthly fee based on the scope we agree on.