Contractors

Job Costing Basics for Contractors in QuickBooks Online

Contractors need two answers out of the books: did the company make money, and which jobs made it. Job costing answers the second one. Set up right, it shows you which jobs paid, which ones slipped, and where labor, materials, or overhead ran past what you figured.

Why job costing matters

Revenue can look healthy while two or three jobs quietly lose money underneath it. Costs by job tell you which ones. That’s what you want in front of you before you bid the next one.

The core pieces to track

At a minimum you need three things tagged to the right customer or job:

• Direct materials, tied to the job that used them
• Labor and subcontractor costs by job
• Major job-specific expenses, like equipment rental or permits

A real cost shouldn’t disappear into one big general account. In QuickBooks Online I set this up with the Projects feature, so expenses, bills, and time all tag to a job and the profitability report builds itself.

Keep the system usable

Whatever you set up, your crew and your office have to keep it up every week. Too many categories and they stop. I’d rather see five cost categories used every time than thirty used when somebody remembers.

Clean books make the job reports trustworthy

Job costing sits on top of ordinary bookkeeping: transactions entered right, names used the same way every time, accounts reconciled, and somebody checking where the costs landed. A steady month-end close covers that. When the entry is sloppy, the job reports go wrong fast.

Questions to ask your numbers every month

• Which jobs had the best gross margin?
• Where did labor run past the estimate?
• Did materials get posted to the right jobs?
• Which cost patterns should change the next bid?

With the books set up this way, those take a few minutes instead of a Saturday. It pays off again at year-end, when closing out jobs is the first thing on my contractor year-end checklist.

How I help contractors

I keep books for contractors, construction companies, and trade businesses anywhere in the United States, from my desk in the Springfield area: job costing set up in QuickBooks Online, accounts reconciled every month, payroll runs from your payroll provider recorded and reconciled, 1099s for your subs prepared and e-filed, and reports that finally match the checkbook. My contractor bookkeeping page covers how I work with the trades, and the pricing page explains how I build a quote. Monthly bookkeeping is a flat monthly fee, quoted in writing after a free review of your file.

I’m a bookkeeper, not a tax preparer or attorney. For tax and legal questions, confirm the details with your CPA. I keep the books that make their job easier.