Bookkeeping Tips for Contractors & Construction Businesses

Contractors work hard to build projects, but behind every successful job is another structure just as important—your bookkeeping system. Unlike other industries, contractors face unique challenges:- Upfront costs for materials and labor- Waiting weeks (or months) to get paid- Managing multiple jobs at once- Staying compliant with payroll, insurance, and tax reporting. This new series is designed for contractors and construction business owners who want to stop guessing and start running the numbers with confidence. Here are 10 actionable tips—from tracking job costs to improving cash flow—that will help you protect your profits and build a stronger business foundation.

Tip #1: Separate Job Costs from Overhead

One of the biggest mistakes contractors make is lumping all expenses together. When labor, materials, and subcontractors aren’t separated by project, you’ll never know if a job was truly profitable.

What to do instead: Track all costs by project and keep overhead (like rent and utilities) in separate categories.

Tip #2: Use Classes or Projects in QuickBooks

QuickBooks has powerful tools like Classes and Projects that make tracking income and expenses by job simple and effective. This ensures you can pull profitability reports for each project.

What to do instead: Set up each project as a separate Class or Project and allocate all related transactions accordingly.

Tip #3: Track Labor Costs Accurately

Labor is often the largest and most variable cost in construction. If you only track gross wages, you’re missing the full picture.

What to do instead: Include wages, payroll taxes, and benefits when calculating total labor costs per job.

Tip #4: Don’t Forget Subcontractors

Subcontractors are a huge part of most jobs, but mismanaging them can lead to compliance issues at year-end.

What to do instead: Collect W-9s, classify them correctly (not as employees), and track payments for accurate 1099 reporting.

Tip #5: Stay on Top of Change Orders

Change orders can make or break profitability. When they’re not documented and billed quickly, contractors lose revenue.

What to do instead: Record change orders as soon as they happen and invoice promptly.

Tip #6: Monitor Cash Flow Closely

Construction jobs often require paying for materials and subs long before clients pay you. This creates cash flow strain if not monitored carefully.

What to do instead: Forecast cash flow weekly, plan for gaps, and keep a reserve account when possible.

Tip #7: Keep Receipts for Materials

Materials are one of the largest direct costs for contractors. Without documentation, you can’t accurately track profitability or claim deductions.

What to do instead: Save and digitize receipts for every purchase. Attach them to jobs in your accounting system.

Tip #8: Stay Payroll Compliant

Construction payroll is complex, often involving prevailing wage requirements, workers’ comp, and overtime rules. Mistakes are costly.

What to do instead: Use payroll software designed for construction or outsource to ensure compliance.

Tip #9: Review Job Profitability Reports

If you aren’t reviewing profitability by job, you’re guessing instead of managing. Some jobs may be losing money without you knowing.

What to do instead: Review profitability reports regularly and use the data to improve future bids.

Tip #10: Don’t Do It All Alone

Bookkeeping for contractors is specialized and can quickly get overwhelming. Trying to manage it yourself often leads to errors and missed opportunities.

What to do instead: Partner with a professional who understands construction accounting so you can focus on building, not bookkeeping.