Bookkeeping for Contractors: A Simple System That Works

1. Separate business and personal money

Use one business checking account and one business credit card for everything job-related. Mixing a supply-house run with groceries on the same card is the single biggest cause of messy contractor books. Pay yourself with a transfer recorded as an owner’s draw — see owner’s draw vs. salary.

2. Track every job separately (job costing)

Job costing means tagging income and costs to the job they belong to. In QuickBooks Online that’s done with Projects (or customers/jobs) and by assigning each materials purchase, subcontractor bill and labor cost to a project.

The payoff: a profit report per job. You’ll see which kinds of work make money and which only keep you busy — information that should shape how you bid.

3. Set up a contractor-friendly chart of accounts

Keep it lean, but split cost of goods sold into the categories you’ll want to analyze:

• Job materials
• Subcontractors
• Direct labor
• Equipment rental
• Permits and dump fees

4. Handle subcontractors and 1099s correctly

Collect a W-9 from every subcontractor before the first payment, and track payments by vendor so year-end 1099-NEC forms are a report, not a scavenger hunt. Make sure workers really are contractors — the distinction is explained in 1099 contractor vs. W-2 employee.

5. Record deposits and progress billing properly

A customer deposit for work you haven’t done yet isn’t really earned income. How you record deposits depends on your accounting method (cash or accrual) — agree on the approach with your CPA and apply it consistently, so your profit isn’t overstated in the month a big deposit lands.

Invoice progress payments promptly, and watch your accounts receivable aging. Contractors are especially vulnerable to the cash gap described in why profitable businesses run out of cash.

6. Capture receipts on the job site

Snap a photo of every receipt the day you get it with the QuickBooks mobile app or a receipt app. Note the job name on it. Faded supply-store receipts in the truck console are how deductible costs get lost.

7. Close the books every month

Categorize, assign costs to jobs, and reconcile every account monthly. Then review job profitability and AR. The full routine is in the monthly bookkeeping checklist. If you have crews on payroll, keep payroll current too — see payroll services.

The bottom line

Contractor bookkeeping comes down to clean separate accounts, costs tagged to jobs, and a monthly close. Tejas Bookkeeping doesn’t prepare or file tax returns, but organized job-level books give your CPA what they need — and give you the numbers to bid smarter.