Bookkeeping for Contractors and Trades Businesses

Contractors and trades businesses don’t have ordinary bookkeeping. Between job costing, retainage, progress billing, equipment, and the way deposits and draws flow, a general-purpose bookkeeper usually creates more cleanup than clarity. This guide covers what contractor bookkeeping actually needs to get right.

Job costing is the whole game

For a contractor, profit is made (or lost) per job, not per month. Your bookkeeping has to attach every cost — labor, materials, subcontractors, equipment, and permits — to the specific job it belongs to. Without true job costing, you can’t tell which projects made money and which quietly bled. Every transaction should tie to a job or a class; “general” should be the rare exception, not the default.

Handle retainage and progress billing correctly

Retainage — the percentage held back until a job is complete — and progress billing for long projects both create timing gaps between earned revenue and collected cash. Your books need to track what’s earned versus what’s been invoiced versus what’s been collected. Compress those into one number and you’ll constantly over- or under-state how the business is doing.

Track equipment and reimbursable expenses

Tools, trucks, and small equipment are real costs that often get scattered across “miscellaneous.” Track them as assets with proper depreciation, and bill reimbursable expenses back to the job that used them. Fuel, dump fees, permits, and rentals all belong on the job — not in a vague overhead bucket that hides true project margin.

Reconcile, then reconcile again

Contractors move a lot of money through multiple accounts — operating, payroll, and sometimes draws tied to financing. Monthly reconciliation across all of them is what prevents the small errors that snowball into six-figure surprises. If you only reconcile the main checking account, the others quietly drift.

The reports that actually matter

• Job profitability report — revenue minus true allocated cost per job.
• Work-in-progress schedule — what’s earned, invoiced, and collected per project.
• Cash position across operating, payroll, and reserve accounts.
• Aging on receivables and payables — late-paying clients and overdue subs.

1099s for subcontractors are not optional

Contractors almost always pay enough subcontractors to owe 1099-NECs by January 31. Track each subcontractor’s total paid across the year through job costing, collect W-9s up front, and you can file 1099s in an afternoon instead of a January panic.

What to set up before the next job starts

Most contractor bookkeeping problems are decided in the first week of a job. Create the job in your books before the first purchase, give it a clear name, and decide how materials, labor, subcontractors and equipment will be coded to it. Agree on a rule for receipts: every material purchase gets a job name at the time of purchase, not at month end when nobody remembers which truck load went where.

Also decide how change orders are recorded. A change order that is approved verbally and never written down shows up later as a job that looks unprofitable. Keep the signed change order with the job file and bill it as its own line so the books match the paperwork.

Contractor bookkeeping rewards consistency over heroics: job costing every transaction, reconciling every account, and closing every month. We set up exactly that cadence for trades businesses — and handle the 1099s at year end. Book a call and we’ll look at how your current setup tracks costs per job.

Frequently asked questions

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