QuickBooks cleanup for contractors: how to untangle job costs, subs and deposits

Common QuickBooks mess-ups for contractors

• Job costs floating loose. Lumber, dumpsters and sub payments are recorded but not tagged to a customer or project, so every job looks the same.
• Deposits treated as earned. A deposit for work that hasn’t started gets recorded as regular income. How it should be booked depends on your accounting method, so this is one for your CPA.
• Retainage forgotten. The held-back amount never shows up anywhere, so it’s easy to never collect it.
• Subs without paperwork. No W-9 on file and vendors not marked for 1099 tracking. Missing sub insurance certificates can also cause trouble at an insurance audit.
• Change orders that never get invoiced. Extra work gets done and paid for in materials, but never billed.
• Tools and equipment. Big purchases expensed one year and set up as assets the next, with no pattern. Ask your CPA how they want them handled.

What a DIY cleanup involves for a contracting business

1. Clean-file basics. One business account and card, every account reconciled to its statements, Uncategorized emptied.
2. Set up jobs. Each job as a customer or project in QuickBooks Online (Projects is included in some plans), then tag open bills, expenses and invoices to it.
3. Sort subs. Collect W-9s, mark 1099 vendors, and check that sub payments are coded the same way every time.
4. Make deposits and retainage visible. Set them up the way your CPA recommends so you can always see what’s owed.
5. Review job profit. Run the project or customer profit report and look for jobs with missing costs or missing invoices.

Example (made-up numbers): a bathroom remodel shows $14,000 invoiced and only $2,100 of cost. A search turns up $5,800 of tile and fixtures on a different card and a $3,000 sub payment, none tagged to the job. Once tagged, the job’s real margin shows up.

DIY kit or bookkeeper?

A kit tends to fit when

• you run a handful of jobs at a time in QuickBooks Online
• the mess is mostly coding and tagging, not missing records
• you want to see job profit yourself every month
• you can spend a few hours a week on it

A bookkeeper is likely the better call when

• you’re more than a year behind, or a tax return is unfiled
• you have letters or notices about payroll tax, sales tax or 1099s
• you need clean books fast for a loan, a sale or a partner buyout
• nobody in the shop has a few hours a week to give it
• you have certified payroll, prevailing wage jobs or complex progress billing

Compare all three routes on the kit vs. bookkeeper vs. doing nothing page.

The contractors kit and its free video

Contractors Fix shows these steps on screen in a demo QuickBooks Online company. The free first video (about 3 minutes) covers job costing by job, subs and 1099s, and materials, deposits and retainage. Watch it free on the Contractors Fix page.

Quick questions