Construction bookkeeping software setup: chart of accounts, job cost codes, a weekly and monthly close checklist, reconciliations, receipts and sales tax.
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Construction bookkeeping software only helps if the routine behind it is solid. I ran three restoration companies over 14 years, and every time our books went sideways it was not because we picked the wrong program. It was because receipts sat in truck cabs, nobody coded costs to the right job, and the bank reconciliation happened whenever somebody remembered.
This guide is about the boring part that makes the numbers trustworthy: how to set up the chart of accounts, how to code costs to jobs, what to do every week and every month, how to handle receipts, retainage and sales tax, and which tools make the routine easier. It also covers the question every owner hits sooner or later: do you keep the books yourself, hire a bookkeeper, or split it?
If you are on QuickBooks and want the click-by-click setup, our QuickBooks for contractors setup and job costing guide walks through it. This post is the routine you run on top of whatever software you use.
KEY TAKEAWAYS
Regular bookkeeping asks what kind of income or expense each dollar is. Construction also asks which job it belongs to and which part of the job. Lumber for the Hendricks kitchen is not lumber for the shop.
So whatever you use, it needs to do these things without workarounds:
| Need | What it looks like in the software | Why it matters |
|---|---|---|
| Job tagging | Every bill, expense, time entry and invoice can be tagged to a job (Projects, Jobs or Customer:Job) | Without it you only know if the company made money, not which jobs did |
| Cost codes | Items, cost codes or cost categories you pick on each line (labor, materials, subs, equipment, by phase) | Lets you compare actual cost to the estimate line by line |
| Bank and card feeds | Transactions import daily and you match or categorize them | Less data entry, faster reconciliation |
| Receipt capture | A phone app or email inbox that attaches the receipt image to the transaction | Receipts in trucks get lost. Receipts in the app do not |
| Progress and retainage invoicing | Invoices against an estimate or contract, with retainage held back | Most construction work is not billed in one lump at the end |
| Job reports | Profit by job, estimates vs actuals, unbilled costs | This is the payoff for all the coding |
| Period lock | A closing date or password that stops edits to closed months | Keeps last month from quietly changing after you filed sales tax |
The most common mistake I see is an account for every job or supplier. That makes the profit and loss unreadable. Keep accounts general and let jobs and cost codes carry the detail.
Here is a starting structure for a small general contractor or trade contractor. Your CPA may want changes for your entity type and tax method, so treat it as a draft to review with them.
| Section | Accounts to have | Notes |
|---|---|---|
| Income | Contract income, Service and T&M income, Change order income (optional), Material markup (optional) | Some contractors keep all job income in one account and use cost codes for the split |
| Cost of goods sold (job costs) | Direct labor, Payroll taxes and burden on direct labor, Materials, Subcontractors, Equipment rental, Permits and fees, Dump and disposal | Only costs that belong to a specific job go here |
| Overhead expenses | Office wages, Rent, Insurance, Vehicles, Fuel, Phones, Software, Marketing, Shop supplies, Professional fees | Costs you would have even with no jobs running |
| Current assets | Operating checking, Payroll checking (optional), Accounts receivable, Retainage receivable, Undeposited funds | Retainage receivable as its own account keeps it from hiding in regular AR |
| Current liabilities | Accounts payable, Retainage payable, Credit cards, Sales tax payable, Payroll liabilities, Customer deposits | Customer deposits stay a liability until you earn them |
| Fixed assets | Vehicles, Equipment, Accumulated depreciation | Your CPA books depreciation, usually at year end |
Tip: Split labor between cost of goods sold and overhead. Field labor on a job is a job cost. The office manager and the estimator are overhead. If they all land in one wages account, your gross margin by job is fiction.
Cost codes are where construction bookkeeping gets its value. In QuickBooks Online most contractors use products and services items as cost codes. In construction systems like Sage 100 Contractor or Foundation, they are built in as cost codes and cost types. Either way, start small. A remodeler might use:
| Code | Description | Code | Description |
|---|---|---|---|
| 01 | General conditions and supervision | 08 | Doors, windows and trim |
| 02 | Demolition and disposal | 09 | Drywall and paint |
| 03 | Site work and concrete | 10 | Flooring and tile |
| 04 | Framing and carpentry | 11 | Cabinets and countertops |
| 05 | Roofing and exterior | 12 | Fixtures and appliances |
| 06 | Plumbing, HVAC and electrical (subs) | 13 | Permits, fees and inspections |
| 07 | Insulation | 14 | Cleanup and punch list |
Match your cost codes to the way you estimate. If your estimate has a line for drywall, your books should have a cost code for drywall. That is the only way an estimates vs actuals report tells you anything. A single-trade sub may only need labor, materials, equipment and subs.
In QuickBooks Online Plus and Advanced, the Projects feature tracks income and costs per job, according to Intuit's help pages. Classes are better used as a second dimension, such as residential vs commercial, or division. Do not try to use classes as jobs and projects as jobs at the same time. Pick one system for jobs and stick to it, because Intuit's community answers confirm there is no built-in way to convert one into the other later.
Weekly is the right rhythm. Monthly lets receipts and coding mistakes pile up until nobody remembers which job that supply house run was for. Block 60 to 90 minutes on the same day every week. For us it was Monday morning.
| 1 | Collect every receipt Chase the crews for receipts from the past week. Anything not already in the receipt app gets photographed now, with the job name written on it or typed in the notes. |
| 2 | Enter supplier and sub bills Enter every bill with its due date, job and cost code. Hold sub invoices missing a lien waiver or current certificate of insurance. |
| 3 | Clear the bank and card feed Match imported transactions to bills and receipts, and categorize the rest. Every job cost gets a job and a cost code before you click accept. If you do not know the job, ask today, not at month end. |
| 4 | Code the time Approve timesheets and make sure every hour has a job and a cost code before payroll runs. Labor is usually the biggest and least accurate number in a contractor's books. |
| 5 | Invoice what you can Send progress invoices that are due, T&M invoices for last week, change orders that got signed, and final invoices for anything finished. Work that is done but not billed is the cheapest money you will ever leave on the table. |
| 6 | Record deposits and payments Apply every customer payment to the right invoice. Deposits go to the customer deposits liability until the work is earned. |
| 7 | Look at the aging Spend five minutes on the AR aging report. Who moved into the 31 to 60 day bucket? Who broke a promise to pay? |
Step 7 is where bookkeeping and collections meet. If you want to read the aging report properly, see our guide to the accounts receivable aging report.
The monthly close turns a pile of entries into numbers you can act on. Finish it by the 10th of the following month.
MONTHLY CLOSE CHECKLIST
In construction, two more balance checks catch the expensive problems:
Our construction accounts receivable guide goes deeper on retainage and progress billing from the receivables side.
Receipts are the biggest leak in most construction books. The fix is a rule plus a tool. The rule: no receipt, no reimbursement, and every receipt gets a job name. The tool: a phone app that sends the photo straight into the books.
QuickBooks Online's mobile app lets you snap a receipt photo and attach it to a new or existing expense, and receipts can also be uploaded or forwarded by email, per Intuit's help pages. Dext (formerly Receipt Bank) extracts receipt data, pushes it to QuickBooks Online as a transaction with the image attached, and can apply account and tracking codes, according to Dext and user reviews. For field crews, a time tracking app with receipt capture can also work. Test that the job and cost code come through to the books before rolling it out.
Good receipts are part of good job files. If you ever have to defend a bill to a customer or an adjuster, our post on bulletproof documentation shows what to keep.
Sales tax in construction is not the same as sales tax in retail, and it varies by state. In many states a contractor on a lump-sum job is treated as the end user of materials and pays tax when buying them, rather than charging tax to the customer. Other states treat some work, or time-and-materials contracts, differently. Repair work and new construction can also be taxed differently in the same state.
Bring one overdue invoice.
Your books say who owes you. We will show you how that invoice would be followed up until it is paid.
Most small contractors need a ledger that handles jobs, plus a few tools that feed it clean data. Prices change often, so check each vendor's site.
| Tool | Role in the routine | Best fit |
|---|---|---|
| QuickBooks Online Plus or Advanced | General ledger with Projects for job income and costs, bank feeds, receipt capture in the mobile app, progress invoicing | Most contractors from 1 to about 30 people |
| Sage 100 Contractor | Construction accounting system with job cost by phase and cost code, general ledger and payroll that posts to jobs, per reseller and review sites | Growing GCs and trades that have outgrown QuickBooks |
| Knowify | Job costing, progress and T&M billing, change orders and purchasing that sync two ways with QuickBooks Online, per Knowify | Trade contractors who want construction job costing but want to stay on QuickBooks |
| Dext | Receipt and bill capture that posts to QuickBooks with the image and codes attached | Anyone drowning in paper receipts |
| AR Workflow | Receivables follow-up on QuickBooks Online invoices: reminders, texts, voicemail and payment links | Contractors whose books are clean but whose invoices still go unpaid |
You have outgrown basic bookkeeping software when you see these signs:
Owners who do their own books past a certain size usually stop doing the close. Owners who hand everything to a bookkeeper who has never worked with contractors usually get clean reconciliations and useless job costing.
| Option | Works well when | Watch out for |
|---|---|---|
| Owner does it | You are just starting, run a few jobs a month and have the discipline to block the weekly time | The close gets skipped when the field gets busy, which is exactly when you need the numbers |
| Office manager in-house | You have steady volume and someone who knows the jobs, the crews and the customers | Train them on job costing and reconciliations, not just data entry. Have a CPA review quarterly |
| Outside construction bookkeeper | You want the close done right every month without a full-time hire | Ask how many contractors they work with and whether they understand retainage, progress billing and WIP |
| Split | Office handles weekly entry and coding; outside bookkeeper or CPA does the monthly close and reviews | The most common setup for firms from about 10 to 50 people, if the handoff is clear |
Clean books show exactly how much is sitting in accounts receivable. They do not get it paid. In my companies the books were often fine while the 60-day bucket kept growing, because reminders were nobody's job.
AR Workflow is not bookkeeping software, accounting software or a general ledger. It works alongside QuickBooks Online as the receivables layer. It picks up your open invoices and follows up on them with automated emails, two-way texts and ringless voicemail from a dedicated number, gives homeowners a payment link, and shows the whole picture on an aging dashboard. On insurance jobs, adjusters get status requests, not payment links. Your bookkeeping routine stays the same. The follow-up just stops depending on someone remembering to do it.
See how it fits with QuickBooks collections, read about construction accounts receivable software, or look at AR reporting for contractors. Plans are listed on the pricing page.
For most small contractors, QuickBooks Online Plus or Advanced is enough, because both include Projects for tracking income and costs by job, according to Intuit. Pair it with a receipt app and a time tracking app that code to jobs. Move to a construction system like Sage 100 Contractor or Foundation when you need committed costs, WIP schedules or certified payroll that QuickBooks handles poorly.
Every transaction also gets a job and a cost code, so you can see profit by job, not just for the company. Construction books also carry items most businesses never deal with: retainage receivable and payable, customer deposits, progress billing, change orders, and sales tax rules that depend on the type of contract.
Clear the bank and card feeds weekly and do a full reconciliation of every bank and credit card account every month, by around the 10th. Waiting until tax time means you are fixing a year of mistakes instead of a month of them.
If you can, yes. A general bookkeeper can reconcile accounts, but a construction bookkeeper understands job costing, retainage, progress billing and WIP, which is where most of the money questions in a contracting business live. At minimum, ask any candidate how many contractors they currently work with.
Related reading
Your books are clean. Now get the invoices paid.
Bring one overdue invoice to a demo and see what AR Workflow would send, when, and how your customer would pay.
Photos: Unsplash. This article is general information, not tax, legal or accounting advice. Check sales tax and payroll rules with your CPA.
Sam owned and ran three restoration companies for more than 14 years and collected over $100 million in receivables. He built AR Workflow in 2020 to give contractors the collections system he wished he'd had.
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