Common Questions
Straightforward answers to questions business owners ask about bookkeeping, payroll, accounting systems, and how we work.
How do I set up job costing for my construction company in QuickBooks?
You'll need QuickBooks Online Plus or Advanced to access the Projects feature. Create a project for each job, enter a budget from your estimate, and code every expense, labor hour, and invoice to that project as work happens.
Read answerWhat is progress billing and how does it work for general contractors?
Progress billing means invoicing the owner in stages based on how much of the work you've completed, not at project end. Each pay application breaks down work completed to date, retainage withheld, and the net amount due for that period.
Read answerHow do contractors account for retainage in their books?
Track retainage in a separate balance sheet account instead of regular AR. When you bill with retention withheld, split the entry between AR for the payable portion and Retention Receivable for the withheld amount. Release the retention to AR when the project closes out.
Read answerWhat bookkeeping records do I need for a California contractor's license?
CSLB requires financial statements showing sufficient working capital, including a balance sheet, income statement, and supporting documentation. Most license classifications require at least $2,500 in working capital, with LLCs needing $100,000.
Read answerHow should a general contractor track subcontractor costs by project?
Every sub payment needs to be coded to a specific job and tracked against the original bid. Monitor variances throughout the project to catch overruns early, and collect W-9s upfront so 1099s aren't a scramble in January.
Read answerDo I need a bookkeeper if I'm a small remodeling contractor in Pasadena?
Even a one or two-person remodeling operation benefits from organized books. Job costing, permit fees, material purchases, and sub payments add up fast, and without tracking them per project you won't know which jobs actually make money.
Read answerHow do I track change orders in my construction accounting?
Document every change order in writing with customer approval before work starts, then update your project budget and contract value to reflect the new scope. Track change order costs and revenue separately from the original contract so you can see whether changes are helping or hurting project margins.
Read answerWhat's the difference between job costing and regular bookkeeping for contractors?
Regular bookkeeping tracks income and expenses at the company level. Job costing assigns every cost (labor, materials, subs, equipment, permits) to a specific project so you can see which jobs actually made money, not just whether the business as a whole did.
Read answerHow do construction companies handle equipment depreciation?
Equipment can be expensed immediately under Section 179 up to $1.22M in 2024, depreciated over its useful life using MACRS, or a combination. Each asset gets tracked separately and equipment used across multiple jobs needs to be allocated.
Read answerWhat are the most common bookkeeping mistakes construction companies make?
The most common construction bookkeeping mistakes are mixing personal and business expenses, not separating job costs from overhead, mishandling retainage, failing to reconcile subcontractor payments to 1099s, and not monitoring work-in-progress against budget.
Read answerHow should I set up my chart of accounts for a construction business?
Build your chart of accounts around job costing. Separate direct job costs from overhead, break COGS into labor, materials, subcontractors, equipment, and permits, and set up income accounts that track contract revenue, change orders, and retainage separately.
Read answerHow do home builders track costs across multiple projects at the same time?
Each active project gets set up as its own job in the accounting system, with every cost coded to the specific project as it's incurred. Monthly WIP reports then compare actual costs against budget across all jobs side by side.
Read answerWhat is a WIP report and why does my construction company need one?
A WIP report compares estimated costs, actual costs, revenue billed, and percentage complete for every active job. It shows whether you're overbilled or underbilled and is required for bonding, bank financing, and accurate financial statements.
Read answerHow do I handle material purchases that span multiple construction jobs?
Hold bulk purchases in inventory when you buy them, then allocate cost to each job based on actual quantities used. This keeps your job cost reports accurate and prevents a single large purchase from distorting one project's margins.
Read answerWhat tax deductions can California contractors claim?
California contractors can deduct vehicle expenses, tools and equipment, materials, subcontractor payments, insurance, license and bond fees, safety gear, continuing education, and home office costs. Section 179 expensing works, but California caps the state deduction at $25,000, well below the federal limit, which creates a state-versus-federal gap that catches many contractors by surprise.
Read answerHow do I prepare for a California sales tax audit as a contractor?
Preparing for a CDTFA audit as a California contractor means organizing material purchase records, resale certificates, use tax accruals, and documentation showing how each material was used. California treats contractors as consumers of materials they install, which creates specific audit exposure most contractors don't understand until the notice arrives.
Read answerShould my construction company use cash or accrual accounting?
Contractors under $29M in average gross receipts can use cash basis for taxes, which is simpler but hides project profitability. Larger contractors must use percentage-of-completion. Most serious construction companies run accrual internally regardless, because bonding agents and banks expect it.
Read answerHow do I manage certified payroll reporting for prevailing wage jobs in California?
California public works jobs require weekly certified payroll reports filed electronically with the DIR through eCPR. You need to track hours, work classifications, wage rates, and fringe benefits for every worker on every project, with strict compliance requirements and steep penalties for errors.
Read answerWhat bookkeeping does an electrician need to do for their business?
Electricians need to track income by job, categorize materials and vehicle costs, log tool purchases, stay on top of license and insurance expenses, and issue 1099s to subs. The work is straightforward but has to be consistent to produce useful numbers at tax time.
Read answerHow do HVAC contractors track service calls vs installation jobs in their books?
Set up separate income accounts for service revenue and installation revenue so you can see the mix at a glance. Use job costing for installations where materials, labor, and subs add up over days or weeks. Keep service call tracking simple with flat-rate invoices and category-level expense coding.
Read answerWhat are the best tax deductions for plumbers in California?
Plumbers can deduct tools, vehicle expenses, licensing, insurance, uniforms, safety gear, continuing education, phone costs, and home office use. Larger equipment purchases like drain cameras and pipe threaders often qualify for Section 179 immediate expensing.
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