How should a general contractor track subcontractor costs by project?
Every subcontractor payment needs to be coded to a specific job. That’s the foundation. If your bookkeeping system lumps all sub payments into a single “subcontractor expense” account with no job assignment, you have no idea which projects are profitable and which are bleeding cash.
In QuickBooks, this means setting up each project as a job (or customer/sub-customer) and assigning every bill from a sub to that job. When the framing sub sends an invoice for the Miller residence, it gets entered with the Miller job tagged. Same for the electrician, the plumber, the drywall crew. At any point, you can pull a job cost report and see exactly what’s been spent on subs for that project.
The next piece is tracking actual sub costs against what you originally bid or budgeted. Before the project starts, enter the estimate by cost category. Framing budgeted at $45,000, electrical at $28,000, and so on. As bills come in, the system compares actual to budget. When the framing sub hits $42,000 and still has two weeks of work left, you see the problem before it becomes a $15,000 loss.
Change orders need the same discipline. If the homeowner adds a bathroom and the plumbing sub’s scope grows, update the budget and get a signed change order. Otherwise you’ll have sub costs that look like overruns when they’re actually approved additions. This is where most contractors lose track. The project has 40 small scope changes and no one updated the budget, so the final numbers look like chaos.
Collect W-9s before you cut the first check. Every sub, every time. It’s much easier to hold a payment until the W-9 arrives than to chase down tax information in January from a sub you haven’t worked with in six months. Any sub paid $600 or more during the year needs a 1099-NEC filed by January 31. If you’ve been coding payments correctly and collecting W-9s throughout the year, running 1099s takes an hour instead of a week. Experienced Pasadena bookkeepers should have a process that keeps 1099 tracking current month by month, not a year-end fire drill.
Retention is another piece that trips people up. If you’re holding back 10% on sub payments until the project closes, that retained amount is still a committed cost. Your job cost report should reflect the full invoiced amount, not just what you’ve paid, or your margins will look better than reality until the retention gets released.
Weekly or biweekly review is where this actually pays off. Pull the job cost report, compare sub costs to budget, flag anything trending over. Catching a framing overrun in week three lets you adjust. Finding out at closeout means you eat the loss. Real construction job costing isn’t about entering data, it’s about using the data to run the project before the project runs you.
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