Bookkeeping for Contractors

Contractor bookkeeping is really job costing wearing a different hat. You can have a healthy looking bank balance and still be losing money on three of your five active jobs, and generic bookkeeping will not tell you which three. Every cost has to land against the job that caused it, and every dollar billed has to be understood in relation to work actually completed rather than cash received.

That is the whole discipline, and it is why contractors get burned by tools built for retail. GlacialBooks categorizes activity as it arrives with the reasoning visible on every line, reconciles continuously with confidence scoring, and traces every figure back to its source, which is the foundation job costing sits on.

What makes contractor books different

Cash received is not revenue earned

You take a deposit before work starts, draw against progress mid-job, and collect the balance at completion. None of those events line up with when you actually earned the money. A contractor who books deposits as revenue looks profitable in month one and unprofitable in month four, on a job that was fine the whole time. Understanding billing against work completed is what keeps the picture honest.

Retainage is money you earned and cannot touch

General contractors and owners routinely hold back a percentage of each payment until the job closes out. That retainage is revenue you have earned and an asset you are owed, and it belongs in its own receivable account rather than quietly not existing until it shows up months later. Contractors who ignore retainage consistently understate what they are owed, sometimes by a lot across several jobs.

Every cost belongs to a job

Materials, direct labor, subcontractors, equipment, and rentals all have to be assigned to the job that consumed them. This sounds obvious and it is where most contractor books fall apart, because a single trip to the supply house often covers three jobs on one receipt, and nobody splits it later. Costs that land in a general materials bucket make job profitability unknowable, which means you keep bidding the same way and keep getting the same result.

Change orders are where margin disappears

Work gets added verbally, the crew does it, and it never makes it onto an invoice. Or it gets billed but never gets costed against the job, so the job looks more profitable than it was. Change orders need to be captured on both sides, the billing and the cost, or they quietly distort every number you use to bid the next one.

Subcontractors bring their own paperwork

Subcontractor payments need 1099 tracking, and depending on your state and your contracts, lien waivers and insurance certificates need to be current before you pay. That is not strictly bookkeeping, but the payment record is where it gets caught or missed.

Equipment is an asset, tools are not always

Larger equipment purchases are assets that depreciate, rentals are a job cost, and small tools are usually an expense. Mixing them makes both your job costs and your balance sheet wrong at the same time.

How GlacialBooks handles it

Bank and card feeds arrive with the source detail intact, so a supply house charge shows up with enough context to be assigned rather than guessed at. Activity is categorized continuously with the reasoning shown on every line, and when a categorization needs to change you correct it in one click, with the correction posting as a reversal so the trail holds.

Reconciliation runs with confidence scoring and a review queue, which matters when draws, deposits, and retainage releases arrive in amounts that do not match any single invoice. Arko runs the month-end close overnight and prepares the report packet, leaving the genuine judgment calls for you.

Receivables and payables live in the same workspace, so progress invoices, subcontractor bills, payment timing, and overdue reminders stop being spread across a folder, a spreadsheet, and your truck. Every figure on your reports traces back to the journal line and source event behind it, so when a job comes in under margin you can follow the trail to the costs that caused it instead of relitigating the whole thing from memory.

Transactions can be divided among as many jobs as needed by percentage, fixed amount, labor hours, a saved template, or an allocation rule. Individual items on a receipt can be assigned to different jobs, so one supply run does not have to become a general materials expense. Employee and contractor payroll can also be uploaded and allocated by job, employee, and payroll line while direct payroll connections are unavailable.

If a bank is not supported by Plaid, add the bank or card account manually and upload CSV or Excel statements. The Import Center previews the rows and keeps an import history before the activity reaches categorization and reconciliation.

Journal entries stay immutable with corrections posted as reversals, which matters in a trade that deals with bonding, insurance audits, and the occasional dispute where the record is the argument.

If you are behind

Contractors run a business from a truck, and paperwork is the first thing that slips when the work is good. Months of unassigned receipts and jobs closed out without ever being costed is a normal starting point. GlacialBooks starts where you are rather than assuming a clean slate.

Useful contractor tools

Start with the contractor variant in the chart of accounts template, which includes job costs, retainage, billings, and equipment accounts. The invoice generator creates a client ready PDF, while the cleanup estimator shows the work behind a backlog before anyone quotes it. The QuickBooks comparison explains the workflow difference, and the S corporation estimator makes owner salary and distribution assumptions visible. GlacialBooks pricing shows the current plans.

Frequently asked questions

What is the best bookkeeping software for contractors? The right tool assigns every cost to a job, handles progress billing and retainage, tracks subcontractor payments for 1099 purposes, and reconciles draws and deposits that do not match invoices cleanly. GlacialBooks automates the categorization and reconciliation and keeps the reasoning attached to every line.

What is job costing and why does it matter? Job costing assigns every material, labor, subcontractor, and equipment cost to the specific project that consumed it, so you know which jobs actually made money. Without it your bank balance tells you how you are doing overall and nothing about which work is worth bidding again.

How do you account for retainage? Retainage is revenue you have earned that the customer is holding back until closeout, so it belongs in a separate retainage receivable account rather than being ignored until it arrives. Tracking it separately keeps both your revenue and what you are owed accurate.

Should contractors use cash or accrual accounting? It depends on your size, your contracts, and your tax situation, and there are thresholds that can make the choice for you. Accrual generally gives a truer picture of job profitability because it matches revenue to work performed, but this is worth confirming with a tax professional for your specific circumstances.

How do I handle a supply run that covers multiple jobs? Upload the receipt, review or enter each item, and assign each item to one or more jobs. When the receipt is matched to its bank transaction, GlacialBooks updates the same job cost allocation used by the job profitability report.

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