Last updated: February 13, 2026
Construction bookkeeping is different from regular small business accounting because you track profit by project, not just by month. Job costing and Work-in-Progress (WIP) reporting are the two practices that show whether each job makes money, and they’re what separate busy contractors from profitable ones.
This guide covers what job costing and WIP are, how to set them up, and the monthly routines that keep your numbers accurate. If you’re a contractor, builder, or subcontractor in LA, this is how you track project profitability and stop wondering where your money went.
What Is Job Costing and Why It Matters
Job costing means assigning every expense to a specific project. You track labor, materials, equipment, subcontractors, and overhead separately for each job. This gives you a real-time view of whether Job 2401 is profitable or bleeding cash.
Without job costing, you’ll feel busy but broke. You might have six active projects, but if you’re not tracking costs by job, you won’t know which ones pay and which ones don’t.
Here’s what you track per job:
- Direct labor (your crew’s time)
- Subcontractor invoices
- Materials and supplies
- Equipment rentals or usage
- Permits and inspections
- Job-specific overhead (site trailers, porta-potties, safety gear)
Most construction bookkeeping systems let you tag every transaction with a job number or project name. Once that’s set up, your reports automatically show cost vs. budget for every active job.
Books LA handles job costing setup for contractors across Los Angeles. We customize your QuickBooks or Xero chart of accounts so every expense flows into the right project bucket. No guessing. No cleanup later.
What Is WIP Reporting?
WIP stands for Work-in-Progress. It’s a report that tracks incomplete projects that span multiple accounting periods. If a project starts in January and finishes in June, WIP reporting shows you the financial position of that job every month in between.
WIP reports compare three numbers for each project:
- Total costs to date
- Total billings to date
- Estimated profit or loss at completion
This tells you if you’re overbilling, underbilling, or on track. It also reveals cash flow problems before they happen.
If your costs are running ahead of your billings, you’re funding the job out of pocket. That’s a red flag. WIP catches it early.
How to Set Up Job Costing in Your Bookkeeping System
You can’t track job costs if your chart of accounts treats every expense the same. You need a structure built for projects.
Step 1: Customize Your Chart of Accounts
Create job-specific categories:
- Cost of Goods Sold by Job (materials, labor, subs)
- Equipment Costs by Job
- Overhead Allocated to Jobs
- Indirect Costs (shop, office, insurance)
Tag each category with a job or class field. This lets you filter reports by project.
Step 2: Use Job Numbers or Project Codes
Assign a unique identifier to every project. Use it on every purchase order, timesheet, receipt, and invoice. Consistency here is everything. If your crew uses “Smith Remodel” and your bookkeeper uses “Smith Job,” your reports will be wrong.
Step 3: Track Change Orders Separately
Change orders add scope and cost. If you don’t track them as separate line items, you’ll lose that revenue or blame the original budget for overruns.
Create a process: when a change order is approved, log it in your system the same day. Update the job budget. Bill it.
Step 4: Don’t Forget Retainage
Retainage is the portion of payment held back until job completion. It’s still your money. Track it as a receivable, not as unbilled revenue. If you ignore retainage, your cash flow reports will be off, and you’ll think you’re more liquid than you are.
Monthly Construction Bookkeeping Tasks
Construction bookkeeping doesn’t work if you only look at it once a quarter. You need a rhythm.
Weekly:
- Enter all receipts, timesheets, and vendor bills
- Code every transaction to the correct job
- Reconcile credit cards
Monthly:
- Run WIP reports for every active project
- Compare actual costs to budgeted costs
- Review profit margin per job
- Reconcile bank accounts
- Categorize any miscellaneous expenses
- Update job budgets if the scope changed
Quarterly:
- Review overhead allocation (are you spreading indirect costs fairly?)
- Reconcile payroll and loan accounts
- Adjust forecasts based on the current job pipeline
Annually:
- Close the books
- Verify all job costs are assigned
- Prepare year-end financials
- Coordinate with your CPA for tax planning
If your bookkeeping services don’t include monthly WIP reports, you’re not getting construction-grade support. General bookkeepers often miss job costing entirely.
Common Mistakes That Kill Profitability
Mistake 1: Mixing personal and business expenses. If you’re buying materials on a personal card and forgetting to log them, your job costs are wrong. Set up a dedicated business account and use it exclusively.
Mistake 2: Not tracking labor by job. If your crew works on three jobs in one week and you don’t track hours by project, you’re guessing at labor costs. Use timesheets. Every day.
Mistake 3: Ignoring small purchases. A $40 hardware store run adds up. If you’re not capturing those receipts, your margins shrink without explanation.
Mistake 4: Waiting until year-end to reconcile. By then, it’s too late to fix overbilling or cost overruns. Monthly reconciliation catches problems while you can still adjust.
Mistake 5: Using a generic bookkeeper. Construction bookkeeping has unique needs: progress billing, retainage, AIA billing forms, certified payroll (for prevailing wage jobs), lien waivers. A bookkeeper who doesn’t know construction will miss these.
Progress Billing and Revenue Recognition
Most construction contracts bill based on milestones or percentage of completion, not time and materials. This creates timing issues.
If you bill $50,000 for framing completion but you’ve only spent $30,000 in costs so far, your P&L looks great. But if you’ve actually spent $55,000 and only billed $50,000, you’re in trouble.
WIP reports reconcile this. They show the relationship between costs incurred, revenue billed, and expected profit. If you’re consistently overbilling, you’ll have a liability when the job finishes. If you’re underbilling, you’re losing cash flow.
Track billing separately from cost. Update your WIP report every month. This is how you avoid surprises at job closeout.
When to Bring in Professional Help
You need professional construction bookkeeping when:
- You have more than two active jobs at once
- You’re juggling subs, material orders, and change orders
- Your cash flow feels unpredictable
- You don’t know which jobs are actually profitable
- Tax season is stressful because your books are a mess
Books LA works with contractors throughout Los Angeles. We set up job costing in QuickBooks Online or Xero, run monthly WIP reports, track retainage, and keep your books ready for your CPA. You focus on the work. We track the numbers.
Learn more about our bookkeeping services here.
Why Location Matters for Construction Accounting
If you’re working in LA, you’re dealing with California-specific compliance: DIR reporting for public works, sales tax on materials, city business licenses, contractors’ license bonds, and workers’ comp audits.
Construction bookkeeping in California means tracking certified payroll, prevailing wage rates, and lien waiver timelines. Miss a deadline, and you’re stuck in a legal mess.
We stay current on California and LA requirements. That’s part of the value of working with a local bookkeeping team.
Disclaimer: This post covers bookkeeping and financial tracking practices. We do not provide income tax advice. For tax strategy, deductions, and filing guidance, coordinate with your CPA. Books LA works alongside your tax professional to ensure your books are accurate and ready for tax preparation.
FAQ: Construction Bookkeeping and Job Costing
What’s the difference between job costing and regular bookkeeping?
Regular bookkeeping tracks income and expenses by category. Job costing tracks them by project. You know not just what you spent, but which job you spent it on. This reveals per-project profitability.
How much does construction bookkeeping cost?
Most bookkeepers charge $300 to $800 per month depending on transaction volume and the number of active jobs. Expect higher fees if you need weekly updates, WIP reports, or certified payroll tracking. Books LA offers packages tailored to contractors. Contact us for a quote.
Can I use QuickBooks Online for construction job costing?
Yes. QuickBooks Online Plus and Advanced include class and location tracking, which you can use for job costing. You’ll need to customize your chart of accounts and set up projects properly. We help contractors configure QBO for construction from day one.
What is retainage and how do I track it?
Retainage is a percentage of each payment held back until the project is complete (typically 5% to 10%). Track it as Accounts Receivable – Retainage. When the job closes and you collect it, move it to income. Don’t ignore it or your cash flow projections will be wrong.
How often should I run WIP reports?
Monthly, at minimum. Weekly is better if you’re running high-volume projects or dealing with tight margins. WIP reports show cost vs. billing in real time so you can catch problems early.
Do I need a special bookkeeper for construction?
Yes. Construction has unique requirements: job costing, progress billing, retainage, change orders, AIA billing, lien waivers, and certified payroll. A general bookkeeper will miss these. Look for someone with construction experience or a firm like Books LA that specializes in contractor accounting.
What happens if I don’t track costs by job?
You’ll feel busy but broke. You won’t know which jobs are profitable, which clients to avoid, or where to adjust your pricing. Job costing is how you turn activity into profit.
Can you help me clean up messy construction books?
Yes. Books LA offers cleanup services for contractors. We reconcile accounts, assign historical expenses to the correct jobs, rebuild WIP reports, and get your books ready for tax season. Most cleanups take 2 to 4 weeks depending on volume.
