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Bookkeeping for General Contractors: Managing Job Costs

Published April 2026

General contractors manage multiple projects simultaneously, each with its own revenue and costs. Accurate job costing is essential to understand profitability per project and identify which jobs are truly profitable. Many contractors underestimate the importance of tracking costs by job and end up with big surprises at year end.

Set Up Job Costing from the Start

Every project needs its own account code or job number in your accounting system. Record all materials, labor, subcontractor costs, and equipment rental against that specific job. This separation allows you to run a profit and loss statement by project to see which types of jobs are most lucrative.

Track Materials and Supplier Invoices

Create accounts for each major material supplier and category (lumber, electrical, plumbing, hardware). When you purchase materials, record them under the appropriate job and supplier account. This gives you visibility into material costs over time and helps identify opportunities to negotiate better supplier pricing.

Document Labor Costs Accurately

Labor is typically the largest cost for contractors. Record time spent on each job, along with the hourly rate or salary. Include employee wages, worker's compensation insurance, and payroll taxes when calculating true labor cost. Many contractors forget to account for payroll taxes when estimating job profitability.

Account for Equipment and Tools

Equipment purchases are capital assets and depreciated over time. However, tool rentals and daily equipment costs are deductible expenses assigned to specific jobs. Track rental invoices by job so you understand the true cost of equipment on each project.

Monitor Subcontractor Payments

Subcontractor costs are among the largest expenses on construction projects. Create a system to track subcontractor invoices by trade and job. Verify that subcontractors have proper licensing and insurance. Keep records of all 1099s issued for tax compliance.

Calculate Overhead Allocation

Office salaries, insurance, vehicle costs, and other overhead cannot be allocated to a single job. However, you need to account for these costs when evaluating job profitability. Consider allocating overhead as a percentage of direct job costs or labor hours to understand full project profitability.

Track Change Orders and Extras

Projects rarely go exactly as planned. Change orders add costs and revenue that must be tracked separately from the original bid. Document every change order with customer approval and ensure it flows into your accounting system with the corresponding cost impact on the job.

Reconcile Invoicing with Costs

Compare what you invoice customers against what you actually spent on the job. If costs exceeded your bid significantly, analyze why. Was the estimate too low? Did you miss documenting something? These patterns help improve your bidding process and project planning.

Good contractor bookkeeping gives you the data to bid jobs accurately, identify unprofitable projects early, and improve your bottom line. Invest in proper job costing systems now, and profitability will follow.