How do I track subcontractor costs by project?
Subcontractors often represent 40 to 60 percent of a project’s total cost. If those costs aren’t tracked by job, you’re guessing at profitability. A project can look profitable until you realize the sub invoices never got coded to it.
Set up each subcontractor as a vendor in your accounting software before paying them. In QuickBooks, create a vendor record with their business name, address, and payment terms. Get a W-9 before that first payment so you have their tax ID on file for 1099s at year end. Collecting this upfront is much easier than chasing it in January.
When a sub invoice arrives, code it to the correct project immediately. Don’t enter it as a general expense to “subcontractor costs” and plan to sort it out later. That later never comes, and when it does you won’t remember which job that $4,800 invoice belonged to. Same-day entry with the correct job assignment is the habit that makes job costing actually work.
Track committed costs, not just payments. You signed a contract with an electrician for $22,000 but have only received invoices for $8,000 so far. Your books show $8,000 spent on electrical, but your real exposure is the full $22,000. Tracking purchase orders or contract amounts separately shows you the true position on each project before all the invoices arrive.
Compare actual sub costs to your estimate regularly. Run a job cost report weekly or at least twice a month during active construction. If you estimated $15,000 for framing labor and your sub is already at $14,000 with work remaining, you have a problem. Catching it early gives you options. Catching it at project end just gives you an expensive lesson.
Break down sub costs by trade or phase for better insight. Instead of lumping everything into “subcontractor,” use cost codes or sub-accounts for electrical, plumbing, HVAC, framing, drywall, and so on. This takes slightly more effort when entering invoices but reveals patterns over time. You might discover your drywall subs consistently run over while your plumbers stay on budget.
Change orders need separate tracking. If the client added scope and your sub charged extra for it, that’s not an overrun on the original contract. Track it against the change order so your original estimate comparison stays accurate.
Reconcile sub payments to contracts before final payment. Verify that what you’ve paid matches what was invoiced and what was contracted. Subs sometimes invoice twice for the same work or forget credits they agreed to. A final reconciliation catches these mistakes before you overpay.
If tracking all of this while running jobs feels like too much, that’s where help makes sense. A construction bookkeeper in American Fork who understands how contractors operate can handle the weekly tracking, keep job reports accurate, and flag cost overruns before they eat your margin.
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More Questions
Are there any bookkeepers in the Wasatch Front that specialize in construction?
Yes. The Wasatch Front has bookkeepers who focus specifically on construction companies and contractors. Construction accounting requires specialized knowledge of job costing, progress billing, and work-in-progress that general bookkeepers typically don't have.
Read answerWhat is the best bookkeeping service for small businesses in Lehi?
The best bookkeeping service depends on your specific business needs. Look for industry experience, QuickBooks expertise, responsive communication, and transparent pricing. Local availability matters for some businesses but expertise matters more.
Read answerHow do I handle bookkeeping for a plumbing company?
Plumbing bookkeeping requires tracking costs by job, managing parts inventory, and allocating labor hours across service calls and projects. The goal is knowing which types of work actually make money.
Read answerHow do I know which jobs are making money?
You need job costing. That means tracking labor, materials, subcontractors, and other costs at the project level and comparing actual costs to your estimates as the job progresses.
Read answerHow do I handle retainage in my bookkeeping?
Track retainage separately from regular receivables using a dedicated retainage receivable account. Record the full revenue when you bill but split the receivable between what you can collect now and what's being held back.
Read answerWhy do contractors need specialized bookkeeping?
Standard bookkeeping tracks income and expenses but doesn't show which jobs actually made money. Contractors need job costing, progress billing tracking, and work-in-progress accounting that generic bookkeepers rarely understand.
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