Set up accounts around job costs
Split your costs of doing work from your overhead. Direct job costs usually include materials, subcontractors, equipment rental, permits, and the labor of crews who work on a specific job. Overhead covers things like the office, insurance on the whole business, advertising and vehicle costs not tied to one site.
Use a cost of goods sold or job costs section with separate lines for materials, subcontract labor, direct labor and equipment. Then tag every one of those transactions to the customer or project. If a purchase at the supply house covers two jobs, split it across both rather than dumping it on one.
Bill in stages and track what is owed
Most larger jobs are billed by deposit, progress invoices or a schedule of values. Your software should show each invoice against the contract total so you can see how much is billed, how much is paid and how much is left to bill. Keep change orders as written, separate line items. Unrecorded change orders are one of the most common reasons a job loses money without anyone noticing.
Retainage and revenue timing
Some customers hold back a portion of each payment until the job is finished. That held amount is money you earned but have not collected. Track it as its own receivable so it does not disappear from view, and follow up when the job is complete. Your CPA can tell you whether your jobs should be reported using a completed contract method, percentage of completion or another method, and which one applies depends on your size and contract length. Ask before the year ends, not during filing.
Subcontractors, insurance and 1099s
Collect a W-9 and a current certificate of insurance before the first payment to any subcontractor. Keep both with the vendor record. Pay subs through a method that leaves a trail, such as check or bank transfer, so year-end reporting is easy. Workers compensation audits often ask for proof that subs carried their own coverage, so a missing certificate can turn into a premium bill.
Common pitfalls
Watch for materials bought for a customer and not billed, owner draws mixed with job expenses, and deposits recorded as income before any work is done. A deposit for work not yet started is a liability until you earn it. Also check how your state treats sales tax on materials and on improvements to real property, since the rules differ and can be confusing. Confirm the current treatment with the state tax agency or your CPA.
Finally, review a job profit report on each active job monthly. If the estimate said forty percent of cost would be materials and the report shows sixty, you want to learn that in week three, not after the final invoice.
Closing out a job
When a job finishes, run a final cost report and compare it to the estimate. Record lessons: which trade ran over, which supplier was late, which change order was never priced. Collect lien waivers or final releases if your contracts call for them, and keep the punch list sign-off with the file. Closing every job formally keeps stray costs from drifting into the next one.
Common questions
Should I use a job costing feature or just classes?
Use the project or customer-level tracking in your software for each job, since it ties income, bills and time to one place. Classes are better for broader categories such as residential versus commercial.
How do I handle a customer deposit?
Record it as a liability or customer deposit, not income. Move it to income as you invoice and earn it against the contract.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.