Subcontractors
Bookkeeping for subcontractors
Job costing, retainage, WIP and 1099s. The parts of the books that only matter if you work in construction, and that a general bookkeeper has usually never had to handle.
A general bookkeeper can balance your accounts. That isn't your problem.
Your accounts probably do balance. The money that went out matches the money that came in, the bank reconciles, and the year-end package goes to your CPA without drama.
And you still can't answer the question that decides next year
Which jobs made money, and why. That is not a bookkeeping failure. It is a setup failure. Books designed for a business that sells the same thing at the same price every day cannot tell you that the Riverview job ran 9% over on labour while the Brandon job came in clean. You need the job in the ledger, not just the month.
Five things construction books have to do that ordinary books don't
1. Cost the job, not the month
Every hour, every material invoice and every sub coded to the job it belongs to. Once that is true, a P&L by job tells you what your bid was worth against what the work actually cost. Without it you are pricing from an average, and averages hide your worst customer.
2. Track retainage as what it is
Money earned, invoiced, and not yet payable. It is not revenue you can spend and it is not a bad debt. Florida caps retainage by statute and your GC will hold it to the last day. Books that fold it into receivables make your cash position look better than it is, right up until payroll.
3. Keep a WIP schedule that holds up
Work in progress is how anyone outside your company reads your financial health. The day a bonding agent or a banker asks for one, you either have it or you spend three weeks and a lot of money reconstructing it. Contractors who keep it current borrow on better terms than contractors who don’t.
4. Classify the people who work for you
A sub you 1099 and an employee you W-2 are different in the eyes of the IRS and the Florida Department of Revenue, and the difference is not what you call them. Getting it wrong is expensive twice over: back taxes, and a workers’ comp audit that reallocates them onto your payroll at your highest class code.
5. Get the comp class codes right the first time
Your premium is payroll multiplied by class code. Codes get assigned once when the policy is written and then nobody looks again. When the auditor arrives in March and moves half your payroll to the roofing code, the bill is not negotiable. Coding the payroll correctly through the year is the whole defence.
What a general bookkeeper does, and what this adds
The first rows are table stakes. Any competent bookkeeper will do them and most do them well. The rows in the middle are the ones that decide whether you can price next year's work, and they only come up in construction.
| A general bookkeeper | Construction bookkeeping | |
|---|---|---|
| Bank and card reconciliation | Yes | Yes |
| Monthly P&L and balance sheet | Yes | Yes |
| P&L by job | No | Yes |
| Retainage tracked separately | No | Yes |
| WIP schedule | No | Yes |
| 1099 vs W-2 classification reviewed | Sometimes | Yes |
| Comp class codes checked through the year | No | Yes |
| Year-end package for your CPA | Yes | Yes |
Where it gets trade-specific
The five things above are true for every subcontractor. How they bite is different in each trade.
Three steps, and the first one is free
- 1
Free file review
Send me your QuickBooks file, or read-only access. I go through it and tell you what is actually in there: what's reconciled, what isn't, and what it would take to make it useful.
No charge and no obligation.
- 2
A fixed quote
If there is cleanup to do, you get one number before any work starts. Not an hourly rate and not a range that moves.
- 3
A monthly rhythm
Books closed, accounts reconciled, and a job-costed P&L in your hands on a schedule you can plan around.
Questions I get asked
What is retainage and why does it need its own treatment?
Retainage is the percentage a general contractor holds back from each payment until the whole project closes, commonly five to ten percent. You have earned it and you have invoiced it, but you cannot collect it yet. Booked as an ordinary receivable it inflates the cash you appear to have. Tracked separately, you can see exactly how much of your money is sitting in other people’s accounts and how long it has been there.
What is a WIP schedule and do I actually need one?
A work in progress schedule compares what a job has cost so far against what it was contracted for, and shows whether you have billed ahead of the work or behind it. You need one the moment a bank, a bonding agent or a serious GC asks about your financial position. Built monthly it takes very little time. Reconstructed under deadline it is expensive, and it shows.
Can't my CPA do this?
Your CPA files your return from the books that exist. A CPA is not sitting in your file every month coding material invoices to jobs, and you would not want to pay CPA rates for it. I keep the books job-costed and current so the return is straightforward and so you have numbers during the year, when they can still change a decision.
How is this different from a regular bookkeeper?
A regular bookkeeper will reconcile your accounts correctly and produce a clean P&L. Ask one about retainage, WIP or certified payroll and you will usually get a blank look, because none of it comes up outside construction. The difference is not care or competence. It is which problems they have had to solve before.
Are you a CPA?
No. I am a QuickBooks Online Certified ProAdvisor. I keep your books accurate and job-costed so your CPA can file from them without rebuilding the year first. If something needs a CPA’s signature, I will say so and work alongside them.
Find out what your jobs actually made
Send me your QuickBooks file. I will tell you what is in it, what is missing, and whether job costing can be rebuilt from what you already have. Usually it can.