The Ultimate Guide to QuickBooks Desktop for Contractors

If you’re a contractor, you know that understanding how much reserves you’ve put into a job is very important. You also know tracking your job costs is a challenging task. In QuickBooks Desktop, you can track job costs at the transactional level. If you’re doing this already, there are some valuable reports that you should consider utilizing to monitor the status of your jobs.

Job Costing Reports

If you’re looking for a concise report, the “Job Profitability Summary Report” will allow you to view the revenues and costs of all your jobs in a summarized format. You can see more detail on the job by running the “Job Profitability Detail Report,” which will break down the revenues and costs by item by job. 

Alternatively, the “Profit & Loss by Job Report” can also be useful. While not as condensed as the Job Profitability Summary Report, this report can display the job costs by the general ledger account.

Lastly, you may have balance sheet accounts, such as “construction-in-progress” or “customer deposits,” on your financial statements. If you have more than one job going on at a time, it can be frustrating to determine how much of your “construction-in-progress” balance pertains to Job A or Job B. In QuickBooks Desktop, you can create a “Custom Summary Report” to break down the balance in these accounts by the job.

Report Customization

Whether you’re interested in contract profitability or year-to-date information, it’s easy to customize your reports. You can filter by job status (in progress + closed) and modify the date range to view contract numbers on open or closed jobs. You can also customize reports to pull balance sheets or income statement accounts to save time in commonly used reports.

Job Costing Report Use

Job costing reports are a great way to view a quick snapshot of your contracts in one place. They allow you to monitor how much cost you have into a job, how much you’ve billed your customer, and, if completed, how the job finished. Here are some of the most common use cases for contractors:

1. Track job profitability in a summarized format

Contractors who need to maintain a job schedule can pull their direct cost/revenue figures from the “Job Profitability Summary Report.” Contractors can also use the profitability report to estimate income on a completed contract basis.

2. Ensure all direct costs are getting job costed in QuickBooks

If the job costing reports do not reconcile to the financial statements, you know that there are some transactions that have not been job costed. These reports can help you identify which transactions need to be coded to a job so that you’re capturing all of your job costs.

3. General job revenue/cost analysis

If you’d like to know how much your company has billed compared to the costs you have incurred on a job, profitability reports can be helpful. They can also aid in monitoring and comparing your expected margin versus actual.

Common Report Issues

When you run these reports in QuickBooks Desktop, there are a few things you should keep in mind:

1. Direct job costs not getting assigned a job in QuickBooks

If you’re noticing that your job report totals are not matching up with your balance sheet or profit and loss figures, the issue could be that not all direct costs are assigned to a job. To check, you’ll need to dig into your direct cost general ledger accounts and sort for transactions that are not coded to a customer/job. Once you’ve identified the problem transactions, you can add a job to these transactions so that your report totals will tie out to your financial statements.  

2. Comingling direct and indirect costs into the same general ledger accounts

It can be difficult to compare a job costing report that includes only direct costs with a general ledger that lumps direct and indirect costs into the same accounts. We recommend dedicating specific general ledger accounts just for direct and indirect costs. If you’re consistently coding only direct costs to a job and you’ve structured your chart of accounts in this manner, it will be easier when you try to tie your job report totals back to the financial statements.

3. Transactions incorrectly reduce the cost and revenue columns on job profitability reports

The numbers flow through your job profitability reports from a variety of transactions, including bills, paychecks, invoices, sales receipts, journal entries, etc. QuickBooks views all these as either revenue or cost-type transactions. Checks, for example, are cost-generating. If you post a check, it will increase the cost on your job profitability report regardless of what general ledger account the item(s) on the check are pointing to. If you intended to reduce revenue rather than increase cost, you might have a difference between the total revenue on the profit & loss versus the total revenue on the job profitability report.

4. Expenses are coded to a GL account instead of an item

If you’re utilizing items to track job costs, it’s best practice to apply that amongst all jobs consistently.  The job profitability detail report pulls job information by item. If you were not utilizing items when you coded your bills or checks, it would make this report irrelevant.

Limitations on Indirect Job Costing

While QuickBooks is a great option for small contractors that want affordable + user-friendly software, there are limitations. Most notably, there’s no easy way to allocate indirect costs amongst jobs. You can find that capability with more industry-specific software at a higher cost. Since this cannot be done effectively in QuickBooks, there are some strategies we recommend for indirect cost analysis:

1. Group your indirect accounts together within your chart of accounts. If these are grouped together, it makes it much easier to determine how much your indirect costs are as a percentage of revenue.
2. Create a default customer in QuickBooks to assign all your indirect costs. If you have this in place, all job costs, including indirect costs, should have a job assigned to them in QuickBooks. This can make it easier to see what transactions may have been missed and not job costed.

Takeaway

Utilizing the job profitability and other custom reports in QuickBooks can help you complete job schedules efficiently, ensure all your job costs are getting costed, and help you monitor your job profitability versus expected margins on open or closed jobs. While there are some limitations to QuickBooks for contractors, it’s a great affordable option for smaller contractors. 

Lutz offers construction accounting services to help contractors get their QuickBooks up and running. Contact us today to learn more or view our QuickBooks Desktop Demo for the Construction Industry!