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Guide

A contractor can be profitable on paper and short of cash on every job. The books have to show both.

Construction breaks the simple bookkeeping most small businesses run on. Revenue is billed in stages, part of it is held back as retainage, costs land months before the final invoice, and every job is its own small business. QuickBooks Online handles this well when it is set up around jobs from the start. Set it up as a general ledger and job costing gets rebuilt in a spreadsheet every month.

Book a free 30-minute call Jobs as Projects

The build

Jobs as Projects

QuickBooks Online Plus and Advanced include Projects. Each job becomes a project under its customer, and every estimate, invoice, bill, expense and timesheet can be attached to it.

Projects is what turns QuickBooks from a record of the company into a record of each job. Once transactions are attached, the project carries its own income, costs and profit, and the standard project reports read straight from it.

ReportAnswers
Project profitability What has this job earned and cost so far, and what is the margin?
Estimates vs actuals Is the job running over the estimate, and on which lines?
Unbilled time and expenses What has been spent that has not yet been billed to the customer?
Time cost by employee or vendor Whose labor went into this job, and at what cost?

Two decisions are worth making before the first job is entered. Name projects the way the field team refers to them, usually the job number and site address, so a bill can be matched without a phone call. And decide how change orders are tracked: as a revised estimate on the same project, so the estimate stays the true contract value, rather than as a new project.

Money out

Coding Costs to the Job

A project report is only as complete as the costs attached to it. Every job cost needs two codes: the project it belongs to, and the cost type it falls under.

The project answers which job. The cost type answers what kind of cost: labor, materials, subcontractors, equipment, permits and other. Set cost types up as products and services or as cost of goods sold accounts, and keep the list short enough that a field supervisor can pick the right one without asking.

  • Attach materials at the bill, not at the payment. A supplier bill for one job is coded to that project when it is entered. A card purchase is coded from the receipt, which is why receipt capture in the field matters more in construction than almost anywhere else.
  • Split mixed bills by line. A lumber yard invoice that covers three jobs gets three lines, one per project. Coding it all to the biggest job distorts three margins at once.
  • Bring labor in through timesheets. Hours entered against a project carry their cost into project profitability. QuickBooks Workforce Elite adds project time tracking, so crews can clock time to the job from the field.
  • Keep overhead out of jobs. Office rent, the owner’s truck and general insurance are overhead. Charging them to projects makes every job look worse and the company look the same.

Money in

Progress Invoicing

With progress invoicing turned on, QuickBooks Online creates invoices from an estimate by percentage or by line amount, and tracks how much of the estimate has been billed.

The estimate becomes the schedule of values. Each draw bills a percentage of each line, or a set amount, and QuickBooks keeps the running total billed and the balance remaining. When the last draw goes out, the estimate is closed and the project shows the full contract billed.

Change orders belong on the estimate before they are billed. An approved change added as a new line keeps the remaining balance correct. A change billed on a separate invoice that is not linked to the estimate leaves the estimate understating the contract, and the estimates vs actuals report stops meaning anything.

AIA-style pay applications

Some general contractors and owners require pay applications on a specific form, such as the AIA G702 and G703. QuickBooks Online’s standard invoices do not produce those forms. Contractors who bill on them usually prepare the pay application from the progress figures and attach it to the invoice, or use a construction billing add-on that syncs to QuickBooks.

Held back

Retainage

Retainage is the share of each progress payment the customer holds back until the job is complete, often 5 to 10 percent. It has been earned, but it has not been paid, and it will not be for months.

QuickBooks Online Plus and Advanced have no dedicated retainage field. The standard approach is to set it up once and use it on every draw.

  • A retainage receivable account. An other current asset account that holds what customers owe you once the job is accepted.
  • A retainage item on the invoice. A negative line on each progress invoice, mapped to the retainage receivable account, so the invoice total is what the customer will actually pay now and the held amount moves to its own balance.
  • A retainage payable account for subcontractors. The mirror image: what you are holding back from subs, as an other current liability, released when their work is accepted.
  • A release invoice at completion. Bills the accumulated retainage from the receivable account, with the project attached, so the job closes with retainage at zero.

Kept in its own account, retainage stops inflating accounts receivable aging and shows up as what it is: cash the business is owed and cannot use yet. Intuit Enterprise Suite has added construction-specific features, so if you are on it, check what your edition already handles before building this manually.

The schedule most files miss

WIP and Over/Under Billing

On a job that runs over months, what you have billed and what you have earned are rarely the same number. The work-in-progress schedule measures the gap.

For each open job, the WIP schedule compares the percentage of the job complete, usually costs to date divided by estimated total cost, with the percentage billed. Billed ahead of the work is overbilling, a liability: the customer has paid for work not yet done. Billed behind the work is underbilling, an asset: work done that has not been invoiced.

PositionMeansOn the balance sheet
Overbilled Billings exceed earned revenue. Cash looks better than the job does. Billings in excess of costs and estimated earnings, a liability
Underbilled Earned revenue exceeds billings. Work is being financed by the contractor. Costs and estimated earnings in excess of billings, an asset

QuickBooks Online does not produce a WIP schedule by itself, but it holds every input: the estimate for each project, the costs attached to it and the amounts billed. The schedule is built from those figures each month, and an adjusting journal posts the net over or under billing so the profit and loss reflects work performed rather than invoices sent.

Bonding companies and lenders often ask for a WIP schedule. A contractor who produces one monthly finds out which job is losing money while there is still time to change it, rather than at closeout.

Compliance

Subcontractors and 1099s

  • Collect a W-9 before the first payment. It gives you the legal name and taxpayer ID the 1099 needs. Chasing it in January is how filings end up late.
  • Track 1099 vendors in QuickBooks. Mark each subcontractor as a 1099 vendor and map their payments, and QuickBooks Online prepares and files the 1099-NEC from the payments recorded. For payments made from 2026, the filing threshold is $2,000, up from $600.
  • Keep certificates of insurance current. A sub without a valid certificate can turn into an audit charge on your own workers’ comp policy. Store the expiry date on the vendor record and check it before each payment.
  • Collect lien waivers with each payment. A conditional waiver with the pay request and an unconditional one once paid. Attach them to the bill in QuickBooks so they are found when the owner asks.

Choosing

Which Edition

EditionFits
QuickBooks Online Plus Contractors running a handful of jobs at once who need Projects, progress invoicing and job profitability
QuickBooks Online Advanced More jobs, more users, custom fields for job details, and more room for classes and locations
Intuit Enterprise Suite Larger contractors or several entities, where project profitability with construction job costing and multi-entity reporting justify the step up

Simple Start and Essentials do not include Projects, which is the single feature a contractor most needs. If you are still on QuickBooks Desktop, the move to Online is the moment to set Projects up properly rather than carrying old customer:job lists across unchanged.

The failure modes

Where Job Costing Goes Wrong

  • Costs not attached to a project. Project profitability looks excellent because half the costs are sitting in the general ledger.
  • Retainage left inside accounts receivable. The aging shows old balances that are not late, and the real collection problems hide behind them.
  • Change orders billed outside the estimate. The contract value is understated and estimates vs actuals stops working.
  • No WIP adjustment. Profit swings month to month with billing timing, not with performance on the jobs.
  • Labor not costed to jobs. Payroll is the biggest job cost, and without timesheets by project it is invisible in every job report.
  • Overhead charged to jobs. Every job looks unprofitable and nobody can tell which ones actually are.
  • Missing W-9s at year end. 1099s filed late, or not at all.

Questions

Commonly Asked

Can QuickBooks Online do job costing for contractors?
Yes. QuickBooks Online Plus and Advanced include Projects, which tracks income, costs and profit for each job. Attach every estimate, invoice, bill, expense and timesheet to its project, and the project profitability, estimates vs actuals and unbilled time and expenses reports read directly from it. Simple Start and Essentials do not include Projects.
How do I track retainage in QuickBooks Online?
QuickBooks Online Plus and Advanced have no dedicated retainage field. Set up a retainage receivable account as an other current asset and a retainage item mapped to it, then add the item as a negative line on each progress invoice. The held amount moves to its own balance instead of sitting in accounts receivable. Bill it with a release invoice at completion. Use a matching retainage payable account for amounts you hold back from subcontractors.
Does QuickBooks Online support progress invoicing?
Yes. With progress invoicing turned on, you create invoices from an estimate by percentage or by amount per line, and QuickBooks tracks how much of the estimate has been billed and what remains. Add approved change orders to the estimate before billing them so the remaining balance stays correct.
Can QuickBooks produce a WIP schedule?
Not by itself, but it holds every input. The estimate, costs to date and billings for each project come from QuickBooks, and the WIP schedule compares percentage complete with percentage billed to find over or under billing. A monthly adjusting journal then posts the net amount, so the profit and loss reflects work performed rather than invoices sent.
What is the 1099-NEC threshold for subcontractors?
For payments made from 2026 onward, a 1099-NEC is required when you pay a non-employee $2,000 or more in a year. The threshold was $600 for earlier years. Collect a W-9 before the first payment, mark the subcontractor as a 1099 vendor in QuickBooks, and QuickBooks Online can prepare and file the forms from the payments recorded.
Which QuickBooks edition is best for a construction company?
QuickBooks Online Plus is the starting point, because it is the first edition with Projects and progress invoicing. Advanced adds more users, custom fields and more room for classes and locations. Intuit Enterprise Suite suits larger contractors and multi-entity groups, with project profitability that includes construction job costing.
QuickBooks ProAdvisor, Elite A team certified in QuickBooks Online, Intuit Enterprise Suite and Workforce.
Xero Gold Partner Certified advisors, with Xero as the platform our depth genuinely sits in.
13+ years in practice Across accounting outsourcing, ERP and accounting software work.

Next

Where to Go Next

QuickBooks QuickBooks Bookkeeping How we run QuickBooks Online and Intuit Enterprise Suite files. QuickBooks service Monthly Bookkeeping The monthly cycle, including job coding and the WIP journal. QuickBooks service Catch-Up & Clean-Up Reattaching costs to jobs when the history is a mess. QuickBooks service Desktop to Online Migration Moving customer:job lists into Projects properly. QuickBooks service Payroll Crew payroll in Workforce, with time tracked to the job. Guide QuickBooks Online vs Intuit Enterprise Suite When a growing contractor should step up.

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