How to Set Up Job Costing in QuickBooks Online for Contractors

QuickBooks Online wasn't designed for construction. It doesn't have native job costing, WIP schedules, or AIA billing. But for subcontractors between $500K and $5M, it's often the right tool — if you set it up correctly.

I've configured QBO for dozens of contractor clients. Here's the exact framework I use to turn a generic accounting tool into a functional job costing system.

Step 1: Enable Projects (or Use Classes)

QBO's "Projects" feature is your job tracking mechanism. Every active contract gets its own project. This lets you assign income and expenses directly to specific jobs.

For contractors running multiple divisions or entities, use Classes for the division level and Projects for individual jobs.

Step 2: Build Your Chart of Accounts for Construction

Delete the default chart of accounts. Seriously. The generic categories (Advertising, Office Supplies, Utilities) tell you nothing about job profitability. Here's what you need:

Income accounts:

• Contract Revenue
• Change Order Revenue
• T&M Revenue
• Retention Receivable

COGS/Job Cost accounts:

• Direct Labor (field)
• Labor Burden
• Materials
• Subcontractor Costs
• Equipment Rental
• Permits & Fees
• Direct Job Overhead

Overhead accounts:

• Office Salaries
• Insurance (GL, Auto, Umbrella)
• Vehicle Expenses
• Office & Admin

Step 3: Create Items That Map to Cost Codes

Your Items list in QBO becomes your cost code structure. Create items for each cost type you want to track at the job level:

• Labor - Journeyman
• Labor - Apprentice
• Labor - Foreman
• Materials - Rough
• Materials - Finish
• Sub - [Trade]
• Equipment

When you enter bills or timesheets, always assign both the Project AND the Item. This gives you two-dimensional reporting: cost by job and cost by type.

Step 4: Use Timesheets Religiously

If your field guys aren't logging time by project in QBO (or a connected app like Busybusy, ClockShark, or TSheets), you don't have job costing. You have expense tracking.

Set up weekly timesheet entry. Every hour gets a project and a service item. No exceptions.

Step 5: Enter Bills with Job Detail

Every vendor bill should be split by project. That $3,000 electrical supply order that covers three jobs? Split it three ways on the bill entry. It takes 30 extra seconds and gives you accurate job costs.

Step 6: Run the Right Reports

The reports that matter for contractors in QBO:

1. Profit & Loss by Project — Your job profitability report
2. Project Profitability Summary — Quick snapshot across all active jobs
3. Unbilled Time & Expenses — What you've spent but haven't billed yet
4. A/R Aging by Project — Who owes you and for which jobs

Common QBO Pitfalls for Contractors

• Not reconciling monthly — If your bank rec is 3 months behind, your job costs are meaningless
• Using "Uncategorized" as a parking lot — Every transaction needs a project and account. Period.
• Ignoring retention — Track retention receivable and payable separately. It's not optional for contractors.
• No backup — QBO is cloud-based but export your data quarterly

When QBO Isn't Enough

If you're over $5M in revenue, running certified payroll, or need integrated AIA billing, you may need to graduate to construction-specific software (Sage 100 Contractor, Foundation, or Procore). But for most subcontractors in the $500K-$5M range, a properly configured QBO setup works well.

Need professional QuickBooks setup for your contracting business? → [blocked]

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