Contractor Bookkeeping: The Simple System That Keeps You Profitable

You didn't become a contractor to do accounting. But knowing where your money goes is the difference between a business that grows and one that bleeds out slowly. Here's the minimum viable system.

Why Most Contractors Have No Idea If They're Profitable

Here's what typically happens: You deposit checks, pay bills, and at the end of the year, your accountant tells you how much tax you owe. Maybe you made money. Maybe you didn't. You have no idea which jobs were profitable and which ones cost you.

This isn't a moral failing — nobody taught you this in trade school. But it's fixable, and it doesn't require an accounting degree.

The 4-Account System

At minimum, you need four bank accounts. This idea comes from the book Profit First, adapted for contractors:

Job Costing: Know Which Jobs Make Money

Job costing means tracking revenue and costs for each individual job. This is the single most valuable bookkeeping habit for contractors. Without it, you might be doing 10 jobs a month — 7 profitable and 3 money-losers — and never know it.

What to Track Per Job

• Job revenue: Total invoiced amount
• Material costs: Every receipt, tagged to the job
• Labor hours: Your time + any employees/helpers
• Labor cost: Hours × loaded rate (including payroll taxes, WC, benefits)
• Sub costs: Any subcontractor invoices for this job
• Other costs: Permits, equipment rental, disposal fees
• Gross profit: Revenue minus all direct costs
• Gross margin %: Gross profit ÷ revenue × 100

Target gross margin: 35–50% for residential trade work. If a job comes in under 30%, figure out why. If a job type consistently underperforms, raise your prices or stop doing that type of work.

Simple Job Tracking Method

You don't need fancy software to start. A Google Sheet with these columns works:

Job Name | Customer | Date | Revenue | Materials | Labor Hrs | Labor $ | Subs | Other | Total Cost | Gross Profit | Margin %

Spend 5 minutes at the end of each job filling this in. After 20–30 jobs, you'll have data that transforms how you price work.

Weekly Bookkeeping Routine (30 Minutes)

Set a recurring calendar event. Every Friday (or Monday morning, whatever sticks). Here's the checklist:

1. Categorize transactions — Open your bank/credit card feed, tag each expense (materials, fuel, insurance, etc.)
2. Photograph receipts — Use your phone. Apps like Dext or just your camera roll. The IRS wants receipts for anything over $75.
3. Send overdue invoices — Check what's outstanding. Follow up at 7, 14, and 30 days.
4. Update job costs — For active jobs, make sure material receipts are logged
5. Check cash position — How much is in operating? Enough for next week's payroll and materials?

30 minutes a week. That's it. If you can rough-in a bathroom in a day, you can handle 30 minutes of bookkeeping.

Software Recommendations (Ranked by Simplicity)

1. Wave (Free) — Good enough for solo operators. Invoicing + basic bookkeeping. Start here.
2. QuickBooks Simple Start ($15/mo) — Industry standard. Your accountant will thank you. Move here when you're doing $100K+/year.
3. Jobber or Housecall Pro ($50–$100/mo) — All-in-one: scheduling, invoicing, payments, job costing. Worth it when you have employees.

The 5 Numbers You Need to Know Every Month

1. Revenue: Total invoiced this month
2. Direct costs: Materials + labor + subs
3. Gross margin: (Revenue - Direct costs) ÷ Revenue. Target: 35–50%
4. Operating expenses: Everything else (vehicle, insurance, phone, marketing)
5. Net profit: What's left. Target: 10–20%

If you know these five numbers, you know more about your business finances than 80% of contractors.

When to Hire a Bookkeeper

Consider hiring help when:

• You're doing $200K+/year in revenue
• You have employees (payroll gets complicated fast)
• You're spending more than 2 hours/week on bookkeeping
• Your bookkeeping is consistently 2+ months behind

A good contractor bookkeeper costs $300–$600/month. They'll save you more than that in tax deductions you're missing and financial clarity.