Date Published:
Author: Joe
QuickBooks Online is a powerful tool for contractors, but most people only scratch the surface. They use it to record transactions and pay bills, but they do not take advantage of the features that actually help them understand whether their business is profitable.
Job costing is one of those features. Knowing whether a job is making money or losing money is critical for contractors. Yet many contractors do not set up QuickBooks to track this information.
Here are five practical ways to get real visibility into job profitability using QuickBooks Online.
The foundation of job costing is tracking income and expenses for each job separately. In QuickBooks Online, you can use either Classes or the Projects feature to do this.
Classes are a built-in QuickBooks feature available in most subscription levels. Projects are available in QuickBooks Online Plus and Advanced plans.
When you enter a transaction, you assign it to the appropriate class or project. This tells QuickBooks which job that income or expense belongs to.
Without this step, all your revenue and expenses are lumped together, and you cannot see how individual jobs are performing.
Once you have set up classes or projects for your jobs, running a profit and loss report by project or class is straightforward.
In QuickBooks, go to Reports and select Profit and Loss. Then filter or group the report by project or class. This shows you income and expenses broken down by individual job.
Now you can see which jobs are profitable and which ones are losing money. You can see which types of work generate the best margins. You can identify problem jobs early instead of discovering them at year-end.
Many contractors lump all expenses together in one account. Everything goes into "job expenses" or "materials and labor." This makes it impossible to understand the true cost structure of your work.
Instead, create separate expense categories for materials, labor (if you pay wages), and subcontractor payments. This lets you see at a glance how much of your job cost is materials versus labor versus outside services.
When you run job costing reports, this breakdown tells you a lot about your business. You might realize labor is higher than you thought, or that subs are eating up more of your margin than expected.
QuickBooks Online lets you create estimates for jobs. Once the job is done and actual costs are recorded, you can compare the estimate to what you actually spent.
This comparison is valuable. It shows you whether your estimating is accurate. If you consistently estimate lower than actuals, you are underpricing your work.
Create the habit of running this comparison when jobs close out. Review why estimates missed. Adjust your estimate process if patterns emerge.
The last and most important step is to review your job costing reports monthly, not just once a year at tax time.
Monthly reviews let you catch problems early. If a job is running over budget, you can address it while the job is happening. You can adjust pricing on future jobs.
Monthly reviews also build a rhythm. Bookkeeping does not feel like a burden that happens once a year. It becomes part of your regular business management routine.
Look at your P&L by project. Look at which jobs are profitable. Look for trends. Ask questions about why certain jobs cost more or less than expected.
This is where job costing becomes a real management tool, not just an accounting exercise.
Job costing in QuickBooks does not have to be complicated. Start with these five basics: set up classes or projects, run regular P&L reports by job, separate your expense categories, compare estimates to actuals, and review monthly.
As you get comfortable with these fundamentals, you can build on them. Add more detail, track additional metrics, dig deeper into what drives your costs.
But start here. These five steps will give you more visibility into job profitability than most contractors ever achieve. And that visibility is what lets you make smarter business decisions and build a more profitable company.
