Bookkeeping Tips for Contractors: Managing Projects, Cash Flow, and Compliance

Bookkeeping for contractors involves unique challenges that go beyond ordinary small-business record-keeping. If you haven’t already, start with our Essential Bookkeeping Tips for Small Businesses — it covers the fundamentals and common mistakes that every owner should know.
This article builds on those principles with practices tailored specifically for construction and trades businesses.

1. Track job costs by project

Each project is effectively its own mini-business. Materials, labour, permits, equipment, and subcontractors should all be assigned to individual jobs.

Tip: Use job-costing features in your accounting software. Accurate job-level tracking helps you quote correctly, monitor profitability, and control overruns.

2. Record work-in-progress (WIP)

For long-term projects, income and expenses rarely match the same period. Without WIP tracking, profits can look inflated or negative month to month.

Tip: Record the percentage of completion at month-end. Recognize revenue and costs proportionally to reflect true progress.

3. Manage progress billing and retainage

Progress billing keeps cash flowing as projects advance, while retainage (often 5–10%) delays full payment until completion.

Tip: Set clear billing schedules tied to milestones. Track retainage receivable separately so you don’t overstate cash flow.

4. Keep subcontractor documentation current

Missing compliance documents can lead to CRA issues or payment disputes.

Tip: Maintain copies of signed contracts, WCB clearance letters, and proof of liability insurance for every subcontractor. Review expiry dates quarterly.

5. Separate materials, labour, and overhead

Lumping all expenses together makes it difficult to price future jobs accurately.

Tip: Create categories for materials, labour, equipment, and overhead. Over time, this builds a cost history that helps you estimate more precisely.

6. Track vehicle and equipment use

Trucks, trailers, and tools often serve multiple jobs.

Tip: Use mileage logs and equipment-use records to allocate costs properly. This ensures accurate job costing and maximizes eligible deductions.

7. Forecast cash flow around project timing

Contract work is cyclical. Large purchases and delayed payments can strain liquidity.

Tip: Use cash-flow projections to plan material orders and payroll around billing cycles. Keep a reserve fund for slow periods or project delays.

8. Store documents digitally

Contractors handle numerous estimates, change orders, and invoices.

Tip: Use cloud-based storage linked to your accounting software. Digital organization reduces lost paperwork and simplifies audits.

9. Reconcile project data with accounting monthly

Job-site spreadsheets or project-management apps often don’t match the books.

Tip: Reconcile job budgets and accounting records monthly to ensure all costs are captured and billed.

10. Review profitability by job

Not every contract yields the same return.

Tip: After each project closes, compare estimated vs. actual costs and margins. Adjust future pricing and scheduling based on what you learn.

Build consistency and control

Strong bookkeeping systems turn project chaos into reliable numbers. By combining general small-business best practices with these contractor-specific methods, you’ll improve cash flow, pricing accuracy, and overall profitability.

If you’d like help setting up or reviewing your contractor bookkeeping system, Complete Bookkeeping & Advisory Services provides professional bookkeeping, payroll, and advisory support for trades and construction businesses throughout Kamloops and surrounding areas.

Learn more about our contractor bookkeeping services.