What bookkeeping mistakes do contractors commonly make?
The biggest mistake contractors make is not tracking costs by job. They categorize expenses as “materials” or “labor” without assigning them to specific projects. At year end they know whether the company made money overall but have no idea which jobs were profitable. A kitchen remodel might have looked good on paper but actually lost money because framing labor ran over and no one caught it. Proper job costing for contractors takes discipline but pays off in knowing which work makes money and which drains the business.
Confusing deposits with revenue comes in second. A customer pays $10,000 upfront before work starts. That’s not income yet. It’s a liability until you actually perform the work. Recording deposits as revenue makes January look great and March look terrible when expenses pile up but the money was already counted. Progress billing creates similar confusion. You bill $25,000 against a phase that’s 80% complete but only $20,000 is actually earned. Contractors who don’t track earned versus billed can’t produce accurate financial statements for banks or bonding companies.
Not reconciling accounts regularly lets errors compound. A charge gets miscoded, a deposit gets missed, and by the time anyone notices it’s six months later. Weekly reconciliation catches mistakes while they’re easy to fix and the details are still fresh.
Mixing personal and business expenses happens constantly. Using the business card at the hardware store for a personal project, running personal gas through the company account, buying job materials on a personal card and never recording them. Tax time becomes a forensic exercise trying to separate deductible expenses from personal purchases.
Missing W-9s for subcontractors creates a scramble every January. Massachusetts requires 1099s for anyone you pay over $600 for services. If you don’t collect W-9s from subs when you hire them, you’re chasing paperwork at year end when they’re busy on other jobs and slow to respond.
Skipping monthly closes means you’re always working with outdated numbers. Financial statements from three months ago don’t help you price the next job or decide whether to take on more work. A structured close with reconciliation and review each month gives you information you can actually act on.
These mistakes add up. Contractors lose money on jobs without realizing it, overpay on taxes, and scramble every spring to reconstruct records. If you’re running a contracting business in the MetroWest or Greater Boston area, working with small business bookkeeping in MetroWest Massachusetts that understands construction workflows makes a real difference. The goal is clean books that show you what’s actually happening in your business.
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More Questions
How do I predict when I'll run out of cash?
Build a rolling 13-week cash flow forecast. Start with your current bank balance, add expected inflows week by week, subtract expected outflows, and watch where the running total goes negative. Update it weekly to stay ahead of problems.
Read answerWhere can I find construction bookkeeping help in Massachusetts?
Look for bookkeepers with specific construction experience who understand job costing, WIP accounting, and retainage tracking. Local knowledge of Massachusetts construction rhythms and vendor norms makes a real difference.
Read answerHow do I know when to upgrade from bookkeeping to CFO services?
The signal isn't a revenue number. It's when you're making significant decisions without the financial insight to evaluate them properly. If you're flying blind on pricing, growth investments, or cash planning, you've likely outgrown basic bookkeeping.
Read answerHow do I track change orders in my bookkeeping?
Set up each change order as a separate sub-project or line item within the main job. Code all labor, materials, and subcontractor costs to that specific change order so you can see profitability on the base contract versus extras.
Read answerWhat payroll records do I need to keep?
Keep employee tax forms, timesheets, pay stubs, and quarterly tax filings for at least four years. Some records like I-9s have different rules. Organized records protect you during audits and make tax season straightforward.
Read answerHow much does a bookkeeper cost for a small business?
Small business bookkeeping typically costs $200 to $600 per month for basic services. Actual pricing depends on transaction volume, how many accounts need reconciling, and whether your industry requires specialized accounting like job costing.
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