Job Costing in QuickBooks Online for Contractors in 2025

Why Job Costing Matters for Contractors

Contractors operate on thin margins, juggling labor, materials, subcontractors, equipment, and overhead on every project. Without a robust job costing system, you risk quoting too low, eroding profitability, or quoting too high and losing bids. Something as simple as setting up job costing in QuickBooks Online might help simplify your data tracking and job profitability.

• Profit Visibility: Know exactly which jobs made money—and which ones didn’t—rather than waiting until the end of the year to discover surprises on your P&L.
• Accurate Bidding: Use historical cost data to inform future estimates, so your bids are competitive yet profitable.
• Cash‑Flow Forecasting: Track committed costs vs. actual spending in real time, preventing cost overruns that squeeze cash flow.
• Resource Allocation: Identify which crews, suppliers, or equipment are driving up costs and take corrective action.

With QuickBooks Online (QBO), you can transform raw accounting data into actionable job‑level insights—without expensive, standalone job costing software. In this guide, we’ll walk through every step of setting up and leveraging job costing in QBO, from chart of accounts tweaks to advanced reporting hacks.

1. Configuring Your QuickBooks Online for Job Costing

Before you can tag transactions to specific jobs, you need to set up a structure that aligns with your projects and cost categories.

A. Turn on the “Projects” Feature

1. Navigate to Settings (⚙️) → Account and Settings → Advanced
2. Scroll to the Projects section and click Edit.
3. Toggle Organize all job-related activity in one place to On and hit Save.

This enables the Projects menu, where each new client engagement becomes its own “Project.”

B. Refine Your Chart of Accounts (COA)

A clean COA ensures costs roll up correctly by category. Consider adding:

• Cost of Goods Sold: Labor (for employee wages and labor burden)
• Cost of Goods Sold: Materials (for raw materials, supplies)
• Cost of Goods Sold: Subcontractors (for specialty trades)
• Overhead Allocations (rent, utilities, insurance apportioned by project)

Pro Tip: Add numbering conventions (e.g., 5000–5099 for labor, 5100–5199 for materials) so your reports sort neatly.

C. Create Service and Expense Items

Under Sales → Products and Services, set up:

• Service Items for billable labor rates (e.g., “Electrician – Standard Rate”)
• Inventory or Non‑Inventory Items for materials (e.g., “Copper Wiring – per foot”)
• Other Charge Items for pass‑through costs or miscellaneous fees

Link each item to the corresponding COA account. When you invoice or bill, selecting the item auto‑tags the expense or revenue to the correct category.

2. Setting Up a New Project (Job)

Every new contract or job should start as a unique Project in QBO. Here’s how:

1. Go to Projects → New Project.
2. Enter the Project Name, Customer, Start Date, and optional End Date.
3. Add any Project Description or Notes that detail scope.
4. Click Save.

Once created, you’ll see a dashboard summarizing Estimates, Transactions, Time Activities, and Profitability for that job.

3. Recording Job Costs Accurately

Accurate data entry is critical. There are three main ways costs flow into a Project:

A. Time Tracking for Labor

• In‑App Timer: Employees can start a timer when they arrive on site and stop it when they finish. Under Projects → Timesheets, ensure each time entry is linked to the correct Project and Service Item.
• Manual Timesheets: Go to + New → Single Time Activity, select the Project, Service, Hours, and Billable toggle if you’re passing labor cost through to the client.

B. Entering Bills and Expenses

• Vendor Bill: + New → Bill. Choose the Vendor, set the Bill Date and Due Date, then under the Category Details tab select the correct Project and expense account (e.g., Cost of Goods Sold: Materials).
• Expense Transaction: Use the + New → Expense screen for credit‑card or petty‑cash purchases, linking each line to the Project and expense account.

C. Invoicing and Pass‑Through Costs

• For subcontractor fees or rental equipment, you can use Billable Expenses. Mark the expense as Billable, assign it to the Project, and when you generate the invoice, QBO will prompt you to add billable costs.

Checklist:

• Every time entry must be tagged to a Project.
• Bills and expenses need the Customer/Project column filled.
• Invoices should draw from Service Items tied to your COA.

4. Monitoring Project Financials in Real Time

Once you’ve captured labor, materials, and other costs, QBO’s Project dashboard and reports let you gauge profitability at a glance.

A. Project Dashboard

Access via Projects → [Your Project]. Key metrics include:

• Estimated vs. Actual Revenue: Compare your original estimate to invoiced amounts.
• Unbilled Time and Expenses: Items logged but not yet invoiced—critical for cash‑flow.
• Project Profitability: Real‑time gross margin (Revenue minus Direct Costs).

B. Essential Reports for Job Costing

1. Profit and Loss by Project
   • Filter by date range and Customer/Project.
   • Shows revenue, direct costs, overhead allocations, and net profit per project.
2. Time Activities by Customer
   • Breaks down labor hours and costs by employee and project.
3. Transaction List by Customer
   • A raw ledger of every expense, bill, invoice, and payment tagged to the job.
4. Budget vs. Actual (using Estimates)
   • If you’ve entered Estimates at the line‑item level, use Reports → Estimate vs. Actual to see cost overruns flagged in red.

Tip: Schedule these reports to be emailed weekly to you or your project managers so nobody misses an early warning sign.