How do I track subcontractor costs in QuickBooks?
The goal isn’t just recording what you paid subcontractors. It’s knowing what you spent on each job so you can see real profitability. Without job-level tracking, you know your total subcontractor expense for the month but have no idea which projects ate your margin.
Start by setting up each subcontractor as a vendor in QuickBooks. Get their W-9 before you pay them the first time and enter their tax ID number and legal business name in the vendor record. QuickBooks uses this information to generate 1099s at year end. Missing or incorrect tax IDs mean scrambling in January or filing inaccurate forms with the IRS.
Use QuickBooks’ projects feature in QuickBooks Online or classes in Desktop to track costs by job. Create a project for each construction job, remodel, or service contract you want to track separately. When you enter a subcontractor bill, assign it to the relevant project. This one step is what makes job costing actually work.
Enter bills when you receive the invoice, not when you write the check. This puts the cost in the correct period and lets you see committed expenses even before payment. If your electrician invoices you on the 15th but you don’t pay until the following month, the expense should hit your books on the 15th. Use the Pay Bills feature in QuickBooks when you’re ready to cut the check.
Create expense accounts that separate different types of subcontractor work if that level of detail matters to your business. Some contractors lump everything into one Subcontractors account. Others break it out by trade: electrical subs, plumbing subs, drywall subs. More accounts mean more work coding expenses but better visibility into where money actually goes.
Run the Profit and Loss by Project report to see subcontractor costs by job. This shows you which projects are running heavy on sub costs versus your estimate. A job that looked profitable on paper might be underwater once you add up the actual sub invoices. You won’t know until you pull the report and look.
Review subcontractor costs weekly during active projects. Waiting until the job is done to analyze costs means you’re doing an autopsy, not managing the project. Weekly reviews let you catch overruns while there’s still time to adjust scope or negotiate with subs.
The tracking only works if you’re disciplined about entering every bill and assigning it to the right job. Skip a few invoices or dump things into a generic expense account and your reports become useless. If maintaining that discipline feels like more than you can handle while running jobs, a QuickBooks bookkeeper in Santa Fe can handle the data entry and make sure your job costing stays accurate.
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