Questions & Answers
Answers to questions business owners ask about bookkeeping, payroll, taxes, and managing the financial side of their business.
How do I track retainage in QuickBooks for construction projects?
QuickBooks Online doesn't have a built-in retainage feature. You need to create a Retainage Receivable account and a Retainage Payable account, then use line items and journal entries at each billing cycle to track what's being withheld.
Read answerWhat is the difference between overbilling and underbilling on a WIP schedule?
Overbilling means you've billed more than the work you've completed, and it shows as a liability. Underbilling means you've done more work than you've billed for, and it shows as an asset. Both are tracked per project on a WIP schedule.
Read answerHow do I set up job costing in QuickBooks Online for a general contractor?
Use sub-customers for each job, classes for cost categories like labor and materials, and enable the Projects feature for tracking. The chart of accounts needs to be structured for construction or the reports won't tell you anything useful.
Read answerShould my construction company use cash or accrual accounting for tax purposes?
Most construction companies under $29 million in average annual gross receipts can use the cash method, which defers taxes. But cash basis hides true job profitability, so many contractors benefit from accrual-style reporting internally even if they file taxes on a cash basis.
Read answerHow do I account for subcontractor payments and ensure 1099 compliance on construction jobs?
Set up each subcontractor as a 1099-eligible vendor in QBO before you pay them, and code every payment to the correct project. Collect W-9s upfront, track retainage as a separate liability, and file 1099-NECs by January 31 for any sub paid $600 or more.
Read answerWhat is AIA billing and how do I record G702/G703 pay applications in my books?
AIA billing is the standard progress billing format used in construction, built around the G702 Application for Payment and G703 continuation sheet. Record the full application amount as revenue, track retainage as a separate receivable, and keep change orders as distinct line items so your financials reflect your true position on each project.
Read answerHow do I calculate percentage of completion for revenue recognition on long-term contracts?
Use the cost-to-cost method. Divide total costs incurred to date by total estimated project costs to get your completion percentage, then multiply by the total contract price to determine earned revenue. Update your cost estimates monthly because they will change.
Read answerHow should I handle change orders in my construction job costing system?
Track each change order as an amendment to the original contract. Update the total contract value and revised cost estimate in your WIP schedule, and keep unapproved change orders separate until the client signs off.
Read answerWhat insurance costs should a contractor track by job versus as overhead?
General liability and workers comp premiums tied to job payroll should be allocated per job. Builder's risk and project-specific bonds are direct job costs. General commercial policies, office insurance, and bonding capacity costs are overhead.
Read answerHow do I track equipment costs per construction job including depreciation and fuel?
Calculate an internal equipment rate that bundles depreciation, maintenance, insurance, and fuel into a single hourly cost. Multiply that rate by the hours each piece of equipment works on a job to allocate costs accurately.
Read answerWhat is a construction labor burden rate and how do I calculate it?
Labor burden is everything you pay on top of base wages to employ someone, including payroll taxes, workers' comp, insurance, PTO, and other benefits. It typically adds 25-50% to the hourly rate, meaning a $25/hr worker actually costs $31-$37/hr.
Read answerHow do I reconcile my construction project budget against actual costs at month end?
Pull a job cost report showing budget versus actual by cost code for every active project. Calculate line-item variances, add committed costs from open POs and subcontracts, and update your cost-to-complete estimates. This monthly process feeds your WIP schedule and shows which jobs are really making money.
Read answerShould I capitalize or expense tools and small equipment purchased for construction jobs?
Tools and equipment under $2,500 per invoice can be expensed immediately if you have a written accounting policy. Items over that threshold should be capitalized and depreciated, though Section 179 often lets you deduct the full cost in the year of purchase.
Read answerHow does bonding capacity affect my construction company's bookkeeping requirements?
Surety companies base your bonding capacity on financial statements, working capital ratios, and WIP schedules that all come directly from your books. Sloppy bookkeeping doesn't just create tax headaches. It shrinks the jobs you're allowed to bid on.
Read answerWhat are the tax implications of construction project warranties and callback reserves?
How you deduct warranty reserves depends on whether you're on the cash or accrual basis. Cash basis contractors deduct warranty costs when they actually pay them. Accrual basis contractors may deduct reserves earlier, but only if they meet specific IRS requirements.
Read answerHow do I account for Medicaid reimbursement delays and denials in my practice books?
Book claims at the expected Medicaid reimbursement amount, not your billed charges. Track Medicaid A/R separately from commercial insurance so you can forecast cash flow accurately and know which claims need follow-up.
Read answerWhat is the difference between a contractual allowance and a bad debt write-off for a medical practice?
A contractual allowance is the gap between what you bill and what the insurer agreed to pay. It reduces revenue. Bad debt is money a patient or payer actually owed you but never paid. The IRS requires you to track them separately.
Read answerHow should a dental practice track PPO write-offs and fee schedule adjustments?
Record every procedure at your full UCR fee, then post the contractual adjustment as a separate entry. Track those adjustments by insurance company so you can see which PPO plans are actually profitable and which ones are costing you money.
Read answerWhat bookkeeping system should I use to track insurance reimbursements by payer for my medical practice?
Use your practice management system for claims and aging, then reconcile monthly into QuickBooks Online. Set up each insurance payer as a customer in QBO so you can track payments, denials, and adjustments by payer.
Read answerHow do I handle patient copays and deductibles in my accounting when collected at different times?
Collect at the point of service whenever possible. When that doesn't happen, book the patient's balance as a separate accounts receivable from insurance A/R so you can track and collect it properly.
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