Construction Bookkeeping for Houston Contractors
Job costing, progress billing, retainage, and WIP schedules — the five systems that protect contractor margin, plus a free checklist.
Houston contractors rarely lose money on the bid. They lose it in the ninety days after the bid — in uncoded costs, unbilled change orders, retainage nobody chased, and a WIP schedule that was never run. Construction bookkeeping is the discipline that catches those leaks while the job is still open.
This guide covers the five systems that separate contractors with predictable margin from contractors who find out the job lost money at tax time: job cost setup, labor and sub tracking, progress billing and retainage, WIP review, and the monthly close.
Why construction bookkeeping is different
Most bookkeeping is built around a calendar month. Construction is built around a job. A single Houston contractor may have twelve jobs running at once, each with its own contract value, change orders, retainage terms, and completion percentage. A standard profit and loss statement tells you nothing useful about any of them.
Three things make contractor books harder than the average small business:
- Revenue is earned before it is billed. Percentage-of-completion accounting means you recognize revenue as costs are incurred, not when a check arrives.
- Cash lags work by 30 to 90 days. Between pay app submission, GC approval, and retainage release, you can be profitable on paper and short on payroll.
- Costs must be traceable to a job. An expense that lands in a general overhead bucket is a margin question you can no longer answer.
1. Job costing: the foundation
Job costing means every dollar spent is tagged to the job and cost code it belongs to. Without it, you have a company-level P&L and no idea which jobs are carrying the business and which are draining it.
Set up a standard cost code structure
Keep it simple enough that the field will actually use it. Most Houston contractors do well with six buckets: labor, materials, subcontractors, equipment, permits and fees, and other direct costs. Use the same codes on every job so you can compare across projects.
Enter the estimate before work starts
An actual cost is meaningless without a budget beside it. Load estimated cost by code at job start so every report shows estimate versus actual versus remaining.
Log change orders separately
Change orders folded into the original contract value hide scope creep. Track them as their own line items with their own approved cost and revenue so you can see whether the extra work was actually profitable.
2. Labor, burden, and subcontractors
Labor is the cost category most often understated. If you cost a crew at raw hourly wages, you are ignoring payroll taxes, workers' compensation, and benefits — a burden that commonly adds 20 to 35 percent. Every job that "made margin" at raw wages may have lost it once burden is applied.
On the sub side, the bookkeeping controls are simple and non-negotiable: current W-9 and certificate of insurance on file before the first payment, sub invoices matched to the sub contract and approved change orders, lien waivers collected before payment is released, and 1099 tracking maintained year-round rather than reconstructed in January.
3. Progress billing and retainage
Progress billing is how contractors get paid, and it is also where the most revenue quietly goes missing. Whether you bill AIA-style pay applications, percent complete, or milestones, every application should reconcile to the schedule of values and to the costs actually incurred in that period.
Retainage deserves its own treatment. Five to ten percent withheld across a year of jobs is often the single largest receivable a contractor has, and it is frequently buried inside general accounts receivable where nobody tracks it. Book retainage receivable to a dedicated balance sheet account. Do the same for retainage payable to your subs, and release it on the same terms your GC releases it to you.
4. WIP schedules and job profitability
The work-in-progress schedule is the single most valuable report in construction accounting. It compares contract value, costs to date, estimated cost to complete, and amounts billed to reveal whether each job is overbilled or underbilled — and whether the margin you bid is still the margin you are earning.
Run it monthly, and require project managers to refresh estimate-to-complete rather than letting the bookkeeper guess. Margin erosion, or "fade," is almost always visible in the WIP two months before it shows up in the bank account. Overbilled jobs are borrowing cash from future work; underbilled jobs are financing the GC with your money.
If you want to run the numbers on a single job right now, our construction job profitability calculator does it in a couple of minutes.
5. Cash flow and the monthly close
Houston's payment cycle is unforgiving: you buy materials and make payroll weeks before the pay application clears. Contractor cash management comes down to a short list of habits.
- Reconcile every bank, credit card, and loan account within fifteen days of month end.
- Review A/R aging weekly — anything past forty-five days gets a phone call, not another emailed statement.
- Maintain a rolling 13-week cash forecast that includes expected draws, sub payments, and retainage releases.
- Issue monthly financials in a format a lender or bonding agent can read without asking follow-up questions.
That last point matters more than most contractors expect. Bonding capacity and SBA lending both hinge on clean, job-level financials. If growth is on the roadmap, see our SBA loan bookkeeping guide for what underwriters actually ask for.
Frequently asked questions
What is job costing in construction bookkeeping?
Job costing is the practice of assigning every cost — labor, materials, subcontractors, equipment — to a specific job and cost code, so you can compare actual cost against the estimate for each project instead of only seeing company-wide totals.
How should contractors handle retainage in their books?
Retainage receivable should be recorded in its own balance sheet account, separate from standard accounts receivable, and tracked by job. Retainage payable to subcontractors is tracked the same way and released on terms that mirror what the general contractor releases to you.
What is a WIP schedule and how often should I run one?
A work-in-progress schedule compares contract value, costs to date, estimated cost to complete, and amounts billed for every open job to reveal over- and under-billings and current margin. Run it monthly, with project managers refreshing the cost-to-complete figures.
Do I need construction-specific accounting software?
Not always. Many Houston contractors under roughly $5 million in revenue run well on QuickBooks Online with a disciplined job and cost code structure. Construction-specific platforms make sense when you need integrated AIA billing, complex certified payroll, or multi-tier sub management.
How much does construction bookkeeping cost in Houston?
Monthly bookkeeping for contractors typically runs more than general small business bookkeeping because of job costing and WIP work. See our Houston bookkeeping pricing guide for current ranges, or our pricing page for our packages.
Get the checklist
Grab the free Houston Contractor Job Costing & Cash Flow Checklist below. It walks through all five systems in this article as a printable checklist you can hand to your bookkeeper or run yourself at month end.
If you would rather hand it off, CreditReady handles job costing, WIP schedules, and monthly close for Houston contractors. Call (281) 301-1550 or book a consultation.
The Houston Contractor Job Costing & Cash Flow Checklist
A 5-part checklist covering job cost setup, progress billing, retainage tracking, WIP review, and the monthly close routine that keeps contractor books lender-ready.
- Job cost code structure you can copy into QuickBooks
- Progress billing and retainage tracking steps
- Monthly WIP schedule review checklist
- Cash flow guardrails for a 30–90 day payment cycle