How do I set up bookkeeping for a construction company that also does service work?

The challenge is that service work and contract work have fundamentally different billing cycles, cost structures, and revenue recognition needs. Treating them the same in your books gives you numbers that don’t reflect either side of the business accurately. The fix is to build your chart of accounts and job tracking around each type of work separately from the start.

Create separate income accounts for each work type. Service Revenue captures your T&M and break-fix billing. Contract Revenue captures your new construction and remodel projects. This split shows up on your P&L so you can see how much each side of the business is contributing without digging into individual transactions. Do the same on the expense side. Direct costs for service work and direct costs for contract work should be distinguishable in your reports.

For service work, keep your job tracking simple. Each service call or small repair gets a job number, you bill time and materials as you go, and you close the job when it’s done. Most service jobs open and close within the same month. You don’t need work-in-progress tracking here because there’s nothing rolling across reporting periods. Bill the customer, collect payment, close the job, move on.

Contract jobs need a completely different level of tracking. A kitchen remodel or new build might span three to nine months. You’re incurring costs in one period and billing in another. These jobs need full job costing with labor, materials, and subcontractor expenses tracked against the original estimate. Set up cost codes that match how you bid the work so you can compare budget to actual throughout the life of the project. Construction bookkeeping that doesn’t separate these two work types will leave you guessing about which jobs actually made money.

Contract jobs also need a WIP schedule. Work in progress tracks the relationship between costs incurred, revenue recognized, and amounts billed. Without it, your financial statements swing wildly depending on when invoices go out versus when work gets done. If you’ve billed ahead of where you are on a job, that’s overbilling. If you’ve done the work but haven’t billed yet, that’s underbilling. The WIP schedule keeps your revenue honest and gives you a real picture of profitability on each contract.

Keep overhead and shared costs separate from both work streams. Rent, insurance, office staff, and vehicle expenses that aren’t tied to a specific job should sit in overhead accounts. You can allocate overhead to jobs later if you want a fully loaded cost picture, but don’t mix direct job costs with general business expenses. That muddles your margins on both sides.

In QuickBooks, use the Projects feature or Classes to distinguish the two work streams. Create naming conventions that make it obvious which category a job belongs to. Something like “SVC-” prefix for service jobs and “CON-” prefix for contract work makes sorting and reporting straightforward. Service jobs get billed T&M and closed out monthly. Contract jobs stay open, accumulate costs on the WIP schedule, and get reviewed against the estimate on a regular cycle.

The discipline matters more than the software. Every expense needs to hit the right job and the right account on the day it happens. Every sub invoice needs to be coded to the correct contract before payment goes out. Every service call needs hours and materials logged before the crew moves to the next one. If you let this slide for a few weeks, your job costing turns into guesswork and you lose the whole point of separating the work types.

If this sounds like a lot to manage on top of running crews and closing deals, that’s because it is. Many construction companies with mixed work types benefit from having a bookkeeper who understands how the two revenue streams interact. Our Northern Virginia small business bookkeeping services are built around giving owners like you the reporting structure to see real margins on every job, whether it took two hours or eight months.