pool planningQuickBooks® is a generic bookkeeping and accounting program, designed to be used by every type of business that you can imagine. If it was industry specific, well, it would have the same big price tag! Sure, Intuit makes a “Contractor” version, but even then it’s designed to meet the needs of every type of contractor – from the handyman to the bridge builder.

As a contractor, you know how important it is to have a plan or blueprint in your hands before you go to the construction site and begin work on the project. That way, you know what you are up against. This same principle applies to using QuickBooks Financial Software for your accounting, payroll and job costing needs.

Many QuickBooks users fall for the seductive marketing messages that boast “easy to set up, easy to learn to use” and fall prey to the myth of do-it-yourself accounting.  QuickBooks users aren’t the only ones who fall prey to this myth; so do accounting professionals.  As a matter of fact, recently I was asked by a QuickBooks ProAdvisor “What are the most common mistakes that you see happen when using QuickBooks for a construction business?”

Here is a list of common mistakes that I see:

  1. Outsourcing payroll
  2. Entering job costs using the Expenses and/or Accounts tab
  3. Thinking or believing that every contractor can/should use the exact same Chart of Accounts or Items List
  4. Not setting up Items to track both Expenses and Income
  5. Not using the built-in Estimate function or an estimating program that interfaces with QuickBooks.
  6. Creating a new QuickBooks file for each project/job
  7. Receiving customer payments incorrectly
  8. Not properly applying Vendor Credits to Bills.
  9. Not reconciling Bank or Credit Card accounts
  10. Not using the Ask My Accountant Chart of Accounts item for expenditures that are difficult to categorize.

The biggest mistake that I see is business owners (not just contractors) failing to hire someone who can help them to really learn how to use QuickBooks and utilize all the different functions that are available.

There are a lot of really great blogs and user forums, such as the forums here at the QuickbooksUsers Forums and the Intuit Community forums for getting help for free.  Keep in mind, when you ask a specific question, it’s difficult for the person answering to know whether or not they should be taking the bigger picture into consideration.  When you hire someone who is experienced in using QuickBooks in your industry, they can help you look at the entire plan.

Have a question about using QuickBooks in your commercial/government construction business?  Feel free to contact me.

25 thoughts on “10 Common Mistakes When Using QuickBooks for a Construction Business

  1. Great post!

    I’ve spent enough time in the Intuit Community Forums to know that people have a big problem with expenses/job costing/items – every time someone uses a journal entry to enter in an expense, I cringe a little. But, that’s why blogs like this are around; to help people out!

  2. I’d like to hear more about these top 10 — they were sort of “hints” that diidn’t really give any “because’s”….. for instance, #1. does that mean we shouldn’t or should outsource payroll??

  3. Hi Ken
    I’ll talk to Shannon about doing a series expanding on this post. In the meantime, to answer your question about payroll.

    Payroll is one of the bigger expenses that a contractor (or any business for that matter) incurs on a construction project, in my opinion, that payroll really needs to be job costed – otherwise you really don’t know if your bidding is on target. When you outsource your payroll, you don’t get the same quality job costing as you do if you process payroll in QuickBooks. So, in my opinion you should do your own payroll.

  4. Pingback: Weekly Wrap-Up: News You Can Use 7/27-8/2/2012 | QuickBooks for Contractors blog

  5. Pingback: 13 Steps to Implementing Job Costing in QuickBooks for Contractors | QuickBooks and Your Business

  6. People should not be using Journal Entries unless they Absolutely have to.
    There’s NO need for them to do so unless they want to do some type of adjustment.

    Also, people SHOULD take courses or just LEARN how to use QB and its features like job costing feature.

    Then again, isn’t that our job?? NO, it’s not!
    Sometimes the frustration of cleaning up their cr@p is Not worth it esp. if the clients B!TCH and complain about the bill!

  7. Tremendous post !!

    I would say that your post is always helping us and our clients as well. I have give your post URL to my clients and he said this is what he was looking for.

    Now I am collecting good information about accountants for contractors.

    Thanks a ton and keep up the good work !!

  8. Most accountants definitely do these mistakes while Using QuickBooks but if accountants get deeply information about these they can get rid of this problem and you are really helping accountants by providing such type of informative posts.

  9. I’m relatively new to the construction world and have a bookkeeper helping me out. When I accidentally spend personal money on a company expense, she makes me give her the information so that she can enter it as a Journal Entry. What would be the alternative to doing this, if journal entries are so terrible?

    • Kristen … she should use the “write check” feature. Enter the company expense on the item tab and include the job costing. On the expense tab, use the owners contribution account as a negative for the same amount. The “check” would record as a zero check.

  10. Muhammad – without knowing specifics about your company, I think it would be safe to say that each site would be either a customer or a job.

    Let’s say you have sites 1, 2, & 3 and they all are owned by Company X, then Company X would be the QuickBooks Customer and sites 1, 2, and 3 would each be a job.

    Hope this helps.

  11. Best Quality All Kinds Of Civil Construction & Contractors Work Call 9739667778 / 8880411411/080 25297735 @ House Construction , Building Construction, Residential Construction, Commercial Construction, Independent House Construction

  12. Question?
    I see that QB allows users to job cost expenses posted in the G&A accounts, and then those amounts end up in the cost and revenue report, which totally alters the actual job numbers, please comment

  13. I started working for this company last year and since I’ve been here I cannot produce a Cash Basis Balance sheet that is in balance. I went to EBS and They just told me that I needed to reproduce every invoice that the owner created, received payment on and then Deleted and applied to the updated invoice to show payments received and balance due do date. I have narrowed it down to january 1st 2015 but there isn’t anything that matches the amount that it’s off by. We haven’t turned in taxes for 2016 yeat due to this problem. I am at a loss as to how to fix this.

  14. accountants comes from the background of finance and accounting they have proper knowledge about accounts. So they handle company financial services.
    Quicks books is a software made for small and medium size business.It includes payroll assistance and outsourcing, electronic payment functions, online banking and reconciliation

  15. Does anyone know what the difference is between labeling something as Cost of Labor
    vs a Contractor.
    I’m fairly new to QB and am confused on this.
    they are an outside company doing work for us , however, do they get classified as a Contractor, or can Cost of Labor be used just the same .

    • Basically Cost of Labor is belong to Cost of Goods Sold. It is part of your manufacturing cost. But contactor is not belong to Cost of Goods Sold.

      Basically sub contractor is belong to Wages & Payroll. They are not permanent employees that is reason we call them sub contractors

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