Bookkeeping for Contractors and Tradespeople

Contractors and tradespeople — electricians, plumbers, roofers, general contractors, HVAC techs, landscapers — run a different kind of business than a typical retail shop or office, and their books should reflect that. If you're a contractor anywhere handling your own bookkeeping (or letting it slide), here's what actually matters and where most contractors get tripped up.

Job costing is the difference between "busy" and "profitable"

The single biggest gap in contractor bookkeeping is job costing — tracking materials, labor, and subcontractor costs against each specific job so you know which jobs are actually profitable, not just which ones kept you busy. Plenty of contractors are slammed with work and still not making real money, because certain job types or certain customers are quietly unprofitable once materials markup and labor hours are properly accounted for.

Without job costing, your profit and loss statement tells you the business made money overall, but it can't tell you why — was it the kitchen remodels or the small repair calls? Was it Job A or Job B? That distinction matters when you're deciding what work to chase next season.

Materials, tools, and equipment need their own categories

A generic "supplies" category in your books hides more than it reveals. Materials that get billed to a specific job, tools and equipment that are business assets, and consumables (fuel, small parts, safety gear) are all different animals for tax purposes and for understanding your true margins. Equipment purchases in particular often qualify for accelerated depreciation or Section 179 treatment — but only if they're categorized correctly from day one, not reconstructed after the fact at tax time.

1099 subcontractors are a compliance issue, not just a bookkeeping one

If you regularly pay subcontractors, you likely need to track what you've paid each one throughout the year and issue 1099-NEC forms by the January deadline. This trips up a lot of contractors because it requires having a W-9 on file for each sub before you pay them, and accurate year-to-date totals per vendor. Waiting until January to figure out who you paid and how much is a scramble that's easy to avoid with clean books kept monthly.

Cash flow is seasonal — plan for it in your books

Many trades have real seasonality: roofing and landscaping slow down in winter, HVAC spikes with the weather, certain remodel work clusters around tax refund season. Your bookkeeping should make that seasonality visible — month-over-month reports that show the pattern, not just a single annual number — so you can plan cash reserves for the slow months instead of getting surprised by them every year.

Deposits, progress billing, and retainage complicate "revenue"

Contractors often collect deposits before work starts, bill in progress draws on larger jobs, or deal with retainage (a percentage a customer withholds until a job is fully complete). None of that is straightforward "revenue the day it hits the bank" — a deposit for a job that hasn't started yet is a liability on your books, not income, until the work is performed. Getting this wrong overstates your income in some months and understates it in others, which makes tax planning and loan applications both harder.

Vehicle and mileage tracking is worth doing properly

Between job sites, supply runs, and estimates, contractors put real miles on their trucks. Whether you deduct actual vehicle expenses or use the standard mileage rate, you need a consistent system tracking business miles versus personal use — and it needs to happen throughout the year, not reconstructed from memory in April.

Where Linked-do-Books fits in

This is the kind of bookkeeping we handle every month for contractors and trade businesses nationwide — categorizing materials and job costs correctly, tracking subcontractor payments toward 1099 season, reconciling accounts monthly so seasonal cash flow patterns are visible instead of a surprise, and making sure deposits and progress billing are recorded the right way. It's not glamorous work, but it's the difference between guessing at your margins and actually knowing them job by job.

Getting started

If your current system is a mix of a bank app, a shoebox of receipts, and a mental tally of who owes you money, it's not a personal failing — it's just not built to scale with a growing trade business. The fix is usually simpler than owners expect once someone sets up the right categories and gets into a monthly rhythm.