How to Use Job Costing in QuickBooks Online as a Contractor

You finished a big landscaping job last month. The client paid, the crew got paid, and materials are accounted for. But do you actually know if you made money on it?

That's the question job costing answers. For contractors juggling multiple jobs at once, it's one of the more useful features inside QuickBooks Online.

What Is Job Costing?

Job costing is the process of tracking every dollar of income and expense tied to a specific job or project. Instead of just knowing that your company made $40,000 last month, you know that Job A made $8,000, Job B broke even, and Job C actually lost $1,200.

That level of detail is what actually drives smarter decisions. It shows you which job types are worth pursuing and where your pricing needs work.

Setting Up Job Costing in QuickBooks Online

QBO uses Projects to handle job costing. Here's how to get started.

Step 1: Turn on the Projects feature

Go to Settings, then Account and Settings, then the Advanced tab. Turn on Projects. This adds a Projects menu to your left navigation bar.

Step 2: Create a project for each job

Click Projects and create a new project. Name it clearly (use the client name and job address or description). Assign it to the customer.

Step 3: Assign income to the project

When you create an invoice, link it to the project. Every dollar that comes in for that job will now attach to it.

Step 4: Assign expenses to the project

When you enter a bill, expense, or purchase, you'll see a field for "Customer/Project." Select the right project. This includes:

• Materials purchased at a supply house
• Subcontractor payments
• Equipment rentals
• Any other direct job costs

Step 5: Track labor

Most contractors skip this one. Labor is usually your biggest cost per job, but if you're not tracking hours by project, it won't show up in your job costing numbers at all. You can use QBO's time tracking or connect a tool like Homebase or Buildertrend, or even a simple timesheet. The goal is getting crew hours tied to specific jobs so you can calculate actual labor cost per project.

Reading Your Job Profitability Report

Once your projects are set up and populated, go to Reports and search for "Project Profitability" or pull it from the Projects section. You'll see:

• Income: What you billed for each job
• Cost: What you spent (materials, subs, labor)
• Profit: The difference

Sort by profit margin to see which job types are actually earning.

A Real Example

Say you run a gutter installation company. You do both residential cleanings at $250 each and full gutter replacements at $2,500 each. On paper, the big replacements look better because the ticket is higher.

But once you run job costing, you might find that your $250 cleanings take 45 minutes per job with no materials, giving you a 70% margin. Your $2,500 replacements take a full day plus materials and a helper, leaving you with a 28% margin.

That's not a reason to stop doing replacements. It's a reason to raise your price on them, or renegotiate your materials costs.

Common Job Costing Mistakes to Avoid

Not coding expenses to the right project. If your team just codes everything to a general "Materials" account without attaching a project, your job costing data is useless. This is a bookkeeping discipline issue, not a software issue.

Forgetting overhead allocation. Job costing in QBO tracks direct costs well, but your truck payment, insurance, and office expenses aren't included by default. Factor that into how you interpret your margins.

Setting it up and never reviewing it. Pull your project profitability report monthly, not just at year-end. The value is catching margin problems early, not discovering them when the year is already over.

Get Your Books Set Up Right

Job costing only works if your QuickBooks file is clean and your expenses are categorized correctly from the start. If your QBO is a mess right now, that's a common starting point. You clean it up, then build the system forward.

At KWK Books, we set up and manage QuickBooks Online specifically for home service businesses. We know the expense categories and project structures that work for contractors, and which reports you'll actually use.