Bookkeeping for Contractors: A Simple Weekly Routine

Most tradespeople didn't start a business because they love bookkeeping. But clean books are what let you see which jobs actually make money, keep taxes from becoming a spring panic, and answer the question every owner eventually asks: "Where did all the money go?"

This guide covers bookkeeping basics for US contractors and home service businesses: the key concepts, how to set up categories that fit a trade business, and a simple weekly and monthly routine that takes less time than you think. It's general information; your accountant can tailor it to your business.

Bookkeeping vs. accounting

• Bookkeeping is recording and organizing every transaction: money in, money out, and what each was for.
• Accounting is using those records to prepare tax returns, analyze profitability and plan.

Good bookkeeping makes your accountant's job faster (and often cheaper), and it gives you numbers you can actually use during the year, not just at tax time.

Cash vs. accrual: which method?

The IRS explains the two main accounting methods in Publication 538:

Method	Income is recorded when...	Expenses are recorded when...	Good for
Cash	You receive the payment	You pay the bill	Most small owner-operators; simple to follow
Accrual	You earn it (e.g., when you invoice)	You incur it (e.g., when the supplier bills you)	Larger businesses, longer projects, a truer picture of profit per period

Many small trade businesses use the cash method because it's simple and matches the bank account. Some businesses may be required to use accrual or special methods for long-term contracts. Ask your accountant which method fits you before you set up your books, because changing later can involve IRS paperwork.

Set up categories that fit a trade business

Your "chart of accounts" is just the list of categories you sort transactions into. Keep it simple but specific enough to be useful.

Income

• Service and repair income
• Installation or project income
• Maintenance plans or recurring service

Job costs (direct costs)

• Materials and parts
• Subcontractors
• Equipment rental for specific jobs
• Permits and dump fees

Overhead (operating expenses)

• Vehicle: fuel, repairs, insurance, payments
• Tools and small equipment
• Insurance (general liability, workers' comp)
• Licenses, bonds and training
• Phone, internet and software
• Advertising and marketing
• Office supplies, uniforms and safety gear
• Professional fees (accountant, attorney)
• Payroll and payroll taxes, if you have employees

Separating job costs from overhead lets you see your gross profit on the work itself before overhead, which is one of the most useful numbers a contractor can track.

Before you start: separate the money

Bookkeeping is far easier when every business transaction runs through a dedicated business bank account and card. The IRS notes that for most small businesses, the business checking account is the main source for entries in the books (IRS: What kind of records should I keep). If you're still mixing personal and business spending, fix that first.

Your weekly bookkeeping routine (30–60 minutes)

1. Record income. Match every deposit to the invoice or job it came from, and mark those invoices paid. Don't forget cash.
2. Categorize expenses. Go through the business bank and card transactions and assign each one to a category.
3. Capture receipts. Photograph or file receipts for materials, tools and anything that isn't obvious from the bank description. Note the job name on materials receipts.
4. Review open invoices. Check what's still unpaid and follow up as needed.
5. Set money aside. Move your planned percentages to tax and reserve accounts.

Your monthly routine (1–2 hours)

1. Reconcile accounts. Make sure your books match your bank and credit card statements to the penny. This catches missing transactions, duplicates and errors.
2. Run a profit and loss report. Look at income, job costs, overhead and net profit for the month.
3. Compare to last month and last year. Are materials creeping up as a share of income? Is a category growing unexpectedly?
4. Check job profitability. For bigger jobs, compare the price to materials, labor and subcontractor costs.
5. Update your cash forecast for the next couple of months.

Quarterly and yearly tasks

• Estimated taxes: Self-employed owners generally need to make quarterly estimated payments if they expect to owe $1,000 or more (IRS: Estimated taxes).
• Payroll filings, if you have employees.
• Subcontractor paperwork: Collect a Form W-9 from subcontractors before you pay them. For payments made in 2026, you generally file Form 1099-NEC for a non-employee you paid $2,000 or more for services during the year (IRS).
• Year-end: Reconcile everything, review fixed assets like vehicles and tools, and hand clean books to your accountant.

Five numbers worth watching every month

Once your books are clean, a few numbers tell you most of what you need to know:

• Revenue: Total income for the month, compared to the same month last year.
• Gross profit margin: Revenue minus job costs, divided by revenue. If it's shrinking, your pricing or material costs need attention.
• Overhead: Total operating expenses. Watch for slow creep from subscriptions and small purchases.
• Net profit: What's left after everything. This is what funds your reserve, taxes and growth.
• Unpaid invoices: How much customers owe you, and how much is overdue.

Writing these five numbers on a single page each month takes ten minutes and gives you an early warning long before tax time.

Tools: what you need

Option	Pros	Cons
Spreadsheet	Free, flexible	Manual entry; easy to fall behind or make errors
Accounting software	Bank feeds, automatic categorization rules, reports	Monthly cost; setup takes time
Bookkeeper	Expert help; frees your time	Ongoing cost; you still need to supply receipts and info

Many contractors use accounting software with bank feeds and hire a bookkeeper for monthly reconciliation and year-end cleanup.

Common bookkeeping mistakes in the trades

• Mixing personal and business transactions
• Not recording cash payments
• Losing materials receipts or not noting which job they were for
• Lumping everything into "miscellaneous"
• Paying subcontractors without collecting a W-9
• Only looking at the books at tax time

Where your invoicing app fits

Your invoicing app and your bookkeeping system do different jobs. The invoicing side records what you billed and what's been paid; your books record everything else. Keeping invoice numbers sequential and payments recorded makes it much easier to match deposits to jobs. SnipInvoice isn't accounting software, but it uses gapless invoice numbers, records the payments you took (including partial payments), and lets the account owner export every invoice, quote, customer and line item as one file to hand to a bookkeeper.

FAQ

Should a small contractor use cash or accrual accounting?

Many small owner-operators use the cash method because it's simple and matches the bank account. Some businesses may need accrual or special methods for long-term contracts. Ask your accountant before choosing.

How often should I do my bookkeeping?

A short weekly session to record income and categorize expenses, plus a monthly reconciliation and profit and loss review, keeps most small trade businesses on track.

Do I need accounting software?

Not necessarily at first, but software with bank feeds saves time and reduces errors as you grow. Many contractors pair it with a bookkeeper.

Do I need to send 1099s to my subcontractors?

Generally, if you paid a non-employee $2,000 or more for services in 2026 in the course of your business, you file Form 1099-NEC. Collect a W-9 before paying, and check the IRS rules or ask your accountant about exceptions.

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Hand your bookkeeper clean, numbered invoices. SnipInvoice is launching soon on iOS and Android. See how it works.