Setting up QuickBooks around how construction actually works, rather than accepting the default configuration, is what determines whether it produces useful job profitability data.
- The construction features contractors need most, like job costing, retainage tracking, and WIP reporting, aren’t available the same way across every QuickBooks product and subscription. Knowing what your specific setup can and can’t do is the first step.
- Illinois contractors face state-specific rules around how materials are taxed and how public jobs need to be tracked, and these should shape the setup rather than get addressed after the fact.
- A handful of concrete setup decisions, covered in the checklist below, determine whether QuickBooks gives you real job-level insight or just a bigger mess to sort through later.
Most contractors choose QuickBooks because it’s affordable and familiar, not because it’s purpose-built for construction. That’s reasonable, but the features that matter most, like job costing, retainage tracking, and work-in-progress reporting, aren’t uniform across QuickBooks products. What’s available depends on whether you’re using QuickBooks Online, Desktop, or Enterprise, and which subscription tier you’re on. Some of these features come standard; others require add-ons, a construction-specific tool, or a schedule your accountant maintains outside QuickBooks entirely.
Illinois adds another layer. State sales tax treatment of materials works differently than in most industries, and public jobs may bring certified payroll requirements that affect how labor gets tracked. Getting these details wrong tends to compound, showing up later as unreliable job profitability numbers or a scramble to reconstruct what happened on a project.
This article walks through what to know before setting up or cleaning up a QuickBooks file for a construction business in Illinois.
Understanding What Your QuickBooks Product Actually Supports
Intuit stopped selling new subscriptions for QuickBooks Desktop Pro Plus and Premier Plus in September 2024. Existing subscribers can still renew, but a contractor setting up a new file today is generally choosing between QuickBooks Online and QuickBooks Enterprise, the only Desktop product Intuit continues to sell to new customers.
QuickBooks Online organizes job costing around “Projects,” while Desktop has traditionally used a “Customer:Job” structure. The concept is similar in both, tracking costs and revenue by individual project, but the reporting depth differs by product and plan. More advanced construction functionality, such as committed cost tracking or built-in work-in-progress reports, is generally tied to specific tiers like QuickBooks Online Advanced with its construction tools, or QuickBooks Enterprise.
The practical implication is that you shouldn’t assume a given report or feature is available until you’ve confirmed it for your specific subscription. A setup conversation with your accountant or QuickBooks advisor before you start entering transactions can save significant rework.
Building Toward Accurate Job Costing
Job profitability depends on three things working together: a chart of accounts that separates direct job costs (materials, labor, subcontractors, equipment) from overhead; a cost code list that mirrors how you actually estimate and bid work; and consistent assignment of every transaction—including material invoices, payroll and subcontractor bills—to the correct job.
If cost codes are generic (“Materials,” “Labor”) rather than tied to specific categories, job reports will be accurate in total but won’t show where a job went over budget. Because job costing depends on how transactions are tagged going forward, it’s considerably easier to get this structure right at setup than to reclassify a year of transactions later.
Tracking Change Orders Without Losing the Original Numbers
A common mistake is overwriting the original job budget every time a change order is approved. That erases the ability to see whether a job is performing well because of legitimately added scope, or simply running over its original estimate. A more useful structure keeps the original contract value and budget intact, layers in approved change orders separately, and tracks pending or disputed change orders on their own. Comparing these figures side by side, rather than collapsing them into one number, is what actually shows how a job is trending.
Handling Retainage Correctly
Retainage, the portion of a payment withheld until a job is complete or approved, should generally be tracked separately from regular receivables. The issue isn’t that QuickBooks will show retainage as cash you don’t have; it’s that a standard aging or job report may not distinguish an invoice that’s currently collectible from an amount that won’t become due until specific contract conditions are met. Without that separation, it’s easy to misjudge how much is currently collectible and how much remains subject to retainage conditions. The right account structure depends on your contract terms and accounting method, so this is worth confirming with your accountant rather than defaulting to a generic setup.
Reporting on Work in Progress
A standard profit and loss statement can show whether the business is profitable overall, but it doesn’t provide the job-level WIP visibility a contractor needs. A WIP schedule brings together each active job’s contract value, costs incurred, estimated costs to complete, percentage of completion, earned revenue and billings to show whether the job is overbilled or underbilled. Depending on your QuickBooks product, this may be generated natively, require a construction-specific add-on, or come from a schedule your accountant maintains separately and uses for monthly adjusting entries. Any of these can work, but it’s worth knowing upfront which applies to your setup rather than assuming QuickBooks produces this automatically.
Illinois-Specific Considerations
Illinois generally treats a construction contractor as the end user, or consumer, of materials permanently incorporated into real estate under a construction contract, rather than as a retailer selling those materials to the property owner. In practice, that generally means the contractor owes tax on the materials at the time of purchase, and pays it either to the supplier or, when a supplier doesn’t collect it, directly to the Illinois Department of Revenue as use tax. This differs from a retail sale of tangible personal property without installation, which is generally treated as a taxable sale. More detail on how the state treats these transactions is available in the Illinois administrative code.
There’s an added wrinkle for projects involving tax-exempt organizations or governmental bodies: an exemption on materials generally isn’t automatic just because the ultimate property owner is exempt. The contract structure and documentation matter, so this is worth confirming case by case.
Contractors purchasing from suppliers in different jurisdictions, or from out-of-state suppliers, may also need to account for how and where tax was collected, which can affect whether use tax needs to be self-assessed.
Projects covered by the Illinois Prevailing Wage Act require contractors and subcontractors to submit certified payroll records through the Illinois Department of Labor. Those requirements call for more detailed labor tracking by job, worker and classification than a typical private job requires. If your business performs public work, this should shape how payroll is set up from the start, since adding this level of tracking after the fact is considerably harder.
A Practical Setup Checklist
Before you start entering transactions in a new or cleaned-up QuickBooks file, it’s worth working through:
- Confirming which QuickBooks product and subscription tier you’re using, and what construction features it actually includes
- Creating a project or job record for every active job, using consistent naming and numbering
- Building cost codes that mirror your estimating system, not generic categories
- Separating direct labor, materials, subcontractor costs, and equipment from overhead
- Setting up payroll so employee time is coded to both a job and a cost code
- Establishing a process for tracking purchase orders and committed costs
- Keeping approved and pending change orders visible separately from the original budget
- Deciding, with your accountant, how retainage will be tracked on your balance sheet
- Requiring a job assignment before a transaction is approved for entry
- Reviewing uncategorized or unassigned transactions each month before closing the books
- Setting a monthly review process for WIP and job cost reports
Getting Your Setup Right the First Time
The decisions covered here, from confirming what your QuickBooks product supports to building a cost code structure around your estimates to accounting for Illinois-specific tax and payroll rules, are far easier to get right at the outset than to unwind later. A QuickBooks file that isn’t configured this way can still generate financial statements, but it typically won’t tell you which jobs are actually profitable.
Ahlbeck & Cook works with general contractors, subcontractors, and specialty trades across Illinois to help structure QuickBooks around how construction businesses actually operate, from job costing and WIP tracking to the state-specific tax and payroll considerations that generic guidance tends to miss. If your QuickBooks setup isn’t giving you the job-level insight you need, contact us to talk through your setup.
