Construction Bookkeeping for U.S. Contractors: The Complete 2027 Guide

A $900,000 site-work job closes in March 2027. The final check clears on a Friday and the bank balance looks better than it has all year. Then the February fuel bill arrives. Then a sub invoice nobody entered. Then someone asks about the retainage, and it turns out the general contractor is still holding five percent of the contract.

The job did not lose money. It might have. Nobody can say, because the file kept regular books, and regular books answer one question: how is the company doing? Construction bookkeeping answers a second one, job by job, every month, from the same file. That second answer is the whole subject of this guide.

Construction bookkeeping adds a job dimension to every transaction. A generic file asks what a cost was. A construction file asks what it was and which job, phase, and cost code it belongs to, and it does not let that answer stay blank. Everything else in this guide follows from that one extra field.

Here is what the same six transactions look like in a generic file and in a construction file.

None of this needs a different product. It is the same QuickBooks or Xero file, with the job field filled in every time and a cost code list the estimator recognizes. And none of it holds unless the bank reconciliation ties every month, because a job cost report built on an unreconciled bank account is a story, not a record. If the reconciliation itself is where things slip, our step-by-step month-end walkthrough for QuickBooks Online covers the mechanics.

The Over/Under Test takes four numbers from each open job at month end: contract value, cost to date, estimate to complete, and billed to date. Earned revenue minus billed to date is the answer. One number per job, with a sign, and the sign tells you what to do next.

Run it in this order:

1. 1Percent complete. Cost to date divided by the sum of cost to date and estimate to complete.
2. 2Earned revenue. Contract value multiplied by percent complete.
3. 3Over or under. Earned revenue minus billed to date.
4. 4Read the sign. Negative means overbilled: you have collected for work not yet done, and the difference is a liability. Positive means underbilled: you have done work you have not billed, and the difference is an asset until you bill it or find out why you cannot.

Two jobs from the same month show both signs.

Job 14 has collected $45,000 more than it has earned. That is not profit. It is a liability, billings in excess of costs and estimated earnings, and the cash behind it belongs to work you still have to do. Job 17 has earned $51,700 it has not billed. One month of underbilling is usually a timing gap: the pay app went out before the costs landed. Two months running is a cost overrun until proven otherwise, because the cheapest explanation is that the estimate to complete is too low.

Three of the four inputs come out of the file. The fourth, the estimate to complete, is the one number a bank feed cannot supply. It comes from the project manager, in writing, every month, and it is the number most files skip. Without it the WIP schedule is a guess wearing a spreadsheet. A file can look reconciled and still be wrong in exactly this way. It is what we found inside three years of a contractor's neglected QuickBooks: every month tied to the bank, and not one job with a current estimate.

Three items leak margin on nearly every job we open: retainage, change orders, and subcontractor records. Each one has a chart-of-accounts fix and a month-end habit, none of them needs new software, and all three fail the same way, by putting a real transaction in the wrong place.

Retainage. Retainage is the 5 to 10 percent a customer holds back from each payment until they accept the work, and the same amount you hold back from your subs. It needs its own receivable account and its own payable account, aged separately from ordinary receivables and payables. It moves only on the release terms in the contract, usually substantial completion or punch-list acceptance, never on a calendar. Bury it in receivables and somebody writes it off. Bury it in payables and you pay it twice.

Change orders. An approved change order changes two numbers, not one. The contract value goes up by the approved price, and the cost budget goes up by the estimated cost. Post both on the same day. Two rules keep the log honest: no price without a cost line, and no cost line without written approval. A change approved by text on site and never entered is work you paid for and had a right to bill.

Subs. Every sub record needs five fields, and the month-end habit is to check them before a payment goes out rather than in January.

In every one of these cases the transaction is real. The file put it in the wrong place.

Five dates in 2027 cannot slip: February 1, March 15, April 15, September 15, and December 31. Everything else on a contractor's calendar is the monthly close, and a close that lands by the 10th makes the five dates routine.

The first line makes the other six easy. A contractor whose month closes by the 10th walks into February 1 with the 1099 totals already in the file. March 15 arrives with a December WIP you finished in January. The month-end close checklist we run for every client is that first line written out, 20 items and six phases.

Three rule sets touch a contractor's books in 2027: the 1099 reporting threshold, the equipment expensing limits, and the revenue method tests. The IRS has published the 2026 figures. Most of the 2027 figures are still to come, and the table says so rather than guessing.

This is general information, not tax advice. Your CPA makes the calls. The books have to support whichever call they make.

Subs and the $2,000 threshold. The 1099 threshold went from $600 to $2,000 for payments made in 2026, so the forms due on February 1, 2027 are the first ones filed under the new rule. Fewer subs will get a form. The bookkeeping does not get lighter, because you still need a W-9 and a running payments total for every sub to know which side of $2,000 each one landed on. From 2027 the threshold rises with inflation, so expect a slightly different figure for 2027 payments once the IRS publishes it.

Equipment. Section 179 and bonus depreciation are the CPA's decision at year end. What the books owe the CPA is a fixed asset record: purchase date, in-service date, cost, financing, and the internal hourly or daily rate you charge jobs for the machine. The 2027 Section 179 figures are not published yet. Wolters Kluwer projects $2.64 million with a $4.23 million phase-out. That is a projection, made before the October 2025 inflation data came out, and this guide will carry the official numbers as soon as the IRS issues them.

Revenue method. Federal tax law puts most long-term contracts on the percentage of completion method. A contractor under the gross receipts test, with contracts expected to finish within two years, can use the completed contract method instead. Home construction contracts, buildings with four or fewer dwelling units, are exempt as well. Under OBBBA, residential construction contracts of more than four units now qualify too. That applies to contracts in tax years beginning after July 4, 2025, and the completion window for them is three years rather than two. Which method your business uses is your CPA's call. The books must support either, which means the WIP schedule has to be current whether or not the return uses it.

A contractor with a handful of jobs and no subs can run construction bookkeeping alone in QuickBooks. Past that point the question is not software. It is who owns the job field, the WIP schedule, and the sub records, every month, without fail.

The owner, in the file. This works while the owner has the evenings and the job count stays small. It fails when the job field goes blank, and it goes blank the month the owner is busiest, which is the month that matters most. The backlog then shows up all at once: one asphalt contractor came to us six months behind, and the six months cleared at four times the pace they had built up. The fix was not new software. It was somebody owning the job field.

An in-house hire. Past fifteen open jobs the picture changes. Add certified payroll, several entities, and a surety who wants the WIP schedule quarterly, and an in-house person who sits with the project managers can be the right answer. We have told contractors that. The honest trade is cost and cover: one person, one salary, and nobody covering the role in July. What bookkeeping actually costs in 2026 sets out the numbers for each option.

A provider. If you go this way, ask five questions specific to construction bookkeeping before anything else. Whose cost code list will you use? Do you produce a monthly WIP schedule with over and under billings, and who signs off on the estimate to complete? How do you track retainage receivable and payable, and what triggers a release? Do you check the W-9, the COI, and the lien waiver before each sub payment? Will you work in our existing file, or move us? Then ask for the security certification. Twelix holds ISO 27001:2022 and SOC 2 Type II and is a QuickBooks ProAdvisor at Level 1 and Level 2. We work inside the QuickBooks, Sage 100 Contractor, or Xero file you already have, on one flat monthly fee that does not change with job count. If the file is behind when you start, we scope and price the cleanup separately, with a finish date in writing.

A note on software. Procore and Buildertrend are the field, not the ledger. They hold the schedule, the daily logs, the RFIs, and the change order approvals, and they feed the books. They do not replace the WIP schedule, the retainage accounts, or the sub file. Our construction bookkeeping service works alongside both, with the ledger in QuickBooks or Sage, which is where the Over/Under Test lives.

Back to the $900,000 job. With construction bookkeeping in place, the March close would have shown it months earlier. The fuel goes to the job in February. The sub invoice goes in the week it arrives. The retainage sits in its own account with a release date. And every month an Over/Under line tells you whether the pay apps are ahead of the work or behind it. The final check confirms a number you already knew.

The discipline is four phrases. Code every cost to a job. Earn revenue on percent complete. Track retainage both ways. Run the Over/Under Test every month. We will add the 2027 inflation figures for Section 179, the gross receipts test, and the 1099 threshold to this guide when the IRS publishes them.

If you would rather hand it off, that is the work we do. Twelix costs every job by cost code, runs the WIP schedule monthly, and tracks retainage both ways. We check every sub's paperwork before payment and put the job report on your desk by the 10th, on one flat fee.