Bookkeeping for Rhode Island contractors

Why contractor books are their own problem

Most bookkeeping advice assumes a business that sells the same thing over and over. Construction does not work like that. Every job has its own budget, its own timeline, its own materials, and its own way of going wrong. A profit and loss that lumps all of it together will tell you the company made money last quarter without telling you the one thing you actually need to know, which is which jobs made it and which ones quietly ate it.

That is the difference between bookkeeping that files a tax return and bookkeeping you can run a business on.

Job costing

There is a longer piece on this in which of your jobs actually made money, if you want the reasoning rather than the summary.

Job costing means every dollar in and out is tagged to the job it belongs to, so each job has its own profit and loss. Materials, labour, subs, equipment, permits, dump fees. When it is set up properly you can answer questions that are otherwise guesswork:

• Which types of job actually make money, and which ones you have been subsidising
• Whether your estimates are landing or drifting, and by how much
• Which crews or subs come in on budget
• What to charge next time, based on what the last one really cost rather than what you hoped it would

Plenty of contractors run for years on instinct and do fine. The trouble is that instinct is calibrated on the jobs you remember, and what you remember is the disasters and the wins, not the steady middle where most of the money is made or lost.

Retainage

On larger commercial work a percentage of each payment gets held back until the job is complete and signed off, often five or ten percent. That money is earned, it belongs to you, and it can sit uncollected for months after you have finished.

Retainage has to be tracked as a receivable in its own right. If it is not, two things happen: your books understate what the business is owed, and nobody chases it. Uncollected retainage on finished jobs is one of the more reliable places to find real money in a set of contractor books.

Progress billing and work in progress

When a job spans months, you bill as you go, and the amount you have billed almost never matches the amount you have actually earned at that point. Bill ahead of the work and you are overbilled; do the work before you invoice it and you are underbilled.

Neither is wrong, but both distort the picture if nobody adjusts for them. Overbilling makes a good month look better than it was and borrows profit from a future month that will then look worse. Underbilling hides profit you have already earned. A work in progress schedule is what reconciles the two, and it is also the first thing a bonding company or a lender asks to see.

Deposits are not income

A deposit is money you owe work against. Until that work is done it is a liability, not revenue. Recording deposits as income is one of the most common errors in contractor books and it produces a specific, painful pattern: a strong spring on paper, a tax bill calculated on profit that was never really profit, and a summer that looks awful because the revenue was already counted.

Subcontractors and 1099s

Every sub you pay above the annual threshold needs a 1099, and a 1099 is only as good as the vendor record behind it. Missing W-9s, a name that does not match the tax ID, an address from two years ago: all of it surfaces in January when there is no time to fix it.

I keep the vendor file current through the year and prepare the list and the totals. Your CPA files them. Chasing a W-9 in March from a sub you last saw in June is a bad use of everyone's time.

Worth saying plainly: whether someone is a subcontractor or an employee is a legal question, not a bookkeeping one, and Rhode Island takes classification seriously. That call belongs with your CPA or an employment attorney. My job is making sure the records support whatever the answer is.

Equipment, materials and the things that get miscoded

• Equipment purchases. A compressor is an asset, not an expense, and how it is treated changes both your balance sheet and your tax position. Miscoding these is routine.
• Materials bought for a specific job versus stock kept on the truck. Only one of them is a job cost, and mixing them makes job margins meaningless.
• Fuel, tolls and vehicle costs spread across jobs with no allocation, so the jobs that ran all over the state look identical to the one down the road.
• Tool purchases run through a personal card and never reimbursed, which quietly understates your costs and your deductions.
• Credit card statements categorised as one lump at the supply house, rather than split across the jobs the materials went to.

Seasonality and cash

Exterior trades in Rhode Island have a shape to the year, and it is a pronounced one. Roofing, paving, siding, landscaping and masonry earn hard from spring through autumn and then get very quiet. Profit and cash are never the same thing, and in a seasonal trade they can point in opposite directions for months at a time.

Books that close on a predictable date let you see the winter coming in September instead of discovering it in January. That is most of what monthly bookkeeping is worth to a seasonal business.

Registration and record-keeping

Contractors working in Rhode Island register with the state's Contractors' Registration and Licensing Board, and registration comes with obligations around insurance and record retention. Keeping clean, current books is not the whole of that, but it is the part that tends to get neglected until something forces the issue: a renewal, a claim, a dispute over what was billed, or a customer complaint that turns into a hearing.

What working together looks like

The chart of accounts gets rebuilt around jobs rather than one long list of expenses. Read-only feeds from the bank, the cards and the supply house accounts land in the ledger. Each month everything is categorised to its job, accounts are reconciled, and you get statements every month with job-level detail underneath them.

If the last few years are a mess, that gets handled first as a cleanup, scoped and quoted separately. If everything lives in QuickBooks and the file has drifted, that page covers what usually needs fixing.

One flat monthly fee, agreed before anything starts. Never hourly, so a question in the middle of a job does not cost you anything. See how pricing works.

Other trades with their own problems

The same thinking applied elsewhere: restaurants, auto repair shops, owner-operators and small fleets, and salons and barbershops.

Trades this suits

General contractors and remodellers, electricians, plumbers, HVAC, roofing, siding, masonry, painting, flooring, landscaping and paving, excavation, and the specialty subs who work for all of them. The bookkeeping problems are the same shape whether you run three vans or work out of one.

Where to next