How to Set Up Job Costing in QuickBooks: Step-by-Step Guide

Why QuickBooks Job Costing Setup Matters

In residential remodeling, profitability is determined on the job site, not in the back office. However, if your accounting system is configured incorrectly, you will not have the data needed to evaluate your performance.

Many contractors use QuickBooks to track overall income and expenses but fail to organize this data by project. They treat their business as a single bucket, making it impossible to determine which jobs generated a profit and which ones lost money.

Properly configured job costing in QuickBooks allows you to:

1. Verify the profitability of individual projects.
2. Compare your actual costs against your estimates to identify estimating errors.
3. Allocate labor, material, and subcontractor expenses to specific cost categories.
4. Generate financial statements that support bank financing and surety bonding.

This guide provides a step-by-step walk-through for setting up job costing in both QuickBooks Online (QBO) and QuickBooks Desktop (QBD). It also explains the operational limitations of a standalone QuickBooks setup and demonstrates how RemodelFin automates field data capture to keep your reports accurate.

Step 1: Enabling Job Costing Settings

Before entering transactions, you must enable the project and class tracking settings in your QuickBooks software.

1. In QuickBooks Online (QBO Plus or Advanced)

Lower-tier plans like Simple Start and Essentials do not support project tracking. Ensure you are subscribed to QBO Plus or QBO Advanced before proceeding.

graph TD
    A[Gear Icon: Settings] --> B[Account and Settings]
    B --> C[Advanced Tab]
    C --> D[Projects: Turn On]
    C --> E[Categories: Turn On Track Classes]

1. Click the Gear Icon (Settings) in the top-right corner.
2. Select Account and Settings.
3. Click the Advanced tab in the left-hand menu.
4. Scroll down to the Projects section, click the edit pencil, and toggle Organize info by project to On.
5. Scroll to the Categories section and toggle Track classes to On (if you plan to track high-level business divisions).
6. Toggle Track locations to On (optional, useful if you operate in multiple distinct municipalities).
7. Click Save, then click Done.

A new Projects tab will now appear in your left-hand navigation bar, serving as your primary dashboard for job tracking.

2. In QuickBooks Desktop (QBD Pro, Premier, or Enterprise)

If you run QuickBooks Desktop, job costing is built around the “Customer:Job” database and the preferences menu.

1. Select Edit from the top menu bar, then click Preferences.
2. Choose Jobs & Estimates from the left-hand column.
3. Click the Company Preferences tab.
4. Under “Do You Create Estimates?”, select Yes.
5. Under “Do You Do Progress Billing?”, select Yes (essential for draw invoicing).
6. Click OK.
7. Next, go to Preferences → Accounting → Company Preferences → ensure Use class tracking for transactions is checked.

Step 2: Creating Projects and Customer:Job Records

Once the settings are enabled, you must create a tracking container for each active project.

1. In QuickBooks Online

In QBO, projects are nested under their parent customer profile.

1. Navigate to the Projects tab in the left-hand menu.
2. Click New Project in the top-right corner.
3. Enter the Project Name (use a consistent format, such as Client Last Name - Job Type — e.g., Smith - Kitchen Remodel).
4. Select the Customer from the dropdown list. If they are a new client, click + Add New to build their profile.
5. Set the Start Date and End Date (estimates are fine).
6. Use the Project Description field to record key contract parameters.
7. Click Save.

2. In QuickBooks Desktop

In Desktop, jobs are created as sub-records under the customer.

1. Open the Customer Center (Ctrl + J).
2. Select the parent customer from the list.
3. Click Add Job (located in the top-left dropdown).
4. Enter the Job Name (e.g., Kitchen Remodel).
5. Verify the contact information and billing details, which inherit automatically from the parent customer record.
6. Click OK.

Step 3: Setting Up Cost Codes as Service Items

This is the most critical step for detailed job costing. You should not assign expenses directly to accounts on your Chart of Accounts (such as “Lumber Expense”). Instead, you must route transactions through Products & Services (QBO) or Items (QBD).

These items must be configured as double-sided. This means they are mapped to both a revenue account and a cost-of-goods-sold (COGS) account.

               ┌─── Double-Sided Item: Rough Framing ───┐
               │                                        │
               ▼                                        ▼
    Expense Map (COGS)                        Income Map (Revenue)
  [Vendor Bills & Expenses]                  [Client Draw Invoices]

How to Create Double-Sided Items in QuickBooks Online

1. Go to Settings (Gear Icon) → Products and Services.
2. Click New and select Service.
3. Enter the name of your cost code (e.g., 03-00 Framing Labor or 05-00 Drywall Material).
4. Leave the SKU blank. Select the appropriate Category to keep your list organized.
5. Check the box: “I sell this product/service to my customers.”
   • Map the Income Account to your primary revenue account (e.g., Construction Revenue).
6. Check the box: “I purchase this product/service from a vendor.”
   • Map the Expense Account to the appropriate Cost of Goods Sold account (e.g., COGS: Subcontractor or COGS: Material).
7. Click Save and Close.

Standardizing Your Cost Code Structure

We recommend using a simplified version of the CSI Division Structure to keep your item list manageable. For residential remodelers, a list of 15 to 25 items is typically sufficient:

Step 4: Tagging Daily Transactions to Projects

Once your projects and items are established, you must tag every transaction line with the correct project name. Unassigned transactions will distort your profitability reports.

1. Materials and Subcontractor Bills

When entering bills from suppliers (e.g., Home Depot) or subcontractors:

1. Navigate to Enter Bills or Expenses.
2. Do not use the “Category details” tab. Instead, use the Item details tab.
3. Select the appropriate service item (e.g., 03-00 Rough Framing).
4. Enter the description, quantity, and cost.
5. In the Customer/Project column, select the specific project name (e.g., Smith - Kitchen Remodel).
6. Check the Billable box if you intend to pass this cost directly to the client (typically used for cost-plus contracts).
7. Click Save.

2. Time Tracking and Labor Allocation

To track labor costs against your projects:

1. Go to the Time menu (QBO) or Enter Time (QBD).
2. Select the employee or subcontractor.
3. Enter the date, select the project, and choose the service item.
4. Enter the hours worked.
5. Click Save.

Step 5: Running and Reading Job Profitability Reports

With your transactions tagged, you can run comparative reports to evaluate your project performance.

1. In QuickBooks Online

1. Navigate to the Projects tab.
2. Click on the specific project name.
3. The main project screen will display a real-time summary of:
   • Income: Total amount invoiced to the client.
   • Costs: Total expenses, bills, and timesheets tagged to the project.
   • Profit: Net income minus costs.
4. Click Project Reports and select Project Profitability to run a detailed statement.

2. In QuickBooks Desktop

1. Go to the Reports menu.
2. Select Jobs, Time & Mileage.
3. Choose Job Estimates vs. Actuals Summary or Job Profitability Detail.
4. Filter by the customer/job name to review the variance report.

Reading Report Variances

Why QuickBooks Standalone Fails Residential Remodelers

While QuickBooks is an excellent tool for bookkeeping and accounting compliance, it has several operational gaps that make it difficult to use as a standalone project management system.

1. The Data Entry Lag

QuickBooks is designed for office administration. If your crew has to turn in paper receipts at the end of the week, and your bookkeeper enters them every two weeks, your reports will be out of date. You cannot manage active projects using stale information.

2. The Mobility Gap

Crews cannot easily use QuickBooks on-site. Exposing your accounting system to field staff introduces security risks, and the interface is too complex for quick field entry. Without a simple mobile tool, field data entry lags, and receipts get lost.

3. The Labor Burden Gap

QuickBooks does not automatically calculate your true burdened labor rate per job. It tracks gross wages but excludes employer-paid taxes, workers’ comp, and liability insurance from project costing reports.

If you pay a carpenter $35/hr, their true burdened cost is likely closer to $50/hr. For a detailed breakdown of this calculation, read our construction labor burden rate guide.

If you use QuickBooks standalone, your reports will display raw labor costs, making your projects look more profitable than they actually are. To see your true burdened costs, use our labor burden calculator and apply those rates in RemodelFin before syncing the clean, pre-burdened data back to QuickBooks.

How RemodelFin Automates the Setup and Execution

RemodelFin is a mobile-first job costing application that sits on top of your QuickBooks setup. It bridges the gap between field operations and back-office accounting.

┌────────────────────────────────────────────────────────┐
│               RemodelFin Mobile App                    │
│  - Field Receipt Capture  - Burdened Labor Rates       │
│  - Real-Time Budget Alerts - Change Order Tracking    │
└───────────────────────────┬────────────────────────────┘
                            │
                            ▼ (Auto-Syncs Clean Data)
┌────────────────────────────────────────────────────────┐
│            QuickBooks Online / Desktop                 │
│  - General Ledger         - Tax Compliance             │
│  - Accounts Payable       - Corporate Payroll          │
└────────────────────────────────────────────────────────┘

By pairing QuickBooks with RemodelFin, you can:

1. Capture Costs Natively: Field crews snap photos of receipts using the RemodelFin mobile app. The costs are categorized and posted to the project dashboard immediately.
2. Automate Labor Burden: Configure each employee’s burdened rate in RemodelFin. Every timesheet entry is calculated at the burdened rate, ensuring your project dashboards show actual costs.
3. Monitor Budgets in Real-Time: Compare your actual costs against your estimates on-site. RemodelFin sends automated alerts when a cost category approaches its budget limit.
4. Sync Data Automatically: Push pre-coded transactions from RemodelFin to QuickBooks to simplify the reconciliation process for your bookkeeper.

For a comparison of different software options, consult our guide on job costing software for contractors.

Setup Checklist Summary

The table below outlines the responsibilities of each software component in a paired QuickBooks + RemodelFin setup:

Conclusion & Action Steps

Setting up job costing in QuickBooks is an essential step for managing your business finances. However, to run a profitable remodeling business, you need real-time visibility that a standalone accounting system cannot provide.

By pairing QuickBooks with RemodelFin, you preserve your back-office compliance while gaining a mobile-first tool for field operations.

Here is your checklist for getting started:

1. Verify you are on QuickBooks Online Plus or Advanced.
2. Set up your cost codes as double-sided service items.
3. Calculate your crew’s burdened labor rates using our labor burden calculator.
4. Connect QBO to RemodelFin to enable mobile receipt capture, burdened time tracking, and live budget-vs-actual dashboards.
5. Refer to our main guide on quickbooks-job-costing-for-contractors for advanced workflows.

RemodelFin’s 30-day free trial lets you track your first job at no cost. Connect to QuickBooks in minutes, set up your cost codes, and see your real-time job margin alongside your QuickBooks data — before you spend a dollar. Start your free trial today.