At a glance
- Separate
- Job costs from overhead
- Track
- Materials, labor and subs per job
- Keep apart
- Owner pay and owner draws
- Mistake
- One "expenses" bucket for everything
Prices and rules change. Verify every item with the vendor or agency before you rely on it.
Short answer: Set up your chart of accounts so job costs (materials, field labor, subcontractors, permits) are separate from overhead (rent, insurance, trucks, office, marketing) and from owner pay. That split is what lets you see gross margin per job and whether overhead is eating the profit. Have a CPA review it once.
Updated October 12, 2026. Requirements and fees change; confirm with the agency named on this page.
A business stuck at the same revenue every year is often stuck because the owner cannot see where the money goes. That starts with how the books are set up.
The basic structure
- Income: by type of work if you want to compare, such as service, install, maintenance agreements.
- Cost of goods sold (job costs): materials, field labor and payroll taxes on it, subcontractors, permits, equipment rental for jobs.
- Overhead: office wages, rent, insurance, trucks and fuel, software, phones, marketing, professional fees.
- Owner: owner pay and owner draws, kept apart from both.
Why the split matters
Income minus job costs is gross profit. If that number is thin, the problem is price or job efficiency. If gross profit is healthy and you still have no money, overhead is the problem. One "expenses" bucket hides both. See markup vs margin and a busy month with no money in it.
Common mistakes
- Field labor booked as overhead, which makes every job look more profitable than it is.
- Truck costs split randomly between job and overhead.
- Personal spending mixed into business accounts.
- Too many accounts to keep straight. Start simple.
Set it once, check it once
Have a CPA who works with contractors review the setup. It is a one-time cost that makes every month after readable.
Where Operator fits
Operator is an online mentor for owners doing the office work themselves. It audits the business, checks the foundation, finds the one thing stopping you, and puts your books and margins on your weekly list with the reason and the next step, for $79 a month. Start with the free Business Audit.
General business information, not tax, accounting or legal advice. Confirm tax and payroll rules with the agency or a CPA.
Want it handled, not just explained?
Operator is the AI business coach for contractors.
A business audit and a plan, an online mentor you can ask any time, team training for your crew, and deadline reminders. $79/month, any state, cancel anytime.
Common questions
What is a chart of accounts for contractors?
The list of categories in your books. For a contractor, the key is separating job costs from overhead and from owner pay so you can see gross margin and whether overhead is eating profit.
Should field labor be a job cost or overhead?
A job cost. Booking it as overhead makes jobs look more profitable than they are.
Do I need a CPA to set up my chart of accounts?
It is worth a one-time review by a CPA who works with contractors, so the categories match how you will read the numbers.