1) Module HUD

  • Module #: 2 / 13
  • Time: 20–30 min
  • Outcome: “After this, you can set up QBO for clean books + clean invoicing without painting yourself into a corner for job costing later.”
  • Prereqs: None
  • Stop after this article if: you just need accurate monthly financials + clean invoices (you’re not ready to chase job profitability yet).
  • Level tags used in this module: ✅ Baseline / 🛠️ Operator Upgrade / ⚠️ Advanced

2) Answer Box (snippet block)

  • What it is (2 lines)
    A minimum-viable QBO setup that keeps your books clean and your invoicing readable.
    It sets the foundation so “job costing later” doesn’t require a rebuild.
  • When to use it (2–4 bullets)
    • You’re new to QBO or migrating from spreadsheets/another system
    • Your Profit and Loss feels like fiction
    • You want simple structure now, with room to grow
    • You need invoices that make sense to customers
  • The common mistakeS (1-2 line)
    Overbuilding the Chart of accounts (COA) and skipping Projects, then trying to “job cost” with vibes.
  • The fixES (1-2 line)
    Keep the COA simple, use Projects for jobs, and use Products and services for detail on invoices and reporting.

3) The mental model (keep short)

  • Customer = who pays you
  • Project = the job/site under that payer (your job container)
  • COA stays simple (Revenue / Job Costs / Overhead)
  • Detail comes from Products and services + optional Project custom fields (like Job Type)
  • If your Profit and Loss and Balance Sheet are clean, you’re already ahead of most contractors

4) Do this in QBO (step-by-step)

  1. Go to Settings ⚙️ → Account and settings
  2. Click Company → confirm legal name, address, email, phone
  3. Click Advanced
  4. In Accounting method, pick cash vs accrual (ask your tax pro if you truly don’t know)
  5. Set First month of fiscal year (usually January)
  6. (Optional) Leave Close the books off for now
    • Pro tip: Don’t optimize settings for a hypothetical future edge case. Get the base working.
  7. Create your first payer (Customer)
    • Go to Sales → Customers → New customer
    • Name it like a real human/business: “ABC Builders LLC” or “Frank White”
  8. Create your first job (Project) under that customer
    • Go to Projects → New project (make sure it’s under the right customer)
    • Naming protocol (sortable): Address – job descriptor – YYYY.MM.DD
    • Example: 123 Pine St – Remodel – 2026.02.21
  9. Turn on account numbers (🛠️ Operator Upgrade)
    • Go to Settings ⚙️ → Account and settings → Advanced → Chart of accounts
    • Toggle Enable account numbers → On
    • (Optional) Toggle Show account numbers → On
    • Click Save → Done
  10. Create a minimal COA (keep it accountant-friendly)
  • Go to Accounting → Chart of accounts → New
  • Create only what you need to start:
    • Income: 4000 Contract Income
    • (Optional) Income: 4010 Change Order Income, 4020 Service / Small Job Income
    • COGS/Job Costs: 5000 Job Costs
    • Overhead examples: 6000 Vehicles / Fuel, 6010 Insurance, 6020 Office & Software, 6030 Tools, 6060 Bank / Merchant Fees
  • Warning: Don’t turn owner draws into “expenses.” That’s typically equity. Ask your tax pro if unsure.
  1. Create starter Products and services (this makes invoicing map correctly)
  • Go to Sales → Products and services → New → Service
  • Create: Labor – Plumbing, Material – Plumbing, Service Call, Change Order
  • For each:
    • Turn Sales information on
    • Set Income account (examples):
      • Labor – Plumbing → 4000 Contract Income
      • Material – Plumbing → 4000 Contract Income
      • Service Call → 4020 Service / Small Job Income (if you made it)
      • Change Order → 4010 Change Order Income (if you made it)
  • Pro tip: Don’t recreate your estimate line-by-line here. Keep items broad and reusable.
  1. Add your main vendors
  • Go to Expenses → Vendors
  • Add supply houses, rentals, key subs (not employees)

5) Real-world example (mandatory)

You’re a plumbing sub.

  • You create Customer: ABC Builders LLC
  • You create Project: 123 Pine St – Remodel – 2026.02.21
  • You create Products and services: Labor – Plumbing, Material – Plumbing

Now the flow:

  • You invoice the customer using line items:
    • Labor – Plumbing = $3,200
    • Material – Plumbing = $1,100
  • That invoice posts revenue to 4000 Contract Income (clean and predictable)

Then you enter a bill:

  • Supply house bill = $700
  • You code it to 5000 Job Costs and attach it to the Project (if you’re using project tracking)

Result: Revenue is clean, job costs are separated from overhead, and reporting stops lying to you.

6) Run this report now (mandatory checkpoint)

  • Report name: Profit and Loss
  • Filters/settings:
    • Reports → Profit and Loss
    • Set date range = last full month (or month-to-date if you’re midstream)
    • Run it: Run report
  • What “good” looks like:
    • Income looks plausible (not missing deposits/invoices)
    • Job costs show up in COGS / job costs (not buried in overhead)
    • No giant “mystery” expense categories doing all the work
  • What “broken” looks like:
    • Income is way too low/high vs bank reality
    • Materials/labor are sitting in overhead
    • One category (like “Misc”) is swallowing everything
  • One fix if broken:
    • Recode the worst offenders: go to Expenses and reassign categories to your job cost account (ex: 5000 Job Costs) vs overhead, then rerun Profit and Loss.

7) Lab (do it on your file)

  • [PASS/FAIL] You can find Account and settings and confirm Company info is correct
  • [PASS/FAIL] You created at least 1 Customer (real payer)
  • [PASS/FAIL] You created at least 1 Project under the correct customer
  • [PASS/FAIL] Your first Project uses the naming protocol (address-first + date)
  • [PASS/FAIL] Enable account numbers is on (or you intentionally skipped it)
  • [PASS/FAIL] You created 4000 Contract Income and 5000 Job Costs
  • [PASS/FAIL] You created 3–5 starter Products and services
  • [PASS/FAIL] Each item has Sales information on and a correct Income account
  • [PASS/FAIL] You ran Profit and Loss and it looks “plausible,” not perfect

8) Knowledge check (3 questions)

  1. What’s the difference between a Customer and a Project in your structure?
  2. Where should “profit by trade/service” detail mainly live: COA or Products and services?
  3. On a messy file, what two places do you check first: Profit and Loss or Balance Sheet (and why)?

9) Next + Related

  • Previous: [Module 0 — Contractor Accounting Mental Model]
  • Next: [Module 2 — Easy COA Your CPA Will Love]
  • Related modules (2–3)
    • [Module 3 — Bank Feeds]
    • [Module 4 — Advanced Products & Services (Start simple → grow)]
    • [Module 8 — Enhanced Job Costing & Profit Reporting]
  • Don’t do this warnings
    • Don’t bloat your COA to mirror your estimate template (that’s how you build a reporting landfill).
    • Don’t skip Projects and expect clean job reporting later.
    • Don’t use Classes as job type unless you love tagging every transaction forever. (You don’t.)

Fast now = slow forever.

FAQ (short)

Do I need account numbers in QBO?
No, but enabling them keeps your COA clean and sortable.

Should I track job type (service/remodel/new construction/commercial) in the COA?
No. Keep COA simple; use Project custom fields (Job Type) and reporting.

What’s the minimum COA I need to start?
Income, one job cost account, and a handful of overhead accounts you actually use.

Do I need Projects if I’m mostly service calls?
If you want job-level clarity later, yes. If not, you can stop after baseline and just keep books clean.

Why not just use one “Materials and Labor” line on invoices?
Because it turns your invoicing and reporting into a guessing game later. Keep lines readable and consistent.

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