Quick Summary
Bookkeeping for restoration contractors works best when each job type, such as mitigation, rebuild, and contents, has its own cost of goods sold category, with labor, materials, subcontractors, and equipment coded beneath it. That setup shows margin by job type instead of one blended number.
- Give each job type its own cost of goods sold parent account, with labor, materials, subcontractors, and equipment beneath it.
- Code every cost to a job when it is entered, and charge equipment to the job that used it.
- Run a two-column margin report by job type each month, mitigation next to rebuild.
- Update estimated costs to complete every month before trusting any unfinished-job calculation.
- Have a CPA confirm equipment depreciation, revenue recognition, and tax treatment.
Table of Contents
- Why Restoration Books Need Job Type Detail
- Job Cost Categories That Keep Restoration Margins Visible
- Reading Margin by Job Type
- A Quick Check on Unfinished Jobs
- A Monthly Close Checklist for Restoration Companies
- Controls That Protect the Numbers
- Get a Second Set of Eyes on Your Books
Why Restoration Books Need Job Type Detail
Bookkeeping for restoration contractors has one core job: show which kinds of work make money. Mitigation, rebuild, and contents work buy labor, materials, subcontractors, and equipment in different mixes, so a single blended cost of goods sold account hides which type is carrying the business.
A water loss can bring many small purchases, day labor, drying equipment hours, and a demo subcontractor invoice. When all of it lands in one account with no job tag, the books show a total, not a margin by job.
None of this needs complicated software. It needs a chart of accounts built around job type, and the habit of coding each cost to a job when it is entered. A reader who wants the underlying mechanics will find them in our guide to why contractors need job costing.
Job Cost Categories That Keep Restoration Margins Visible
Restoration job cost categories should follow how the work is bought and performed. Four categories cover most jobs, and each needs its own cost code under the job type, so mitigation margin and rebuild margin can be read separately.
| Cost Category | What Belongs Here | Restoration Examples | Common Posting Error |
|---|---|---|---|
| Labor | Direct technicians, leads, temporary labor | Water techs extracting and setting drying equipment; fire crews doing pack-out and demo | Payroll posted to one labor account with no job tag |
| Materials | Consumables and installed goods | Antimicrobials, drywall, insulation, lumber, plastic sheeting, tape | Supply house purchases coded to overhead instead of the job |
| Subcontractors | Trades under contract | Demo, HVAC, electrical, specialty cleaning, contents storage | Invoice posted when paid instead of when received |
| Equipment | Company-owned and rented equipment | Extraction units, air movers, dehumidifiers, generators | Equipment charged to a company-wide account, never to the job |
How to Structure the Chart of Accounts
Give each job type its own cost of goods sold parent, with the four categories as children beneath it. A simplified structure looks like this:
- 5000 Cost of Goods Sold: Mitigation
- 5010 Mitigation Labor
- 5020 Mitigation Materials
- 5030 Mitigation Subcontractors
- 5040 Mitigation Equipment
- 5100 Cost of Goods Sold: Rebuild
- 5110 Rebuild Labor
- 5120 Rebuild Materials
- 5130 Rebuild Subcontractors
- 5140 Rebuild Equipment
- 5200 Cost of Goods Sold: Contents
- 5210 Contents Labor
- 5220 Contents Materials
- 5230 Contents Subcontractors
- 5240 Contents Equipment
This structure lets you run a profit and loss by job type without exporting to a spreadsheet, and a cost code tells the bookkeeper where each receipt belongs. If your file has one Cost of Sales account with dozens of mixed sub-accounts, clean it up before your next busy season.
Handling Costs That Cross Categories
Some costs do not fit neatly into one bucket. A few patterns to plan for:
- A technician who works mitigation in the morning and rebuild in the afternoon. Split payroll by hours to each job type. If time tracking is not detailed enough, allocate by a documented percentage and revisit the split monthly.
- A dehumidifier rented for one job but kept on the truck for a week. Charge the rental to the job that drove the need. If the unit serves several jobs, use a day rate and post the charge to each.
- A subcontractor who handles both demo and rebuild framing. Split the contract into two scopes with separate job numbers, or post the invoice to the larger job type and note the split in the job file.
Watch out: posting equipment to a company-wide account instead of the job that used it makes the job look more profitable than it is, and you bid the next one wrong. A job with no labor charge looks better than it is for the same reason.
Equipment Charges and Depreciation
Depreciation and tax treatment for equipment purchases should be confirmed with a CPA, since the right answer depends on how the asset is used and on your entity.
A simple approach many contractors consider is an internal equipment rate: a set charge per day or per hour for each major piece of equipment, posted to the job and credited to an equipment cost recovery account. Your CPA can tell you whether it fits your situation.
Reading Margin by Job Type
Once costs sit under the right job type, run a two-column margin report each month: mitigation on one side, rebuild on the other. It shows whether one type is carrying the other, and that answer should shape how you price and staff each service line.
Track a short list of numbers, and define each one the same way every month.
| KPI | Formula | Early-Warning Signal |
|---|---|---|
| Gross margin by job type | (Revenue - direct costs) / revenue | Mitigation margin sliding while rebuild holds |
| Labor as a percentage of revenue | Direct labor / revenue | Climbing on fixed-price jobs |
| Equipment cost recovery | Equipment charged to jobs / equipment cost for the period | Falling below what the equipment costs to own and run |
| Underbillings | Earned revenue - billed to date | Rising two months in a row |
| Days in receivables | (AR / revenue) x days in period | Climbing past your normal collection time |
For more on the billing gaps and untracked costs behind these signals, see identifying profit leaks with better bookkeeping.
A Quick Check on Unfinished Jobs
Jobs that span month-end need one extra step: compare what a job has earned to what you have billed. Under the percentage-of-completion method, percent complete is costs incurred divided by total estimated cost, and earned revenue is percent complete times the contract value. If earned revenue is higher than billings, the difference is an underbilling. If it is lower, it is an overbilling.
Hypothetical example. Assume a mitigation job with a contract value of $54,000 and total estimated costs of $40,500.
- Costs incurred to date: $20,250
- Percent complete: $20,250 / $40,500 = 50 percent
- Earned revenue: 50 percent x $54,000 = $27,000
- Billed to date: $18,000
The job has earned $9,000 more than it has invoiced; review the contract terms to determine when the next invoice can be submitted. The estimate of remaining costs drives the whole calculation, so update it with the project lead every month.
Revenue recognition depends on contract terms and the accounting method you use, so confirm the treatment with a CPA. For a comparison of cash, accrual, completed-contract, and percentage-of-completion methods, see construction accounting methods for contractors. For deeper reporting support, see our construction accounting page.
A Monthly Close Checklist for Restoration Companies
A repeatable checklist turns month-end from a scramble into a routine.
- Reconcile every bank and credit card account to its statement.
- Post all subcontractor invoices and match them to committed cost.
- Review accounts payable aging and flag anything past terms.
- Update each active job's estimated costs to complete.
- Reconcile job cost reports to the general ledger by cost code.
- Review accounts receivable aging.
- Produce the income statement, balance sheet, and a margin report by job type.
- Compare budget to actual by job and note variances over your threshold.
Controls That Protect the Numbers
A few simple controls keep errors from compounding into a bad month:
- Require a purchase order tied to a job number before materials are bought.
- Approve subcontractor invoices against the signed contract and any change orders.
- Review the vendor list monthly for new or duplicate payees.
- Separate duties where you can, so the person writing checks is not the person reconciling the bank account.
For outside oversight, see our financial oversight support.
Get a Second Set of Eyes on Your Books
A free Profit Review starts with a short call to see whether it makes sense to talk further. At Golden Bookkeeping, we work with contractors, building trades, and real estate operators, and we pair bookkeeping with fractional CFO guidance. Fees are scoped to each company after a conversation. If your close keeps slipping, our bookkeeping for trade businesses can help keep job costs and monthly books current.
A CPA should confirm revenue recognition, equipment depreciation, and tax treatment for your specific situation.
Frequently Asked Questions
How should restoration contractors set up job costing?
Make each job type its own category within cost of goods sold, such as mitigation, rebuild, and contents, then add cost codes beneath each for labor, materials, subcontractors, and equipment. Code every cost to a job at the point of entry. That lets you read gross margin by job type instead of one blended number. Confirm any equipment depreciation and tax treatment with a CPA.
How often should restoration contractors review job cost reports?
Weekly for active jobs and monthly for the full portfolio is a practical split. Shorter jobs can finish quickly, so a weekly review can catch a labor overrun while the crew is still on site. Longer jobs can be reviewed monthly, but update the estimate of remaining cost whenever a change order or scope revision lands.
How should restoration contractors compare mitigation and rebuild profitability?
Track each job type as its own category and read gross margin by category instead of blending them. A simple two-column margin report each month shows whether mitigation is subsidizing rebuild or the reverse. Keep the definitions the same every month so the comparison holds.
What costs should be assigned to each restoration job?
Direct costs belong on the job: technician labor and labor burden, equipment charges, antimicrobial and cleaning materials, subcontractor invoices, disposal fees, and permits tied to that address. Overhead such as office rent, owner salary, and general insurance stays at the company level. Equipment is the line that needs a clear method, so ask a CPA to confirm how to treat it.
Which financial KPIs should restoration contractors track?
Start with gross margin by job type, labor as a percentage of revenue, equipment cost recovery, underbillings, and days in receivables. Review them on the same day each month and keep the formulas written down so the numbers mean the same thing over time.
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