The three tools, and when each is right
Projects: the job-level workhorse
QBO's Projects feature attaches income and costs to a specific job for a specific customer, creating a per-job P&L automatically. Use a project for anything with a beginning, end, and budget: installs, remodels, roof replacements, restoration losses. Every invoice, bill, expense, and timesheet gets tagged to its project at entry; the discipline is the system.
Classes: the division-level lens
Classes cut the whole P&L by a dimension you choose, service vs install, crew A vs crew B, residential vs commercial. They answer 'which side of the business makes money,' not 'which job.' Most contractors want both: classes for the standing divisions, projects for the individual jobs.
Items (products & services): the estimating bridge
Items map what you sell and buy, 'Condenser 3-ton,' 'Labor – install', and become powerful when purchases are entered by item rather than just by account: that's what makes estimate-vs-actual reporting work line by line. Service businesses can run without deep item costing; contractors who bid work shouldn't.
The setup sequence
- Fix the chart of accounts first, direct costs in COGS, matched to revenue streams; job costing on a messy chart just organizes the mess ( HVAC Chart of Accounts: A Template That Shows Real Margins )
- Turn on Projects, classes, and (if bidding) billable expenses + estimates in settings
- Create the project the moment a job is sold; the jobs that skip setup are exactly the ones that go sideways
- Route every cost to its job at entry: bills, card charges, checks, the receipt-to-job link happens at categorization time or never
- Enter estimates for bid jobs, so estimate-vs-actual exists
The labor problem, and its three solutions
Labor is the biggest cost on most jobs and the one QBO won't allocate automatically: wages post as payroll lump sums unless you intervene. Options, in ascending order of precision:
- Timesheets in QBO tagged to projects, free, adequate for small crews, dependent on techs actually filling them
- QuickBooks Time or your field software's time tracking synced to projects, the practical answer for most trades; clock-ins carry the job tag
- Fully burdened labor rates via journal allocation, wages plus payroll taxes, comp, and benefits loaded into job costs (a bookkeeper task, monthly); without burden, job costs run 15–25% flattering
That last point deserves italics it can't have: unburdened labor is the most common reason contractors believe jobs made money that didn't. A $30/hour tech costs $38–42 loaded. Cost jobs at what labor costs, not what it pays.
The two reports that matter
- Project profitability (per-job P&L): revenue, costs, margin per job, reviewed monthly, compared against the estimate. The habit worth building: a five-minute 'job autopsy' on everything that missed by more than 10%, because estimating only improves when actuals talk back
- Estimate vs actual by item: where the misses live, materials that outran the bid (price moves? waste? theft?), labor hours that blew through (scope creep? callbacks?). This is the report that turns bidding from art toward science
What field software changes
ServiceTitan, Housecall Pro, Jobber and peers do their own job costing upstream and sync summaries to QBO. The rule that keeps you sane: pick one system as the costing truth (usually the field software for ops detail, QBO for financial truth) and reconcile them monthly, mapped items, no duplicate invoices, payroll burden applied on the QBO side. Two half-trusted systems are worse than one honest one. This reconciliation is standing work in our contractor engagements. HVAC
Frequently asked questions
Is job costing worth it for small jobs?
Cost every job over a threshold that matters to you ($1–2K is common), and let routine small work ride under classes ('Service') instead of individual projects. The overhead of costing a $180 call exceeds its lesson.
We're a year into messy books, start job costing now or clean up first?
Both, in that order, quickly: costing new jobs starts immediately (it's forward-looking), while the cleanup restores the baseline. New-job discipline doesn't need to wait for history to be fixed.