Accounting for Colorado construction and trades: job costing, retainage, and getting paid

A contractor’s books are not like a retailer’s. Every job is effectively its own small business, with its own budget, its own materials and labor, its own timeline, and its own way of getting paid — slowly, and in pieces. Generic bookkeeping treats it all as one bucket and hides exactly the information you need to know whether you are making money. Here is what construction and trades accounting has to handle on the Front Range.

Job costing: the number that runs the business

Job costing means tracking the revenue and the costs — materials, labor, equipment, subs — for each individual job, so you can see the profit on that job rather than just the business as a whole. It is the single most important thing trades accounting does, because a company can look profitable overall while quietly losing money on half its jobs. Without job costing, you cannot tell which kinds of work, which crews, or which estimates actually make money — you are bidding blind.

Retainage: revenue you have earned but cannot touch

Construction contracts commonly hold back a percentage of each payment — retainage, often around 5–10% — until the job is finished and accepted. That money is yours, you have earned it, but it sits unpaid for months. If your books do not track retainage receivable separately, two bad things happen: your financials understate what you are owed, and your cash-flow planning misses a chunk of money that is real but not yet in the bank. On the flip side, retainage you hold back from your own subs has to be tracked as a payable.

Revenue recognition on long jobs

A job that spans several months does not earn its revenue all at once. Construction accounting typically recognizes revenue as the work progresses — often percentage-of-completion — rather than all at the end. Getting this right keeps your monthly financials honest; getting it wrong makes a profitable quarter look like a loss, or vice versa, and can distort your taxes. It is one of the most technical areas of trades bookkeeping and a common place generic setups fall down.

Change orders and progress billing

Two more places money leaks. Change orders — work added or altered after the contract is signed — have to be documented and billed, or you do the work for free. And progress billing (invoicing in stages as the job hits milestones, often via AIA-style applications) has to tie back to the job budget so you are billing for what you have actually completed. Sloppy tracking here is one of the most common reasons a busy contractor is somehow always short on cash.

In trades, the danger is not a single bad month — it is being busy and broke: plenty of work, plenty of revenue on paper, and no cash, because retainage, change orders, and slow progress billing are quietly holding your money hostage.

The Colorado layer

On top of the trade-specific accounting, Colorado adds its own wrinkles: sales-and-use tax on materials (and the home-rule city mess we cover in our Colorado sales-tax guide), local contractor licensing, and — if you have a crew — payroll, workers’ comp, and the local taxes like Denver’s OPT. For multi-jurisdiction contractors working across the metro, keeping the tax side straight is its own job.

The bottom line

Construction accounting done right tells you which jobs make money, what you are really owed, and whether next month’s cash will cover next month’s payroll. Done generically, it hides all three. If your trades business is busy but the bank balance never seems to reflect it, that gap is usually in the job costing and the billing — and it is exactly the kind of thing we build properly for Front Range contractors.

This is general guidance for Colorado contractors, not specific tax or accounting advice, and rules change. Talk through your specifics with a professional.