To evaluate your bookkeeper, start with a simple question. Do you get numbers that help you decide, or just papers for the IRS?
Many contractors get their reports late or do not understand them. Maybe you already think about changing bookkeepers. These 10 questions tell you if your service is up to the level of your business.
In short
- Your bookkeeper should keep your records up to date all year, not just during tax season.
- They should explain your reports in plain words and answer you in a reasonable time.
- They must understand construction: job costing, subcontractors, retainage and progress payments.
- It does not decide legal or tax matters for you; coordinate with your tax preparer.
- Be careful if they suggest hiding income or ignoring labor rules.
The 10 questions to evaluate your bookkeeper
Read each question and mark whether your current service gives the good answer or shows the warning sign. Do it with your latest reports on hand.
| # | Question | Good answer | Warning sign |
|---|---|---|---|
| 1 | How often do we talk? | At least every month or every quarter | Only during tax season |
| 2 | Do you know construction? | Talk about job costing, retainage and progress payments | Treats you like a store |
| 3 | Do you reconcile my accounts every month? | Bank and cards reconciled every month | “We do it at the end of the year” |
| 4 | When do I get my reports? | Before the 15th of the next month | Months behind |
| 5 | Does it separate income and costs by job? | You can see how much each job made | Only a total for the whole business |
| 6 | Can you explain the profit and loss (P&L) statement to me? | Tells you what went up, what went down and why | Sends you the PDF with no comments |
| 7 | How long does it take to reply? | 1 to 2 business days | Weeks or never |
| 8 | Will you let me know if you see questionable 1099 payments? | Alerts you if someone looks like an employee | Never mentions it |
| 9 | Do you coordinate with my tax preparer? | Hand over closed, clear books | Your tax preparer has to redo everything |
| 10 | Does it keep my receipts in order? | Digital file by month and by job | Boxes of unreviewed receipts |
If you checked 3 or more warning signs, it is worth reviewing your service. A bookkeeper for contractors should give mostly good answers.
Three construction terms you should know
- Job costing: how much each job cost you and how much it left you.
- Progress payment: the customer pays in stages, based on the progress of the job.
- Retainage: part of the payment the customer holds until the job is done.
If your service does not handle these concepts, your reports do not show how your money moves.
About question 8: 1099 payments
A good bookkeeper does not decide whether someone is an employee or a contractor. But they should warn you if they see fixed payments every week to the same person, with no invoice or license. Classification follows official rules from the IRS.
To learn how this is decided, read our guide Employee or contractor? 5 signs and the ABC test.
About question 10: receipts
The IRS asks you to keep records that support your income and expenses. Check what you need to keep in its guide to records for businesses. One digital file per month and per job saves you from digging for receipts in a box.
Warning signs you should not ignore
- Your books are more than 60 days behind.
- Suggests you "not report" the cash you collect.
- Does not know what a progress payment or retainage is.
- It only appears when you have to file the return.
- It cannot tell you how much you earned last month.
The second sign is the most serious. Hiding income can get you in trouble with the IRS, and a serious bookkeeper will never suggest it.
What you can ask of a good construction bookkeeping service
These are the monthly financial reports a contractor can reasonably ask for:
- Monthly reconciliation of bank and card accounts.
- Profit and loss (P&L) statement by job, not just for the whole business.
- Accounts receivable report: who owes you and since when.
- Deadline calendar: payroll, estimated taxes and renewals.
- One short meeting a month to explain the numbers to you.
If you want to see how each report is built, check our guide to bookkeeping for contractors: reports and habits. You can also learn about the ODC bookkeeping service.
Example: the job that looked good
Picture Luis, a remodeling contractor. In January he closed a $48,000 contract and thought it would leave him a 25% profit. His bookkeeper only recorded totals, so nobody checked the job on its own.
In April, with the costs separated, he saw this:
| Item | Amount |
|---|---|
| Contract price | $48,000 |
| Materials | $21,000 |
| Labor (with payroll taxes) | $17,500 |
| Electrical subcontractor | $6,000 |
| Job profit | $3,500 (7.3%) |
The job left $3,500, not $12,000. And that is before counting his fixed costs.
With monthly reports by job, Luis would have seen it in time to adjust the next estimate. To learn how to calculate your profit per job, read profitability for contractors.
How to review your bookkeeper in a 30-minute meeting
You don't need an audit. A short meeting with your latest reports on the table is enough. That way you get more out of the 10 questions.
- Ask for a job report. Pick a finished job and see how much it really left you.
- Compare two months. Ask what changed and why each number went up or down.
- Review your accounts receivable. Confirm who owes you and since what date.
- Ask to see the reconciliation. Your bank balance should match your books.
Common mistakes when evaluating a service
- Judging only by the monthly price, without looking at what reports you get.
- Waiting until year-end to ask how you're doing.
- Switching services without first asking for your files and access.
Imagine your bookkeeper answers all four requests clearly. That's a good sign. If they dodge the questions or promise to "fix it later," write down the date and ask again. A serious service doesn't mind having its work reviewed.
What to do now
- Print the table of the 10 questions.
- Rate your current service honestly.
- Ask for your last 3 profit and loss (P&L) statements.
- If you do not understand them or they do not exist, schedule a review.
FAQ
How often should I get reports from my bookkeeper?
Ideally every month, before the 15th of the following month. If you only get them at the end of the year, it is too late to fix prices, costs or decisions about your jobs. Also ask for a short meeting so they explain what the numbers mean.
Can a bookkeeper prepare my taxes?
Not always. The bookkeeper keeps the books; tax returns are prepared by a tax preparer, CPA or enrolled agent. They can work at the same company, but they are different jobs. What matters is that your books reach the person preparing your return closed and clear.
How long should I keep my receipts?
In general, the IRS asks you to keep records for at least 3 years, and 4 years for payroll records. Some cases require more time, for example if you bought equipment or vehicles. Keep them in a digital file organized by month and by job so you can find them fast.
When to talk to a professional
This article is a general guide. If your case involves a letter from the IRS, the FTB or the EDD, a lawsuit, an accident or a change in your business structure, talk to a lawyer, a tax preparer (CPA or enrolled agent) or the official agency. Every case is different.
How ODC helps you
At Oficina del Contratista we keep your bookkeeping up to date: we record your income and expenses, reconcile your accounts and explain your reports in Spanish. For taxes, payroll, insurance or legal matters, we connect you with independent partners; they provide those services, not ODC. See all services.
Want us to review your last 3 months of numbers with no obligation? Message us on WhatsApp.
References
- IRS – Recordkeeping — What records a business should keep to support income and expenses
- IRS – How long should I keep records? — General 3-year period and 4 years for payroll records
- IRS – Independent contractor (self-employed) or employee? — IRS rules for telling an employee from an independent contractor
Runs Oficina del Contratista, a Spanish-language bookkeeping service for contractors. Has experience in management, sales and construction consulting.
Important notice: this article is educational and informational only; it is not legal or tax advice. It may contain errors or be out of date. Before making decisions, check it with a licensed expert or attorney.
