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Top 5 Bookkeeping Mistakes DFW Contractors Make

ChatGPT said: Concerned construction worker in a hard hat and safety vest looking at a computer screen in a Dallas office with the city skyline in the background.
Written by
Lijin Philip
Updated on
July 23, 2025

Construction work in Dallas–Fort Worth chews through capital faster than a jackhammer through old slab. Lumber prices swing, fuel bills climb, and crews expect to be paid on Friday whether your customer has signed the pay application or not. Profitable contractors share one habit: they treat bookkeeping as a job site tool, not an afterthought. Below are the five accounting blunders that hurt DFW builders and trade contractors most often. Each section explains why the mistake happens, the damage it causes, and clear steps to get back on track.

1. Mixing Business and Personal Money

The mistake
Owners swipe the company card for groceries, funnel personal truck payments through the business, or deposit client checks into a personal account because it was “handy.” The lines between business and personal money disappear.

Why it hurts

  • Taxes become a guessing game. Personal expenses that slip into your deductible list can trigger penalties when the IRS reclassifies them.
  • Job costs look bloated or strangely low, so your bids stop reflecting reality.
  • Legal protection fades. Courts may decide that your company is not separate from you, which puts personal assets at risk if a lawsuit lands.

How to fix it

  1. Open dedicated accounts. Separate checking, savings, and credit cards for the company. No excuses, even for sole proprietors.
  2. Use an owner draw or reimbursement form. If you must take money out, log it as a draw. If you spend personal money on a job, turn in a reimbursement slip instead of moving receipts around later.
  3. Reconcile every week. QuickBooks Online, Xero, and similar software pull bank feeds automatically. Schedule thirty minutes each Friday to match transactions. Catch one bad charge quickly and the books stay clean the rest of the year.

Local angle: Many regional banks understand Texas Construction Trust Fund rules. They can flag transfers that might violate client deposit restrictions.

2. Dumping All Costs into Generic Buckets

The mistake
Everything from apprentice wages to boom‑lift rentals lands in a single “Job Expenses” account. Payroll taxes might show in overhead while the wages themselves sit in Cost of Goods Sold. QuickBooks default accounts make this jumble easy.

Why it hurts

  • You cannot see true margins. If direct labor and materials mix with overhead items, gross profit fluctuates for no clear reason.
  • Bids drift off‑target. Last year’s job cost data becomes useless for estimating new work.
  • Sales tax errors creep in. Texas taxes certain repair labor and some materials purchases, but not new construction labor. Misclassified items lead to over‑payment or, worse, unpaid taxes plus penalties.

How to fix it

  1. Build a tailored chart of accounts. Break cost of goods sold into direct labor, subcontractors, direct materials, equipment rental, and permits or fees. Keep office salaries and marketing away from these accounts.
  2. Tag every transaction by job. QuickBooks classes, Xero tracking categories, or job codes in Sage all accomplish the same goal: every receipt shows both the cost type and the project it belongs to.
  3. Track use tax. Buy materials tax free for resale, but if leftovers end up on a taxable repair job you owe use tax. Separating labor and material accounts makes this compliance step simple.

Texas twist: If you fabricate items in‑house, Texas expects you to collect tax on the fabricated product unless it becomes part of new construction. Proper account mapping keeps that liability visible.

3. Skipping Work‑in‑Progress (WIP) and Job Costing

The mistake
Cash‑basis books say you made money because a customer paid ahead of schedule, or they claim you lost money because lumber invoices arrived before the first draw. Without WIP schedules, the numbers lie.

Why it hurts

  • Phantom profits. Early draws show revenue today even though much of the work remains.
  • Hidden losses until it is too late. You may keep pouring overtime into a job that already passed its budget.
  • Bonding limits shrink. Sureties want to see reliable WIP reports before approving larger projects.

How to fix it

  1. Adopt percentage of completion for management reports. Revenue and costs move together based on completion, even if your tax return keeps a simpler method.
  2. Create a monthly WIP schedule. List every active job with contract price, estimated total cost, cost to date, percent complete, and earned revenue. The difference between earned revenue and billed revenue flags over‑ and under‑billings.
  3. Pull field data straight into accounting. Use project management apps like Buildertrend or CoConstruct. Foremen log labor hours and materials used each day, which feeds cost‑to‑date in real time.

Example: A Plano HVAC contractor cut a projected six‑figure loss in half after WIP reports showed labor costs ballooning on a school project by month three. Management negotiated scope changes before damage worsened.

4. Treating Texas Sales Tax as an Afterthought

The mistake
Contractors charge sales tax when they should not, or forget to collect when they must. Rules depend on project type and client status. Residential new builds are exempt from labor tax, commercial repairs are taxable, and certain nonprofits hand you exemption certificates. Confusion reigns.

Why it hurts

  • State auditors collect interest all the way back to the first missed return.
  • Paying tax on materials that should be tax‑free eats margin; failing to charge the customer leaves you paying out of pocket later.
  • Incomplete exemption paperwork delays payment because the customer’s accounting team refuses an invoice that does not match their tax status.

How to fix it

  1. Write a short guide for field staff. One page that spells out when to collect tax, when to pay tax at purchase, and which jobs require certificates. Keep it on the cloud so crew leaders can pull it up on a phone.
  2. Gather certificates before mobilizing. The office sends a digital link; the client uploads signed exemption documents. No paperwork, no work.
  3. Hold quarterly internal audits. Sample random invoices and receipts, confirm correct tax treatment, and adjust procedures promptly.

Local quirk: Dallas, Fort Worth, Frisco, and dozens of suburbs add city tax layers. The correct rate is based on where the work happens, not where your shop sits, so update point‑of‑sale software for each jurisdiction.

5. Billing Late and Ignoring Aged Receivables

The mistake
Progress invoices go out once a month regardless of contract terms, retainage is not tracked separately, and nobody follows up until ninety days have passed.

Why it hurts

  • Cash drought. Payroll, fuel, and materials cannot wait for a GC to process slow paperwork.
  • Increased write‑offs. The longer an invoice sits, the less likely full payment becomes.
  • Strained supplier relationships. Slow incoming cash forces you to stretch outgoing payments, which hurts discounts and reputation.

How to fix it

  1. Align billing dates with contracts. If your contract allows billing on the twenty‑fifth based on percent complete, set calendar automation so pay applications go out that day without fail.
  2. Separate retainage in the general ledger. This prevents premature recognition and makes it easy to chase retainage once work finishes.
  3. Review aging weekly. Print a report grouped by 0‑30, 31‑60, 61‑90, and 91 plus days. Attach action steps: reminders, lien notices, or attorney letters, depending on the age of the debt.
  4. Use prompt‑payment laws. Texas public work requires owners to pay within thirty days or accrue interest. Citing the statute often shakes loose stalled checks.

Case study: A Denton concrete subcontractor reduced average days sales outstanding from sixty‑two to forty‑eight after installing automatic reminders three days before due dates and sending a notice of intent to lien at forty‑five days.

Putting It All Together

Every mistake listed above drains cash but also carries a hidden cost. Poor records break trust with banks, bonding companies, and potential buyers if you ever decide to sell. Cleaning up one area often improves the others. For example, job costing produces accurate WIP schedules, which improve bond capacity, which in turn allows larger contracts that demand split bank accounts and better billing procedures. In other words, bookkeeping discipline builds a flywheel that spins faster over time.

Start with the low‑hanging fruit

  1. Open dedicated bank and credit accounts if they are not in place already.
  2. Build a basic construction chart of accounts, then code this week’s bills properly.
  3. Schedule a WIP meeting on the first business day of next month. Even a spreadsheet beats guessing.
  4. Create a digital folder for sales tax certificates and require crews to upload signed copies before work starts.
  5. Turn on automatic invoice reminders and review the aging report every Friday until it looks clean.

These five steps cost little more than time. Within a quarter, the books will offer insight instead of confusion. Owners who know their true costs, cash position, and tax exposure make better bids and sleep better at night.