Ever wondered why your business feels busy, but your bank account doesn’t reflect the effort?
You’re constantly chasing new projects, juggling deadlines, and pouring resources into clients—but the numbers don't add up at the end of the month. The issue might be your inability to identify which projects are profitable and which are quietly draining your margins. Without this clarity, you risk overspending on low-value projects, underpricing your services, or misallocating resources.
By leveraging QuickBooks Online (QBO) to track profit by project, you’ll:
- Spot inefficiencies that hurt your cash flow.
- Gain confidence in where to invest your time and money.
- Strengthen your overall financial health by aligning your efforts with the projects that yield the highest returns.
This approach not only boosts profitability but also reduces financial stress, giving you the insight to grow strategically and sustainably.
Why Tracking Profit by Project Helps
To grow a successful business, it’s not enough to simply be profitable overall—you need to know exactly where that profit is coming from so you can capitalize on it.
Common Challenges Without Project Profitability Tracking
- Losing money on seemingly “big” projects: Without detailed tracking, you might think your largest clients are the most profitable, but hidden costs like unbilled time or labor expenses could be draining your earnings.
- Inability to identify underperforming services: Relying on general profit margins doesn’t reveal which parts of your business—or which customer projects—are falling short.
- Pricing guesswork: If you don’t know which projects are yielding the highest returns, how can you confidently set competitive and profitable prices?
How Profit Tracking Helps
✅ Identify High-Value Projects: See which services and clients contribute the most to your project income so you can focus on getting more like them.
🚀 Stop Wasting Resources: Eliminate or adjust underperforming services to save on project-related expenses and labor costs.
💵 Set Better Pricing: Use real data from the built-in project profitability tracking feature to price your work accurately and maximize margins.
🔑 By tracking project-level profitability, you’re no longer making decisions based on assumptions—you’re acting on insights. For example, accurate project costing reveals discrepancies between billable expenses and actual payroll expenses, allowing you to adjust pricing or cut unnecessary costs. If you want to know more about how to track revenue you can also read this
article.
Profit Tracking in Action
Take the case of a digital marketing agency. They assumed large website redesigns were their bread and butter. However, after tracking profitability in QBO, they discovered these projects were high-cost and low-margin. Their real moneymaker? Smaller SEO retainers with minimal overhead. Armed with this knowledge, they shifted their focus and saw a 20% profit increase in six months.
What You’ll Need to Get Started
Before diving into project tracking in QuickBooks Online Advanced or Plus, make sure you’re set up for success:
- QBO Subscription: You’ll need QuickBooks Online Advanced, Plus, or a similar plan that includes project management features such as the “Projects” menu and project-specific reports.
- Accurate Records: Detailed invoices, expense tracking, and payroll expenses are essential for precise calculations.
- Organization Tools: Project templates, correct column setups, and standardized project names simplify workflow.
Step-by-Step Guide to Tracking Profit by Project in QBO
1. Enable Project Tracking in QBO
- Navigate to Settings → Advanced Settings and turn on the “Projects” feature.
- Create a new project and assign it to a customer from the Customer drop-down menu.
- Pro Tip: Use clear, descriptive project names (e.g., “Website Redesign for ABC Corp”) to avoid confusion later.
2. Add Transactions to Projects
- Link Income: Assign all invoices and sales receipts to their respective projects.
- Track Expenses: Categorize expense transactions, labor expenses, and even project-related work hours to the appropriate project.
- Example: Use the COST RATE field to include hourly cost rates for each employee when tracking labor costs.
3. Monitor Project Profitability
- Navigate to the Projects center to see real-time project progress and profit totals.
- Use the Project button to view detailed project income and costs for each project type.
4. Customize Reports for Deeper Insights
- Run the Sample Project Profitability Report to break down key metrics such as revenue, direct costs, and margins.
- Add additional columns like unbilled time and project timesheets to refine your analysis.
Common Pitfalls and How to Avoid Them
⚠️ Tracking profit by project is straightforward in QBO, but here are some pitfalls to watch out for:
1. Forgetting to Assign Expenses
Missing this step can skew your profitability reports, leading you to believe a project is more profitable than it actually is.
- Example: Forgetting to assign subcontractor invoices to a specific project may inflate profit margins artificially.
- Solution: Use the “Projects” drop-down list when entering transactions to ensure everything aligns.
2. Overcomplicating Your Setup
Trying to track every detail (e.g., individual screws in a construction project) can overwhelm you and obscure the bigger picture.
- Solution: Focus on major project accounts, such as labor costs, expense category totals, and significant purchases. Adjust your method for job costing only when needed.
3. Misinterpreting the Data
Misreading reports could lead to discontinuing a service that appears unprofitable due to misallocated costs.
- Solution: Collaborate with an accountant or bookkeeper to validate your reports and ensure accurate interpretations.
The Business Impact of Project Profit Tracking
🌟 Imagine being able to look at your numbers and instantly know which projects to prioritize, which to scale back, and which to walk away from.
Tracking profit by project in QBO empowers you to turn data into dollars. With features like QuickBooks Time for time tracking and QuickBooks Online Payroll for accurate employee wages, you gain full control over project costs and progress. Use these insights to scale smarter, not harder.
Benefits of Project Profit Tracking:
- ✅ Make Confident Decisions: Use project-specific reports to evaluate the profitability of customer projects and say yes to the right opportunities.
- 🔄 Strategically Allocate Resources: Focus your team’s efforts on what truly drives results.
- 💵 Achieve Greater Profitability: Optimize pricing, reduce waste, and grow your profit totals over time.
Lets track our tax revenue here.