Some other things to be aware of. You’ll also have to batch your deposits manually, QuickBooks can only do it for you automatically, when you use their service, and it’s not easy to batch manual credit card deposits to match your bank deposits. Make sure to post separate deposits for Amex, Discover and MC/Visa because they are each deposited as separate transactions on different dates (Amex, for instance, takes a few days longer to deposit than MC/Visa). You should also ask your merchant service provider to use gross deposits (fees debited in a separate transaction) instead of net deposits (fees deducted from the deposit) otherwise reconciling your checking account is going to be a nightmare, if not impossible.
Using QuickBooks merchant services will save you a lot of time, so you should consider it. Intuit can generally match whatever pricing you currently have, plus I can get the first two months of monthly fees waived, if you’d like to try it out. You can always go back to your old provider if you aren’t happy with it.
New payroll items are mapped to an expense account in QuickBooks called Payroll Expenses, but you can edit your payroll items so they post to any expense account you wish. However, each payroll item can only be mapped to one expense account which causes problems when you want to allocate field labor to cost of goods sold and admin labor as a regular expense.
You can get around this by establishing two payroll items for each of your payroll expenses – one mapped to a cost of goods sold account, another mapped to a payroll expense account – with one important exception, payroll taxes. Because QuickBooks requires that you use one payroll item for each federal and state tax, you are forced to choose between mapping your payroll taxes to an expense account and understate Cost of Goods Sold or a Cost of Goods Sold Account and understate Payroll Expenses.
Many QuickBooks consultants recommend that you prepare a journal entry each month to move your payroll taxes into the correct category. But there is a way to automate this.
1. If you haven’t already, create payroll tax accounts under cost of goods sold and expenses. Go to Lists > Chart of Accounts, click on the Accounts button, and select New. The cost of goods sold type is one of the Other Account Types. You may want to create sub-accounts for each payroll tax. You can do this by creating a parent account called Payroll Taxes, checking the box next to Subaccount of, and entering in the Payroll Tax account when creating the sub-accounts. Note: the sub-account types must match the parent account selected.
2. Go to Lists > Payroll Item List and edit your payroll tax items to map to the Cost of Goods Sold payroll accounts you created above.
3. Click on the Payroll Item button and select New. Create an Addition payroll item called “Allocated Admin Payroll Taxes”. Select EZ Setup, Other Additions, and map it to your regular payroll tax expense account. Don’t change any of the other defaults until you get to Gross vs. Net. Change this to gross pay. You can enter an estimated % for payroll taxes (make sure to enter the % after it) or if you want really accurate job costing you may want to create separate payroll items for each tax so you can set the % and upper limits for each one. Just don’t forget to adjust the upper limits each year.
4. Create a Deduction payroll item called “Admin Payroll Allocated to Admin”. Follow the same steps as you did when creating the Addition payroll items, except select Other Deductions as the account type and map it to your cost of goods sold payroll tax account.
5. Add the addition and deduction items to each admin employee’s Payroll and Compensation Info tab. Note: you must enter the deduction payroll item on top of the addition payroll item, or you will change the amount of net pay.
6. When you create paychecks for these employee in the future, the addition payroll item will increase regular payroll expense, and the deduction payroll item will decrease cost of goods sold by the same amount. You can also edit prior paychecks by unlocking them. Just make sure that the deduction item is ALWAYS listed first.
- This will probably be really time-consuming, but you can cleanup your items by deleting and/or merging your items. To delete, just right-click on the item and select delete item (this is only available if the item has never been used). To merge, change the name of one item to the same exact name as another.
- You could start a new file, with only the items you’re currently using.
- You might also want to consider using POS, which has an unlimited number of items and is less expensive than Enterprise. Just make sure to set the preferences to send information to QuickBooks in summary, instead of detail.
We are Intuit Solutions Providers, so we can get you the best prices on either Enterprise or POS, if that’s something you’d like to explore further.
You can get a brief overview of QuickBooks POS program on our website. I can also send you a free 30-day trial if you would like to play around with it.
In terms of cost, you can usually find Premier for less than $300 and Pro for less than $100. You may find that Pro does everything you need. You do not have to buy a support plan; however, if you purchase direct from Intuit they may try to sell you one.
Most of the problems with 2009 were due to a massive change in online banking, and have been resolved with the R7 update. Many of our clients have been using it for months now, without any problems.
You need to make sure to use items, instead of expenses, when entering the bills. And, you’ll also need to enter a customer:job. You can create one called something like rototillers. The customer:job you use makes no difference when using the Item Profitability report, but if you don’t use one the expenses won’t show up on the report.
Builders and contractors who purchase land and then develop it have to comply with accounting requirements for revenue and expense recognition that are a little different and require a some modification of the standard QuickBooks set up. The accounting rule is that revenue and costs are not to be recognized on financial statements as income and expense until the job is complete, or in some cases as certain milestones are completed for the job. Many engineering firms, attorneys and other similar organizations like to use work in progress (WIP) accounts as well.
The procedure described here for handling work in progress (WIP) or construction in progress (CIP) in QuickBooks assumes that all revenue and costs will be tracked as assets (for costs) and liabilities (for revenues) until the end of the job, when they’ll be transferred to income and expense accounts.
1. Set up a new account called Work in Progress or Construction in Progress—go to Lists > Chart of Accounts, click the Account button and select New. Select Other Current Asset for the account type.
2. Go to Lists > Item List and change the expense account on your service items to the asset account you set up above. If you don’t see an expense account, click the button next to This item is used in assemblies…”
3. Add two Other Charge items:
a. Transfer out of WIP – with WIP as the account and note in the description that the amount should be positive
b. Transfer into COS – with COS as the account and note in the description that the amount should be negative
4. Make sure to always use the Items tab instead of the Expenses tab on all your transactions
5. If you use Job Profitability reports, modify/filter them to include your WIP account. Click on Modify Report, select the Filters tab, select Account, select Multiple Accounts, check All income and expense accounts and your WIP account. Memorize the report.
6. Create a report to track the amount in WIP by job by going to Reports > Custom Summary Report. Click on Modify Report, select Display Columns = Account List and Display Rows = Customer. Click on the Filters tab, select Account = your WIP account. Memorize the report.
7. Once the project is completed, prepare an invoice or sales receipt with a line for the sales price (mapped to an income account) and then add the two other charge items you created above making sure to use a negative amount for Transfer into COS. Once done, the ending total for the invoice should match the sales price.
If you don’t see any payments on this list, but you do see invoices that you know have been paid, it’s likely that they were deposited into the bank without going through Receive Payments first. You’ll need to find the deposits and change the account to Accounts Receivable and enter the Customer name. Once you do this, they’ll show up on the Open Invoices report and you can apply the credits as explained above.
It’s always best to use QuickBooks the way it’s designed. If you enter invoices, you should always use Receive Payment. Never go directly to Make Deposit or enter the deposit directly into the register. If you don’t enter invoices, you should use Enter Sales Receipts so you can batch the payments using undeposited funds (see below).
It’s also a good idea to deposit your payments into undeposited funds, and then enter the deposit on the day you’re actually going to the bank. When you select Make Deposits, a popup box will list all the payments you’ve received into undeposited funds that haven’t been deposited yet. Simply select the payments that you are depositing that day, and Quickbooks will batch them all in one deposit that will match your bank statement.
Some customers for certain types of construction projects require you to hold back a certain percent of your total invoice or of each invoice (invoicing only for only a portion of the contract price) until you've completed the project satisfactorily. After the job is complete and it's agreed that you can collect the remaining percentage, you then create an invoice to the customer for the balance.
The procedure described here for handling retainage in QuickBooks will not only help you track who owes your for retention, but also track how much they owe. In addition, it helps to track the retention on your books as an asset until the customer pays the balance:
1. Set up a new account called Retainage Receivable—go to Lists > Chart of Accounts, click the Account button and select New. Select Other Current Asset for the account type.
2. Set up a new item called Retainage—go to Lists > Item List, click on the Item button and select New. Select Other Charge as the item type. Enter Retainage for the description, a negative for the Amount (for instance, -10% if your retainage is 10%), and the Retainage Receivable account you just setup for the Account.
3. Create an invoice for the total % completed—creating an estimate first can really automate this step because you have the option of invoicing a percentage of the estimate amount. Then add a line for the retainage. This will deduct retainage from the total invoice leaving the balance actually due from the customer. If your retainage varies, you can override the % on the invoice. Make sure your customers know that your invoice total already has the retainage deducted, many customers simply deduct a percentage from the invoices they receive when making a payment.
4. Memorize a Retainage Receivable report. Go to Reports > Customers & Receivables > Customer Balance Detail. Click on Modify Report, select the Filters tab, select Account and choose the Retainage Receivable account. Click the Memorize button and call the report Retainage Receivable. If you only want to see the unbilled retainage, periodically reconcile the Retainage Receivable account (Banking > Reconcile) and click on all the retainage that’s been billed—they’ll have offsetting amounts in both columns. Then add another filter to your memorized report to filter out cleared transactions by selecting Cleared for the filter and clicking No.
5. Once the job is completed, go to your Retainage Receivable report to see what’s still owed. Then create an invoice using the Retainage item and change the amount to the amount still owed.