This introduction describes two popular options for QuickBooks Desktop users who track costs by Job (projects, matters, etc.) and/or by Class (program, department, funding source, etc.). This is common in industries like construction, contracting, professional services, and nonprofits.
I’ll briefly describe the benefits and work required for two techniques: Zero-Dollar Check and Manual Paycheck. Both of these options assume that you want to use Service Items in QuickBooks job costing reports. If you don’t need QB Items you will have a third option: a general journal entry. [Why? Journal entries cannot use Items, so you need one of these work-around techniques]
Time-based or percentage allocations used to calculate the cost:
If you use Timesheets in QuickBooks Desktop, the time entries will feed the allocation
If not, you’ll calculate the allocation outside of QuickBooks. Time can be entered easily…you’ll need a summary of the time per job for each employee. If using percentages, you’ll need to convert them into hours.
Is this the right solution for me? Zero-Dollar Checks
· Job costing utilizing a calculation of an average employee’s total payroll cost plus estimated burden. Burden can include an estimate of payroll tax costs, plus any other benefits you want to include. (It’s your estimate…you can do what you want with it!)
· P&L will have a new line for Payroll Job Costs. A single line containing all types of employees (eg not broken down as laborers, supervisors, estimators, executive). On a financial report it will appear as $0. On Job reports it will show the total allocated to that job, which you can zoom in to see costs per each employee name.
This can be done either per pay period for each paycheck, or monthly per employee, or any other time period. You’ll enter one Write Check per employee or crew.
You will need: the average burdened cost of an employee (or you could do it by crew). You’ll program it as the cost of each Item. (Whatever items you use on timesheets and want to see on job cost reports: Design, Labor, Oversight, etc.)
[The Zero-dollar check technique should also work in QBO but you would use Bill instead]
Is this the right solution for me? Manual paychecks
QuickBooks calls them “manual”. I call them “mock paychecks”. If you’ve ever made Ritz Mock Apple Pie like I have, you’ll understand.
· Detailed job costing, including gross pay plus payroll taxes allocated exactly (SS, Med, FUI, SUI)
· Individual Net Pay checks. Depending on how your payroll service withdrawals hit the bank, the net pay of the mock paychecks can either be pointed to hit the bank account or a clearing account.
· Summary tracking of payroll taxes managed by the payroll service (“impounding”). Each mock
· Detailed tracking of benefit deductions – for things like retirement and insurance contributions by withholdings - each employee’s names will appear under liabilities, enabling filtered reports to verify that the correct amount was withheld as compared to payments over a period of time
· Company paid benefits are not typically included. It can be done, but is so awkward that most chose not to.
You will need to enter each paycheck to match the payroll service’s journal, and you’ll use a payroll liability check to record the payroll service withdrawal of the tax money. Depending on how these transactions hit your bank – each payroll service is different – you may need one or two more simple entries to record the movement of money.
[Not available in QBO]
Zero-Dollar Checks is simple but less precise method.
Manual paychecks offer more detail and precision for a little more work.
Contact me for assistance in deciding and implementing one of these solutions so you can get the critical information your business needs.
I’ll make QuickBooks sing and dance for you.
Wayne Higdon firstname.lastname@example.org