Are you frustrated with job costing in QuickBooks? Trust me, when I say you are not alone – I think there’s a big club! Construction contractors, landscapers, government contractors, architects, engineers, are just a few who need to be able to track the costs and revenue for jobs/projects.
I find in many cases, frustration is because users don’t really understand how to job cost in QuickBooks – but they think they do. Most try to job cost in the Chart of Accounts, but then find the chart gets very cumbersome. And when they go to run some of the job cost reports in QuickBooks they wonder where the data is (predominantly costs)!
Items are the KEY to good job costing. Some of the most important job cost reports are based on the Items list, NOT the Chart of Accounts. I tell my clients the detail belongs in the Items list, not the Chart of Accounts. So it’s critical that Items be setup and used as intended. While you have to use Items on estimates and invoices, Items are usually ignored when it comes to entering the expense. And, unless you have inventory, I find that the Items are set up incorrectly to be used for expenses.
So take a look at your Items list. It helps to have your list to be organized (some do it by number, some by project phase or tasks), so that when you run a report, like products/services can be seen together or you can see the progression in the project.
Next, take a look to see if your Item shows a cost component. I find most times, Items are single-sided (i.e. they show only revenue or cost), but they should be double-sided. That way you can enter the cost of the Item when you pay for it and revenue when you invoice for it. There’s a little check box that will change the Item from showing only one side to showing two sides. I’ll admit the wording isn’t always good, nor is the box really evident, but it is sooo crucial. Once you have the cost side showing, you can select the Cost of Goods account you want to use.
After the Item is setup, the next key is to use Items when entering your expenses, instead of selecting your COGS account on the Expense tab. Remember, if the Item is setup correctly, the dollar amount of the Item will hit the correct COGS account for you. When you do bank/credit card downloads or journal entries, there is no place to enter Items, so you want to use the bills, checks, credit card charge forms for these costs. That also means that if you outsource your payroll and just have journal entries to record taxes, wages, etc., then you miss out on using Items for your labor, which is usually a significant job cost.
There are also ways to use Items to allocate overhead to projects, but that’s a little complex for an article.
There are several other important areas for job costing in QuickBooks, but we will address some of those on another day. However, if you start working with Items as intended, you will be much happier!
If you would like additional assistance on job costing, you might like our Keys to Mastering Job Costing in QuickBooks or you can contact our office and we’ll be happy to work with you.