Having just returned from the Green Industry Expo where I got the chance to talk with lots of contractors, I heard many of the same issues:
- I don’t have confidence in my reports
- It’s hard to discern profitability of jobs and/or divisions (or departments or ….)
- I can’t get good job cost reports
- It takes too long to … (you can fill in the blank here)
- I track in a spreadsheet or a project folder because I can’t get this in QuickBooks
- I wish you could……
With just a few changes, you can start getting great results. So much of the solution is in the setup. It’s the old “garbage in garbage out”. Part of the problem is that people think “anyone” can setup QuickBooks (and QuickBooks sometimes “feeds” that misconception).
Below are 6 common mistakes.
- Your version of QuickBooks is not appropriate for your needs. Different versions of QuickBooks offer different tools and features. Many times, one of the easier and least expensive fixes is to change the version of QuickBooks, either to a new release or to a higher-end package. Imagine find out that you can solve some of your problems by just switching to a different version of QuickBooks! (That was easy!)
Keep in mind that not all versions are equal and they are continually improving; the desktop versions change every year and the online version is constantly evolving. So don’t assume that the version you’ve been using is still the best fit for you – it’s always worth evaluating.
Many simply upgrade every 3 years, but I recommend re-evaluating your QuickBooks version each year. I write about the new features every year, usually around October. There are many times when one or two of the new features is absolutely worth the price of the upgrade (batched timesheets being one for those with crews). Remember, work-arounds are costly.
Choosing the right version of QuickBooks is so important that we have a chart that compares the different versions of QuickBooks. We also have a video that shows what Premier has to offer Pro does not and what Enterprise has to offer Premier does not. We use these tools to help clients determine which package is best for them.
- Not taking advantage of the “Class” feature. I’ve had several clients want to see profitability by division or department or state or…. With their existing setup (multiple departments in the “income” and “cost of goods” accounts), they often don’t get a monthly or quarterly report showing them the profitability of each because of the time and/or difficulty factor. Below is a P & L by “Class” – look at how easy it is to compare the profitability of the different aspects of your business! You can even turn on “% of row” and get a better sense of which is more profitable for your business.
Once you turn on and use “Classes”, you will find they not only help you easily compare profitability of the different aspects of your business but they can also help you simplify your Chart of Accounts. Instead of listing 5 different income accounts, you might be able to list just one or two!
- “Chart of Accounts” is not setup well. I usually see at least one of these mistakes:
- Accounts are in the wrong place
- Job costing in the Chart of Accounts
- There is too much clutter in the Chart of Accounts
I typically find the clutter for those who job cost or have inventory; I was guilty of this once. Keep it simple – it will be easier to see the big picture of your business. By putting the detail in the “Items” and using “Classes”, you will find that you won’t need so many accounts and there are better reports to handle the detail. This is often a discussion I also have with those who are converting from other software into QuickBooks.
For those who do job/project costing, I’m a big proponent of having all your direct expenses in the Cost of Goods section – that includes the job materials, payroll expenses of those who work on the project as well as the subcontractors’ cost and even equipment. Those are costs you incur in order to do the job (compared to overhead which is an expense even if you have no job).
If your projects are big, as in construction, your “Work in Process” (WIP) belongs on your Balance Sheet; it should not be in your P & L until your project is done. There are ways to setup reports so you can track job costs and cash flow.
- “Items” list isn’t setup correctly (or well). And it is often made worse by having different people making recommendations! I usually have clients start by having “Items” organized by “Type” (like service, non-inventory aka job materials, and inventory) and then by some other organization, such as type of service or product, followed with sub-items. For those who job cost, I recommend having the “Item” setup to be “double-sided” so it can capture both the cost side and the income side. Some of your reports pull straight from the Items list so once you have your items setup correctly and use them correctly, you’ll get some very valuable data.
- Jobs not setup – I frequently hear frustration with not being able to easily assess profitability of a job. This is often because jobs were never set up in QuickBooks, which makes it really challenging to see how you’ve done! And if this is a long-time customer who’s had you do multiple jobs, it’s really hard to pull out the costs and invoicing for just that one job.
- Taking too long – I frequently hear frustration with not being able to get work and/or reports done in a timely basis. Typically I see one or more of the following as to why:
- Poor setup – with better setup, you may find you can quickly get the information you need
- Lack of Training – This can affect the accuracy of your data as well as how long it takes to do something. Many bookkeepers and accountants are not familiar with how QuickBooks wants to job cost, but they think they are. QuickBooks is user-friendly, but a very powerful program, so training can impact the quality and timeliness of getting work done. And learning a more efficient way to get the work done pays off by reducing overhead. This short video has some great shortcuts – including making reports a click away!
- Doing work-arounds – work-arounds are costly. So it’s worth finding out if it can be done in QuickBooks or if an add-on can streamline your workflow
- Expecting that QuickBooks can do it all – QuickBooks is an accounting software – not project management, or CRM or scheduling, or… so sometimes you need to look elsewhere for part of your solution
- Not asking for help – this can result in doing work the long hard way and even worse – costly mistakes
As you can see, these “little” mistakes may be behind many of your frustrations. But with just a few changes, you not only will get much better reporting, but with more ease, as well!
We offer evaluations of your existing setup and workflow with respect to your needs and capability of QuickBooks. We record these so you can review them again and again. If you are interested in seeing how you can get better results with QuickBooks, we’ll be happy to schedule an evaluation with you.
If you have any questions about QuickBooks or want to schedule an evaluation, please contact our office.