Understanding Items Pt. 2 – Item Setup

Last time I wrote about Items, saying they were probably one of the most misunderstood features in QuickBooks and discussed what an Item was.   I then mentioned that a common mistake was to use the wrong Type of Item.  Today I’d like to discuss another common Item mistake – Item Setup.

When I’m working with new clients and hear their frustrations with QuickBooks and reporting, I frequently find that their Item setup is part of the problem.

When you initially set up an Item, the first one in the list is a Service and there’s a place for a description, account (usually income) etc.   This is what we call “single-sided”. However, if there is both an income and expense associated with a product or service, a “double-sided item” is the way to go. I once had a client who used one Item for the purchase and a different one when they sold. They had a very difficult time trying to assess profitability of the project! Had they used double-sided Items, Item profitability would have been much simpler. When in doubt, make the item double-sided.

While this is obvious for inventory and QuickBooks automatically turns on both sides, another area it’s frequently useful is in job/project costs. You purchase something for the job and mark it up on the invoice – could be subcontracted labor or materials (e.g. for a landscaper, remodeler, painter or other type of contractor).   Or, maybe you don’t mark it up, but you’d like to have more detail about your job costs.  When this is set up correctly, the estimated vs actual, job profitability detail and other reports can give you some very helpful information.

I admit, it seems like you have to read the fine print to turn this feature on.  The first key is to click on the box saying it is used in assemblies, performed by a subcontractor or purchased for a job (wording varies depending on whether it’s a service or non-inventory part). Then you see two sides – an expense (or Cost of Goods) side on the left and an income side on the right.  Some job cost reports pull directly from the Items list so when you don’t use an item with a cost side, you lose the detail and have to take extra steps to get the data you want.

1
2

A quick way to see if you need to make change an Item from single-sided to double-sided is to look at your Items List. You can customize the columns that you see and the order in which you see them simply by right-clicking in the Items List and selecting Customize Columns. You can decide which columns you see and in what order.  Since you will most likely need to fix the expense side, I recommend showing the COGS Account in addition to the Account (usually an Income account).

Screen Shot 2015-05-24 at 10.13.16 AM

You can then quickly review all your Items rather than having use the Edit mode to view each one.  If any need to be changed, simply double-click to edit or use the Add/Edit Multiple List feature where you can make changes to multiple items quickly.

So, this week, review your list to see if your Items are posting where you want on your Chart of Accounts.  Let us know if you have problems or questions.

This entry was posted in Features, Job Costing, QuickBooks and tagged , , , , , , . Bookmark the permalink.

2 Responses to Understanding Items Pt. 2 – Item Setup

  1. Monica says:

    I’ve been recently hired as a bookkeeper at a small design consulting firm with many projects going at the same time. My goal is to set up Items so we can run Job Profitability reports, however, we only enter payroll through a journal entry. We are using TSheets to track hours and syncing with QB. This leads me to two questions:
    1 – Should Items still be set up double sided if using the payroll Workaround method? If so, to which expense acct should these Items point?
    2 – We’re not (yet) using the Add Time/Costs feature to create invoices, so which Item should be used on an Invoice for a job that has time recorded to several different Items? If we use Service Item: Design, for example, on the invoice, the Job Profitability report with show income to Design but $0 income to all other Items to the same job. Is there a better way to set up Items for this scenario?

    Thank you for your help! I need to take extra care to make very few changes to the P+L and BS (owner preference). I’ve asked for help from other bookkeepers and accountants but, as your previous article mentioned, there’s very few people who really understand Items in QB.

  2. As you know, journal entries don’t use Items. There is a way to job cost labor when you outsource your labor, but not a quick way to explain.

    In answer to your questions:
    1- It depends. If you want to use the same item for invoicing, and you are using that same item in a timesheet and you are job costing labor – then yes to dobule-sided. Otherwise, doesn’t matter
    2 -No right answer. The item(s) you use on the invoice are what you want your client to see – how much/little detail is up to your. Doesn’t matter if it’s the same or different item if you’re not going to use the items in the Add Time/Costs

Leave a Reply

Your email address will not be published. Required fields are marked *