Payroll Setup Tips for Better Job Costing

If you are a contractor, landscaper, engineering firm or some other company who job costs and run payroll in QuickBooks, then you most likely want to see your labor job costed as well as materials, subcontractors, equipment and so on. There are a few changes I recommend in QuickBooks payroll instead the default settings.

First is making sure that your labor costs show in your Cost of Goods section. Afterall, labor is a very important job cost!   The default in QuickBooks is in your regular expenses, so you need to pay attention.  It’s up to you whether or not you want to track the labor burden (e.g. employer taxes) as a separate account in your Chart of Accounts.

payroll template

Many get that far.  The one that’s missed the most often are the payroll taxes.  Social Security, Medicare, state and federal unemployment default to expenses too, yet that’s part of the cost of having an employee working on a job. S0, I believe it’s important to have both wage and labor burden in your Cost of Goods. However, you can’t have separate payroll tax items, which would make it easy to split.  So, I recommend you have the payroll taxes post to your Cost of Goods account(s) and then do a journal entry to move the office/admin portions out of the Cost of Good and down in your Expenses; I’m assuming office/admin personnel are fewer in number than employees working on jobs.  Before you panic and wonder how to find the numbers, the Payroll Summary report is a great place to find these. Notice the payroll tax information is already there for you.
payroll template

I would customize the above report.  A few changes I would make– 

  1. Uncheck Hours and Rate on the Display tabpayroll template
  2. On the Filters Tab, instead of All Employees, choose Multiple names – you can then select your office/admin staffpayroll template
  3. Still on the Filters tab, scroll down to payroll item.
    1. Again, click on Multiple and select the payroll taxes paid by the employer and any other benefits (e.g. health insurance) or employer-paid labor “burden”payroll template
  4. Once you’re done customizing, click okay for your report.  I will admit in this sample file I might not include the designer & landscaper, but I wanted you to see how you’ll have just the information you need to make your journal entry. payroll template

So you don’t have to keep customizing this report, I would recommend memorizing it.  When possible, I recommend using the date selections from the drop-down menu (e.g. this month, last month, this week, last week, etc.) so that when you memorize your report (which you will want to do), it will roll forward with you.

  1. The next step is to move the labor burden for the office and admin from Cost of Goods to expenses. 
    1. Click on Company>Make Journal Entriespayroll template
    2. Credit your Cost of Goods account and debit your payroll expense account
    3. It’s up to you whether you want to list this for each office/admin employee (using the Name field); personally, I wouldn’t – especially if you have several office/admin.  You could just attach the report to this entry if you want a detailed record

How often you do this is up to you – whether it’s after each pay period or if you just do it on a monthly basis; depends on the reports you run and what you want to see.

Once you make this change, I think you’ll see more meaningful numbers when reviewing your job costs.

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