3 QuickBooks Invoicing Problems Construction Companies Commonly Run Into
Watch the video to learn about 3 QuickBooks invoicing problems that construction companies tend to run into trouble with:
1. Billing for Unincurred Charges
2. Credited Expenses on a Bank Statement
3. Deleting Billable Items from an Invoice
Billing Clients for Charges That Were Not Actually Incurred
I assume that the reader has some experience with QuickBooks for construction job accounting and is aware that when entering a bill, you input the following information: the vendor; amount; account; cost code; and customer, and it shows up as billable.
There are some situations though where you might want to bill a client for something that you’re not paying for and therefore is not recorded in QuickBooks as a billable item. An example of this could be a piece of equipment that you own and that’s on the client’s land, an excavator, for example, that you would like to bill the client for the use of. In this situation, you set up the billing in QuickBooks by creating a new customer which you can call, “Equipment Use.”
Let’s say that you want to bill the client $300 for the use of this piece of equipment. You create a check, or a journal entry of some sort, where you put in the correct cost code and amount and bill it so that it shows up as billable on the invoice. You have to be careful though not to mess up the bank reconciliation when you bill the client. To avoid that, you need to keep the amount received by “Equipment Use” at zero so that it doesn’t affect the cash balance. To keep everything reconciled, you need to have a negative amount for the same amount that you’re billing out in order to zero everything out. You use the same cost code and other info and put it under “Equipment Use.” Obviously you’re not going to send out an invoice to “Equipment Use” so it’s not going to affect any invoices and this way when you select an invoice for this particular job, the amount will show up but not mess up the bank reconciliation. As an added bonus, you can go back to your Profit and Loss by job and take a look to see how much you’ve earned from the use of your equipment.
On a general ledger, you always want to show payroll wages and payroll taxes that match up to your 941s your W2s and so forth. We can’t put the payroll directly toward specific jobs because if you expense a certain job, that means you’re not expensing the payroll account. So you want to first select the payroll account and put it through that, and then create another job called “Payroll Job Cost” and then follow more or less the same steps as we did for billing unincurred charges.
For example, let’s say you paid John Doe $1,000 with $250 in payroll taxes. You want to bill out that $1250, but you want your general ledger to show payroll wages of $1,000 and payroll taxes of $250. So you first put those amounts directly in payroll costs, and then create a check, or a journal entry, and label it whatever prefer as the cost code, “General Labor” for example, and then put that amount in that job and do a negative one for payroll job costs. It’s a very similar procedure to billing for unincurred charges.
Credited Expenses on a Bank Statement
Another thing I go over in the video concerns credited expenses on a bank statement. For example, if you purchased something but then got a refund because you realized you didn’t need it, you’re going to see a positive amount under the deposits that’s not income or equity, it’s just a negative expense. What a lot of people do in this situation is go to Make Deposits and record it as received from whoever and put it in whatever account. If you do it that way, it will show up correctly on the general ledger as a negative expense in Direct Costs, but it won’t show up on the sub-ledgers, the job cost ledgers. You want to be able to see all of the returns and refunds for particular jobs in the Job Estimate vs. Actual reports, but if you merely record them as dummy payments in Make Deposits, they won’t show up on those reports.
In order to fix it, you delete the deposit and instead go to a credit card charge, or check, and put in zero. Under the correct Item code, enter the amount–it’s a negative credit card charge which means it’s a deposit. You put in the deposits that are refunds as negative credit card charges because a regular credit card charge would of course debit the account rather than crediting it.
If it was coming out of the bank account, you would just go to Bank Account and you would put in a positive amount, but don’t put it under that customer, just put it under “overhead.” That way the credit card reconciliation doesn’t get messed up. It zeroes out because your Bank Account increases by the amount of the refund while your expense decreases by the same amount. When it is saved, you will be able to see the refund in the individual Job Estimate vs. Actual report.
The reason this problem crops up is that QuickBooks uses items as cost codes, not expenses. When you’re doing the deposit, it doesn’t allow you to choose an item, just an expense. That’s why it doesn’t show up on the Job Estimate vs. Actual report and why you have to do as described above in order to reconcile the bank account, not mess up the credit card and correctly show the refund in the job cost reports.
Deleting Billable Items from Invoice
The final thing I show you in the video is related to creating invoices. It’s pretty basic, but many people seem to have problems with it.
When you want to invoice a client you usually add all your expenses to the invoice and maybe add on a builder’s fee as well. Sometimes though, there may be an item on the invoice that should not be billed out, or you may want to bill it out at a future date. Where you can get into trouble here is if you decide to delete an item after the invoice has already been saved once. If you have saved the invoice and then decide you want to delete an item, it will be deleted from the invoice, but because you originally saved the invoice with the item on it, it will be marked as having been billed in QuickBooks’ billing records for that customer. Therefore, you have to make sure to go back to the original transaction where it will be shown as having been billed to the customer and click on the box that shows the icon indicating, “billed” to change it to a check mark instead which indicates, “billable,” in order to keep the billing history correct.
The 3 common QuickBooks invoicing problems above are ones that I often see people having trouble with when they are using QuickBooks Desktop. I hope this short tutorial will be of help to you in case you ever run into any of them. As always, don’t hesitate to contact me if you have an questions.