How to Do Job Costing in QuickBooks When You Outsource Payroll

Eric GreenspanGuest Contribution3 Comments

This guest post is brought to you by Alicia Katz Pollock of Royalwise Solutions, Inc.

QuickBooks has a powerful Job Costing feature that allows you to compare the income you made from a job to the expenses you incurred to provide the product or service. It allows to you see if a project was profitable or not.

If you’re a contractor or other professional who really wants to know if you’re making any money on the jobs you do, Job Costing is essential, especially if your job expenses include payroll. Sometimes you may feel like you made a bunch of money, but not realize that your labor costs were so high that you barely made a profit!

If you’re using Intuit Payroll through QuickBooks, and using Timesheets to track Employee Hours, applying those hours to a Customer: Job is automatic, and Job Costing reports show your profit margin.

But, if you’re like most small businesses, you use an outside payroll service such as ADP, your accountant process your payroll, or you just write checks yourself. In these scenarios, your payroll expenses don’t show up on your Profit & Loss report, even if you assign them to Customer:Jobs. You have to use a workaround!

Job Costing in QuickBooks Workaround

Create Two New Accounts in Your Chart of Accounts

  1. Payroll Service Clearing, a Bank account
  2. Payroll Job Costs, an Expense account

Create Items for your Estimates and Invoices

  1. It must be a 2-sided service item (check the box that says the work is purchased or performed by a subcontractor)
  2. In the Purchases section:
    1. Cost – enter full payroll cost, including wages, taxes & benefits
    2. Account – use Payroll Job Costs

Set Up Your Employees

Now, let’s look at your staff. Each person should be created either as a Vendor or an Other Name, instead of an Employee. If you already have them in as employees, make a new Other Name, with a slight variation (no two names can be exactly the same). You’ll use this new account moving into the future.

Track Employee Hours

To track the hours, use the Timesheet for each of the new Vendors/Other Names, with each entry applied to a Customer:Job. Don’t check Billable unless you’re passing on costs for the customer to pay.

Write a Check

Once the hours are in, write a check. It will have a $0 dollar amount. The purpose is simply to move the cost from an Expense to a trackable cost.

  1. Use Payroll Service Clearing as the Bank at the very top.
  2. Enter Employee’s Vender/Other name.
  3. It will ask if you want to add items; say yes. They will appear on the Items tab at the bottom.
  4. Switch to the Expenses tab.
  5. Enter the Account Payroll Job Costs.
  6. Enter a negative dollar amount to zero out cost from Items tab.

That’s it!

 

About Alicia Katz Pollock

Over 30 years ago, when she was 13, Alicia Katz Pollock received her first computer, an Apple IIc. She immediately designed a database for her father’s dental practice to automatically send postcards to his patients every 6 months to come in for a checkup and cleaning. Her passion for computers grew as she did.

A natural teacher, Alicia earned her Master of Arts in Teaching, but instead of turning to the public schools, she developed computer curricula.

As one half of the husband and wife team at Royalwise Solutions, Inc., Alicia blends the skills of technology, the art of communication, the patience of a trainer, the wisdom of a business consultant, and the detailed eye of an obsessive-compulsive to bring you the finest in business solutions.

She has authored several courses for Lynda.com in Microsoft Office applications for both PCs and Macs. Watch her online courses in Microsoft Access, Microsoft PowerPoint, and MS Outlook for Mac.

Visit her YouTube channel for short videos of some of the techniques found in the Tips & Tricks category of our blog.

Connect with Alicia on LinkedIn.

Certifications

  • QuickBooks Certified User
  • Intuit ProAdvisor
  • Microsoft Certified Trainer
  • Apple Consultants Network
  • Apple Certified Support Professional, 10.5
  • Apple Certified Support Professional, 10.7
  • Microsoft Certified Application Specialist in Word, Excel, Access, PowerPoint, and Outlook
  • Microsoft Office Specialist, Master Level

About Royalwise Solutions, Inc.

Founded by Jamie Pollock and Alicia Katz Pollock, Royalwise Solutions is an Apple certified and Microsoft certified computer training and support company. Our focus is on all things Apple, but we are also certified to train and support Microsoft Office and Intuit’s QuickBooks on any platform.

As a member of the Apple Consultants Network, we are certified by Apple to support all desktop machines running OSX and mobile devices running iOS. We have vast experience with iPads and iPhones and how to configure and utilize iCloud to sync your data seamlessly.

Our goal is always to teach you enough that you will be able to do it yourself next time. And if you do not want to learn how, we are here to do it for you.

Visit our website.

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3 Comments on “How to Do Job Costing in QuickBooks When You Outsource Payroll”

  1. We’re attempting to job cost labor in QB Desktop (Enterprise 2018); all of our employees are already setup as “Employees” in QB, which syncs to TSheets; but I cannot write a $0 check using time data; can we do the same task, a $0 check using Employees? Or, if that have to be setup as “Other Names” can this be done easily and not ruin my sync?

  2. Hi Daniel,
    Normally, we ask that you use the ANSWERS Forums or ABBO for these types of questions. I will send this question to Alicia of Royalwise who I’m quite certain can help you. If not, she will find someone that can.

  3. Hi Daniel, This article is intended for people who are not using Timecards or any method in QB for tracking time assigned to customers. If you’re using T-Sheets and assigning customers to the hours, you may already have your Job Costing taken care of. Are you sure the costs don’t already show up on your P&L?

    You do have to make sure that the Customers field is turned on in T-Sheets.

    If you do go this route, by setting up the Employees as “Other Names” instead of Employees, you can keep them out of T-Sheets and not mess up your sync. You can even manually exclude them in the T-Sheets interface.

    Note that this is just one possible option. There are also several methods of creating Journal Entries for Job Costing.

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