The main purpose of business people is to grow their business; small-sized businesses have to maintain good cash flow to know whether it is positive or negative. It will help them to predict profit or loss in their business. For business owners, it’s important to track expenses related to time, materials, labor, and overhead costs.
Nowadays, prediction or forecasting for your future projects is possible with a job costing in QuickBooks tool, which we will discuss in today’s blog. You will learn about job cost, its uses, and how it can be set up in your QuickBooks account.
Introduction to Job Costing in QuickBooks
Job costing is an accounting method that enables one to track the cost of a job and its revenue. It also helps to track a rise in profit due to jobs and expenses.
For instance, it is a project-based accounting in goods manufacturing and a construction job. All these expenses are evaluated by job costing.
How is the Job Cost Calculated?
Job cost is calculated based on these three components:-
- Calculate Direct Labor: It is the wages of workers.
- To Determine Overhead Rate: It is an indirect cost, like salary, machine repair, rent, and utilities.
- To calculate Direct Material: It is the cost of raw materials for products.
How do I Set Up Job Costing in QuickBooks?
By using Job costing, you can easily assess the difference between expenditure and revenue for a job. Some steps have to be followed to set up the job costing tool in QuickBooks.
Step 1: Preferences Configuration of QuickBooks
First, you need to maintain the proper configuration in Intuit QuickBooks. To accomplish this:
- Select Edit and click on Preferences.
- Choose Jobs and Estimates and click Company Preferences.
- Under the company preferences option, do appropriate modifications before initiating job creation.
- Verify Time and Expenses.
Step 2: QuickBooks Construction Job Costing or Job Types
First, you need to design the job type for QuickBooks Construction job costing before assigning it to your clients
- Select Lists and press Customer and Vendor Profile Lists, and then click Job Type List.
- Now hit the Job Type button and choose NEW.
- A new window will be shown with the message New Job type. Now fill in all job types.
- You can repeat the same process if you want to add multiple jobs and then create a subtype under the category by selecting New again.
Step 3: Setting up Jobs for Customers in QuickBooks
Set up job costing in QuickBooks Online by fitting the customer into QBO job costing.
- Click on the Client and choose the Add Job option to assign a job to a client.
- A window will pop up that includes your client’s details. Select the Job Info button and the type of job in the given field.
- Skip Recording Opening Balance and enter Tax Preparation.
- Click Job status to choose the status of the job.
- Now, enter the fields like start and end date, job description, and select the preferred job type that was set up previously. Continue by pressing the OK key.
Step 4: Generate Bills Throughout the Job
QuickBooks can set up estimates and dispatch progress bills.
- First, create the estimate and select the Create Invoice.
- A window will list 3 options:
- Create an invoice for the entire estimate.
- Generate an invoice for a percentage.
- Create invoices for selected items.
Step 5: Use Estimates and Progress Invoicing
Ensure that your company uses estimates and change orders efficiently and consistently. Use reports to identify training issues, such as missing change orders, and retrain your team whenever necessary.
Steps to Set Up Payroll for Job Costing in QuickBooks
You can set up a job costing by following the steps given below:
Set Up a Job For Each Customer
There are plenty of projects under the same client or one job for a customer, you should set up one job for that customer. Your income and expenses can be tracked. For that customer, you can also add another job.
Step 1: Change QuickBooks Preferences
Here are the steps:
- Go to the option Edit and click Preferences.
- Select the Accounting option and click Company Preferences.
- Ensure that the Use Class Tracking for transaction option is clicked.
- Click Payroll & Employees, then Company Preferences.
- Now, click and select Job Costing, Class, and Item Tracking for Paycheck Expenses.
- You can choose either the Entire Paycheck or the Earnings Item
- After selecting the option, click OK.
Step 2: Set Up Payroll Items to Track Payroll Expenses
To track your expenses by job, you have to create a new payroll item. It can be done in the following ways:-
- Go to the option Lists and then select the Payroll Item dropdown menu and select New.
- Now select Custom Setup and then click on Next.
- Go to Deduction, Addition, or Company Contribution and click Next.
- Now, enter the item name and click Track Expenses by Job.
- Click on Finish and Run Payroll.
Step 3: Run Reports of Job Costing in QuickBooks
To view taxes, deductions, payroll wages, and contributions by a job, you can run job reports. Follow these steps:
- First, go to Reports and then select Jobs, Time & Mileage.
- Now, click on the Job Profitability Summary.
Note: Job reports are important to know whether a job is profitable or not.
QuickBooks Premier Contractor Edition and Accountant Edition have a wide range of job costing. It can be done in the following steps:
- Click on the option Reports.
- Now go to Industry Specific and click Contractor Reports.
Track and Set up Job Costing in QuickBooks Desktop
You can track and set up job costing in QuickBooks by following these steps below.
Step 1: Set Up the Customer
You need to set up individual jobs even if you have one job for a particular customer. This will enable you to keep track of your income and expenses on a job-by-job basis and can simplify your accounts. It will be helpful to you if you add a new job for that customer in the future.
Step 2: Assign All Expenses to Jobs
To get a complete detail regarding job costing in QuickBooks, assign all expenses to jobs. Select the job for the customer.
- For Billable Time: Track the hours spent on the job by using a weekly timesheet or a single activity. Each log is automatically checked in the billable column on the form.
- For Job-related Purchases: To record the purchase, use a bill, checks, or a credit card. Enter all items that you purchase under the Item Tab.
- For Mileage: Record mileage in the Enter Vehicle Mileage window. The QuickBooks Mileage Tracker app is one of the best tools for tracking mileage.
For Overhead Expenses:
If you select to allocate overhead expenses to specific jobs, talk to your accountant before making any changes to the invoice.
Step 3: Enter Your Estimates in QuickBooks Desktop
- You can create your estimates inside and outside of QuickBooks, and if you want to maintain them in a spreadsheet or outside the program, record the summary estimates into Quickbooks.
- In the scenario, if you want to create an invoice inside QuickBooks and estimate it outside the QB, fill in your invoice details in the Create Estimates window and convert your estimate into invoices.
- Users can use some job costing in QuickBooks reports without recording estimates on the QB desktop.
Step 4: Creating an Invoice
Ensure that you choose the right Customer: Job while generating the invoice.
If you create an invoice outside the QuickBooks Desktop, confirm to enter at least a summary of each invoice into the program that consists of the revenue in the job Profitability reports.
Step 5: Run Reports of Job Costing in QuickBooks to See Business Growth
Job Reports will help you identify which job is profitable, which helps in making estimates and identifying problems before losing it.
- Go to the Reports section from the menu.
- Click Jobs, Time, and Mileage
QuickBooks Premier Contractor Edition and Accountant Edition provide a huge range of Job costing in QuickBooks reports. You can find them by following the steps:
- Select the reports, Menu
- Click on the Industry Specific and press the Contractor Reports
In Which Edition of Job Cost QuickBooks Online is Available?
There are some plans for QuickBooks Online for tracking job costing as well as to get profit from the project. Here are some plans for QB to access the job costing tool:
- QuickBooks Online Plus
- QuickBooks Online Advanced
Benefits of Job Cost Accounting in QuickBooks
Here are some of the Pros of job costing in QuickBooks:
- Improved Profitability: Small businesses are able to identify projects that it is profitable or not by monitoring labor, materials. Job costing in small businesses improves profitability, helps to improve financial results.
- Accurate Financial Reporting: Job costing in QuickBooks assures accurate and comprehensive financial reporting. It makes it easy to track cash flow, profitability, and tax obligations. This is particularly useful at tax time or for securing business loans, as it gives clarity and transparency to your financial records.
- Enhanced Client Communication: Job costing enables small enterprises to present customers with detailed bills, itemizing costs by materials, labor, and overhead. Such openness builds trust, minimizes the danger of charge disputes, and strengthens customer relationships.
- Better Cash Flow Management: By keeping track of job expenses with precision, small firms can more accurately forecast cash requirements and prevent shortages of cash. Being aware of when payments on finished jobs and ongoing expenses are due guarantees easier financial planning and fewer surprises.
- Efficient Project Tracking: Job costing within QuickBooks ensures that companies account for all of the costs per job, from labor to materials and overhead. This amount of organization gives better insight into the project timelines so that companies are able to fulfill deadlines and meet to client’s expectations more efficiently.
- Scalability: As your business expands, being able to scale through job costing procedures will be easy. QuickBooks offers the capabilities to handle added volumes of projects and more intricate cost structures without giving up visibility into profitability or efficiency.
- Improved Budget Control: Job costing enables small companies to create and monitor budgets for specific projects. By checking actual costs, companies can calculate whether a project is overspending, allowing them to correct spending and ensure financial control.
- Informed Decision-Making: With real-time job cost information, business owners can make informed decisions. For example, if a particular kind of project has higher labor costs, the pricing model or resource allocation can be adjusted and enhance efficiency and profitability.
Conclusion
As a business person, you can estimate your profitability using the Job costing in QuickBooks desktop and online tools. There are some editions of QB in which this feature is available. We hope this blog will provide information on the use of job cost QuickBooks and how it can be set up in QuickBooks to increase the efficiency of your business.
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