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, material, 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 About Job Costing
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.
What Are The Steps to 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.
Set up Job Costing in Quickbooks Online
There are many QuickBooks with job costing steps available. Follow the steps one by one:
Step1. Preferences Configuration of Quickbooks
First, you need to maintain the proper configuration in Intuit Quickbooks, To accomplish this:
- Select the 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. Construction Job costing in QuickBooks or job types
First, you need to design the job type 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 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 the New again.
Step 3. Setting up Jobs for Customers in Quickbooks
Set up job costing in Quickbooks online by fitting the customer in QBO job costing.
- Click on the Client and choose the Add Job for assigning a job to a client.
- A window will pop up that includes your client’s details. Select the Job info button and 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, and job description, and select the preferred job type that was set up previously. Continue by pressing the OK tab.
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 which are given below:
Method 1. 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. It can be done by changing 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 “Entire Paycheck” or “Earnings Item”
- After selecting the option, click “OK”.
Step 2. Set Up Payroll Items to Track Payroll Expenses
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
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 in 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, and credit card. Enter all items that you purchase under the Item Tab.
- For Mileage: Record mileage in the Enter Vehicle Mileage window. 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 on the invoice.
Step 3. Enter Your Estimates in Quickbooks Desktop
- You can create your estimates inside and outside of the 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 them outside the QB, fill 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 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 from the menu section.
- 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:
- It helps to maintain profit margin goals.
- Easy to track and manage employee time.
- It enhances the revenue of the business in the form of profitability.
- Unexpected costs can be avoided.
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 QB to increase the efficiency of your business.
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