NEW for QuickBooks Online: Labor Costing for Projects!
Many clients struggle to know if they are making money on their projects at any given moment; they want to make sure they are charging the right amount and determine whether a project is profitable.
QuickBooks® Online Plus added the projects feature last year to organize all the transactions related to a project in one place. Projects can be created under a customer or a sub-customer, and allows a user to assign any expense transactions to that project; it is often referred to as “job costing.”
Hector will present “QuickBooks Online Labor Job Costing for Projects” on April 18, 2019, at 1 pm ET. Register Today!
Before this latest release, you could do job costing for all transactions except payroll. Now, QuickBooks Online Plus and Advanced will calculate project profitability, including payroll costs. There are two modes to this new feature.
First mode: When QuickBooks Payroll is enabled, both the wages and employer taxes will be allocated to the projects that were used in the timesheets.
The payroll expenses will only be allocated if the weekly timesheets (or single time activity) are used by tagging time to a project and specifying the pay type prior to creating a paycheck. The total time should be automatically populated when running payroll. QuickBooks recommends tracking time within weekly timesheets or TSheets by QuickBooks before you run payroll. If you edit time within the run payroll experience, project labor reporting will not work.
Once payroll is created, you can go into the projects page and immediately see the costs of the projects which include payroll costs:
And when you click in any of the active projects in the projects summary page, you will now see the Projects Detail screen:
You will see all the costs associated with the projects broken down into two categories: Cost of Goods Sold and Expenses, and by account; including Payroll Expenses. If you click on the Payroll Expenses line, you will see a report that shows all the burdened Payroll Expenses:
In addition, if you run a Profit and Loss Report by Customer, you will also see the allocated payroll expenses by Project:
And, finally, you can go to the Time Activity tab to view a drill-down of hours worked for the project by Employee or Service Item:
Second Mode: If QuickBooks Payroll is not enabled (for example, when using a third-party payroll processor), QuickBooks can estimate labor costs based on the time entered on the timesheets multiplied by a manually calculated burdened rate. In the Projects tab, you will see a new button that says “Hourly Cost Rate”:
And Inside the Hourly Cost Rate screen, you can enter the gross wages and additional items to calculate the burdened rate, such as: Employer Taxes, Worker’s Compensation and Additional Overhead:
You will notice that inside the timesheets, the cost is estimated in real time:
And the total labor costs for the Projects will be shows in the Project Details screen:
The only downside to using Project Labor Costing without QuickBooks Payroll is that none of the financial statements will display labor costs, as these are driven by time sheets (and these are non-posting transactions) so all the labor cost information and job profitability that included labor costs will live within the Projects module. A new report called “Project Profitability (without time costs)” will be displayed in the Project reports tab:
Companies can now use Projects instead of sub-customers and classes to track their projects.
This is a very significant enhancement in the QuickBooks Online world, and many companies in the Construction, Contracting and Project-based activities will immediately benefit from this. Check out this video: