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QuickBooks Tip – 12 Steps to Implement Job Costing

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It’s the start of construction season, is your job costing system in place?

tracking construction costsWhile the start of a busy construction season may not be the time to do a full-scale revamp of your current job costing system, it is certainly time to give it a thorough review for the upcoming season and perhaps make some modifications to your existing system within QuickBooks.  As you read through this article, take some notes and see what you can change now and what should wait until you are in “off season” before implementing.

  1. QuickBooks is a very flexible and versatile program.  The Customer Center List provides you with the ability to track your Customers (project owners, awarding authorities, or general contractors) that you perform work for.  For each Customer you can then track the various Jobs (projects) that you are working on for that specific customer.  For each Job that you are working on you can also track Sub-Jobs (your Change Orders or Extra Work orders) that are specific to the original job.

Each Job and Sub-Job should have its own Estimate; the Estimate that you create at the Job level should be for the Original Contract, whereas, the Estimate that you create at the Sub-Job level should only be for the items that are specific to the change order/extra work order.

ALL costs that are entered into QuickBooks should be posted or job costed to either the Job or to the Change Order/Extra Work order.

Variations:

Sometimes the contract owner wants the Change Order/Extra Work Order to be added or included with the original contract for billing purposes, in this case it is recommended that you still set up both the Job and Sub-Job records in QuickBooks for job-costing purposes and also add the Change Order/Extra Work Order (in whatever sort of detail required) to the BOTTOM of the Original Estimate for billing purposes.

NEVER, I repeat – NEVER simply open the original QuickBooks Estimate and simply change the dollar amounts of any line item to reflect the new amount after a change – this will NOT provide you with a good documentation system.

2.  Review your QuickBooks Chart of Accounts and make sure that you have suitable accounts listed there for Direct and Indirect Job Costs

3.   Review your QuickBooks Item List – it should be set up to match your industries cost code lists with all items being “Double-Sided” (having both a Purchase and a Sales price) and using “Group Items” as appropriate.

4.   Review your QuickBooks Payroll Item List – does it have different payroll wage items that reflect the type of work (work classification) that the employee performs work under on the jobsite?

5.   While we are on the subject of Payroll, you should be doing your payroll in-house or through the use of QuickBooks Assisted Payroll and entering employee hours using the weekly timesheet – mirroring the information that is sent from the field. 

6.   Make sure that you are accounting for your Equipment Costs on the job site and in your job costing reports.

7.   Track committed costs, material purchases, and subcontracts using customized QuickBooks Purchase Orders and the Cost Codes you create in your Items List.

8.   Create Estimates that reflect the Schedule of Values using the Cost Codes you create in your Items List and then use the Progress Invoicing feature to generate the base billing.

9.   Use our free Project Info Worksheet as a means of providing essential contract information to the appropriate people.

10. Document procedures.

11.  Get your employees involved; make sure that everyone is trained properly.

12. Monitor the work flow carefully and make adjustments as necessary.

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About Your Host:

Nancy Smyth, Certified QuickBooks ProAdvisor

Nancy Smyth, Sunburst Software Solutions, Inc.
QuickBooks Construction & Payroll Expert


I've been using and supporting QuickBooks products since the early 1990's. I've worked with thousands of contractors, assisting them with QuickBooks setup, Certified Payroll Reporting requirements, AIA Billing and Weighted-Average Overtime.


QuickBooks is a powerful product, but learning how to use it in your construction business can be difficult. I hope you find resources available here to be helpful.

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