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Breaking Down Payroll by Job, Phase and Cost Code

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Breaking down payroll by job, phase, and cost code is something that I’m often asked about by the construction clients/customers that I work with.  Construction payroll is probably one of the more complex payrolls that anyone can encounter, see this question submitted by a reader.

Ask the Expert - Q & AI need payroll broken down by Job, then Phase (service item), then cost code. Is there a way to enter time in QuickBooks by three categories? Thanks, Susan


Hi Susan

Thanks for stopping by and submitting this awesome question!

Actually, I’m asked this question a lot and have been working on an entire training series (eBook and several videos) about different ways that contractors can set up QuickBooks to handle even the most complex payrolls like this – unfortunately it won’t be finished until later this fall.

Here is what I suggest, it’s going to take a little work on your part – and you should make a copy of your current QuickBooks data file to play around with my suggestion before you make any changes to your current working file.

My suggestion involves working with your QuickBooks Items list – which is where your Phases and Cost Codes ultimately “live”; the Items list can have both Items and Sub-Items which we’ll use for your Phase and your Cost Codes.  Each Phase should be set up as an Item and then the Cost Codes used within that Phase should be set up as Sub-Items – see the screenshot below:

Items by phase and cost code

Right click on the image to enlarge it

Use these same items when you create your Estimates in QuickBooks:

phase and cost codes on an estimate

Right click on the image to enlarge it

When you enter employee time in QuickBooks using the Weekly Timesheet, select the appropriate Job Name. Phase/Cost Code, Payroll Item and enter the number of hours worked each day:

phase and cost codes in the timesheet

Right click on the image to enlarge it

When you enter vendor bills for this job, use those same Phase/Cost Code items:

phase and cost code on vendor bill

Right click to enlarge the image

When you set up your Item List in this manner, and use the Phase/Cost Codes consistently, you’ll get very well organized Actual vs. Estimate reports from QuickBooks:

phase and cost codes in Actual vs. Estimate reports

Right click on the image to enlarge it

There are several other things that can be done to “tweak” this to further meet your needs, this is just one of them.   Please feel free to contact me to arrange a training/consultation appointment if you’d like.

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4 Responses to Breaking Down Payroll by Job, Phase and Cost Code

  • Hi Scott
    No there is no “technical” reason.

    The contractors that I have dealt with looked at a job as just that – all the work or phases as being part of the entire job – that’s how they bid it and that’s how they wanted to see their reports.

  • Is there a QuickBooks technical reason why it would be better to use Items and Sub-Items to track job phase costs instead of using a sub-job for each phase?

  • Hi Frank
    When the training materials are completed this fall, they will be available on my other website Learn to Use QuickBooks in your construction business . I am updating and migrating many of the higher end training materials to that location.

  • Excellent! Can’t wait for your training materials… 😛

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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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