An “audit trail” for Accounts Receivable in QuickBooks is only one of the many complexities faced by government construction contractors. Running any sort of construction business can be difficult – but the amount of paperwork, the level of detail, and the additional requirements for a government contractor can cause 2 and sometimes 3 times the amount for a bookkeeper. Below is a question submitted by a reader named Shirley.
We are a Construction Company and do government contracting. Is it possible to use the Accounts Receivable Summary to track each Project and the invoices when received and when paid. It has been several years since I have used QuickBooks and have never used the Construction Version. We have QuickBooks 2011 Premier Construction.
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First, let me say that the Contractor version doesn’t work any differently than the Pro – it just has some built-in construction specific reports and other features that aren’t available in other versions. So your learning curve shouldn’t be difficult at all! That’s the good news 
As for using the Accounts Receivable Summary Report as an audit trail, personally I don’t think I would use that because it wouldn’t give me the detail that I would want – OR – that I “think” you are looking for. The A/R Summary report only shows you how much {total} money is overdue in 30, 60, and 90 day increments. This information may meet your needs if you just need to know how much money is how many days overdue by job.
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My own personal preference, would be to know which invoices were how many days past due; therefore, I would rather run the Accounts Receivable Aging Detail to determine exactly which invoices where outstanding.
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Both of these reports would provide me with information about just a specific job – each could be modified and filtered for a specific job or jobs.
Another very good report, especially if you are concerned about a specific job, is the Customer Open Balance Report {available from the actual QuickBooks job record and choosing Open Balance}.
Another alternative to obtain this information easily, without running and printing reports – would be to customize how job record information is displayed in QuickBook, that way anyone who has access to this type of information can easily see it without having to run, print, and then distribute reports. Remember, it’s all about efficiency and streamlining the workload/work flow. Customizing how information is displayed in the job record let’s you quickly see how much total money is outstanding for a specific job, when invoices were created {dated}, the date you anticipate receiving the money, how many days outstanding the money is, what the invoice was issued for and the open balance.
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For tracking Vendor costs you could run a Job Cost by Job and Vendor Detail, click the Modify Report button and customize it like the screenshot below:
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QuickBooks can do many things, including provide you with an “audit trail” for Accounts Receivable and Accounts Payable. You just have to get in there an poke around and see what works for you.
While the information provided about may not answer the original question to the 100% satisfaction of the person asking it, based on the information provided it should at least provide you with things to look at and modify to best meet your needs.
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A QuickBooks for contractors tip about receiving and applying joint checks from a general contractor to pay a lower tier subcontractor or material supplier for work completed or materials on a construction project.
Quite frequently, in the construction industry, a contractor will receive a joint check from a General Contractor to pay their lower tier subcontractors or material suppliers for work completed and/or materials delivered to the construction project’s job site.
Unlike many high-end construction accounting packages, QuickBooks doesn’t have a way to handle this automatically — or easily.
This QuickBooks for contractors tip provides what we consider to be a best practice when a situation like this arises.
Problem:
Your company, Sam Subcontracting, received a $10,000.00 joint check from Joe’s General Contracting; which is made out to both your company AND O’Fallen Gravel {your Vendor/Material Supplier} who delivered sand, gravel, and crushed rock to a jobsite. The $10,000.00 was included in your most recent invoice totaling $45,000.00 that you sent to Joe’s General Contracting AND you have a $10,000.00 invoice from O’Fallen Gravel in Accounts Payable. Amy, your bookkeeper, isn’t sure how to correctly receive this payment against your own Accounts Receivable AND correctly apply this payment to your Accounts Payable.
Solution:
When Amy is ready to receive the payment against the invoice issued to Joe’s General Contracting AND record the payment to O’Fallen Gravel, she should do the following:
- Verify that she has a special “Clearing” Account in her QuickBooks Chart of Accounts that is a “Bank” type – if one does not exist she should create it by going to the Lists menu -> Chart of Accounts -> Account -> New -> Type = Bank -> Continue -> Account Name = Clearing -> Save & Close.
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- Click the Receive Payment icon on the QuickBooks Home Page – OR – from the Customers menu -> choose Receive Payments. Received From = Joe’s General Contracting -> Amount = $10,000.00 -> Date = Current Date -> Pmt. Method = Check -> Check # = Check Number -> Memo = Joint Check issued to O’Fallen Gravel -> Deposit to = CLEARING ACCOUNT. Click Save & Close.
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- The balance in the Clearing Account should now be $10,000.00.
- Click the Pay Bills icon on the QuickBooks Home Page – OR – from the Vendors menu -> choose Pay Bills. Choose the O’Fallen Gravel bill -> Method = Check -> Select Assign check number -> Account = CLEARING ACCOUNT.
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- Click Pay Selected Bills.
- In the Assign Check Numbers window – enter the number of the check that you received from Joe’s General Contracting.
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- Click OK
- The balance in the Clearing Account should be 0.
Make sure that you also have the proper Lien Waive and Release forms.
We hope you found this QuickBooks tip to be useful — if so please take a moment to leave a comment, share it on your favorite social media site or click the +1 button below.
Top 10 Tuesday features our favorite QuickBooks, social media, construction and business tips from around the web.
It’s tough to choose just 10 and even tougher to read everything that is of interest – if I did ……. well I wouldn’t ever get anything else done!
This week’s Top 10 include:
Carrie Kahn
Darren Slaughter
Intuit Small Business Blog
Top Notch Bookkeeping
A Bookkeeper’s Corner
ProBlogger
BNET
QuickBooks and Beyond
These were our favorites, what were yours?
There are two possible ways to track retainage (retention) that you owe to your subcontractors; one method utilizes a Sub-Account of Accounts Payable, called Retainage Payable, and the other method utilizes an Other Liability Account, called Retainage Due to Subcontractors. Please review the setup and use of both methods, and choose whichever one seems more appropriate for your use.
You will need to inform your accountant of this at year end, so he or she, may make the necessary Journal Entries.
Method 1: Retainage as an Accounts Payable Sub-Account
Accountants tend to really like this method, but, it is a two-part process for the person actually doing the billing, which means that it’s error prone, simply due to normal day-to-day distractions.
From the Lists menu, choose Chart of Accounts
- From the Chart of Accounts window, click the Accounts button (lower left), and choose New
- Choose Accounts Payable as the Account type
- Enter an Account Number
- In the Name Box, enter Retainage/Retention Payable
- Click on the Subaccount of box, and choose Accounts Payable
- In the Description box, enter Retainage/Retention Payable on Contracts
- Click OK
Deducting Retainage/Retention Payable on a Vendor/Subcontractor Bill
If you have created a Purchase Order for this subcontractor and are now receiving his first progress billing, choose Vendors, and Receive Items with Bill, and if you have not created a Purchase Order, simply choose Enter Bill.
Select the Subcontractor from the drop down list; change the date, enter a Reference Number, the total amount of the bill, select terms, due date, and enter a memo if applicable – select either the Expenses or Item tab, and pull in the appropriate Item Code or Expense account associated with the vendor bill, and select the Customer: job. In the next blank line, again, pull in either the Item Code or Expense Account, enter the retention as a negative amount, in the memo field type in less retainage held, choose the Customer: job from the dropdown list.
Sample 1 below shows a sample bill created from a Purchase Order using the Item tab:
Sample 2 below shows a sample bill created using Enter Bills and the Expenses tab:
Recording Retainage Payable
Select Enter Bills; change A/P Account from Accounts Payable to Retainage/Retention Payable. Select your subcontractor; enter date of original subcontractor invoice, in the Ref. No., input the invoice number followed by, –R to indicate Retainage/Retention, enter amount due, change your terms to reflect when you will pay the retainage, select either the Item Code or the Expense account, and select the job.
Sample 1 shows a bill for retainage entered using the Items tab:
Sample 2 shows a bill for retainage entered using the Expenses tab:
Method 2: Retainage Payable as an Other Liability Account
This is a simple one-step process for the person actually doing the billing, and at the end of the year, the accountant will need to do a Journal entry to move the dollars for tax return purposes.
From the Lists menu, choose Chart of Accounts
- From the Chart of Accounts window, click the Accounts button (lower left), and choose New
- Choose Other Liability as the Account type
- Enter an Account Number
- In the Name Box, enter Subcontractor Retainage/Retention Payable
- In the Description box, enter Retainage Payable on Contracts
- Click OK
Setting up Items to Deduct Retainage Payable
- From the Lists menu, choose Item List
- From within the items List window, click the Item button (lower left), choose New
- In Type box, select Other Charge
- In the Item Name/Number box, type in 92 Less Sub Ret
- In the Description box, type in Less Subcontractor Retainage/Retention
- In the rate box, leave the amount set to 0 (you cannot use percentages in the detail of the bill) in the
- Account box, select the account used for Retainage Payable on Contracts
- Click OK to create the new item
NOTE: If you have different flat rates of retainage (retention) that you use, a separate item can be created for each of them using the rate in the Item Name|Number.
Deducting Retainage Payable on a Vendor/Subcontractor Bill
If you have created a Purchase Order for this subcontractor and are now receiving his first progress billing, choose Vendors and Receive Items with Bill, and if you have not created a Purchase Order, simply choose Enter Bill.
Select the Subcontractor from the drop down list; change the date, enter a Reference Number, the total amount of the bill, select terms, due date, and enter a memo if applicable – select either the Expenses or Item tab, and pull in the appropriate Item Code or Expense account associated with the vendor bill, and select the Customer: job.
Sample 1 shows a deduction for retainage using the Items tab:
Sample 2 shows a deduction for retainage using the Expenses tab:
While this is a much more simple process than Method 1, it will not reduce total expenses or Cost of Goods Sold, on a Profit and Loss Report. You will need to inform your accountant of this at year end, so he or she, may make the necessary Journal entries.
Recommendations:
Create a copy of your actual QuickBooks company data file and experiment with each of these methods to determine which is the right method for your company –and discuss this with your accountant so that they are aware of what you are doing!
Did you find this article helpful? If so please take the time to leave a comment – or share it with your friends.
Small businesses are particularly vulnerable to theft simply because they don’t have the resources or security controls in place to stop them.
Employee theft is extremely common; unfortunately, we hear about it or read about it in the newspapers all of the time.
While it is fair to say, most people don’t steal, embezzlement does happen; so it only makes good business sense for you to consider what you can do to minimize your employees’ opportunities to steal.
Below are some general internal procedures that many business owners who use QuickBooks can implement quite easily.
Who should be the QuickBooks Administrator? As the business owner, you should create the QuickBooks Admin account and password and be the Administrator for your own QuickBooks company data file. All too often we have seen or heard from many business owners that their CPA or QuickBooks ProAdvisor is the Administrator of their QuickBooks file and that they don’t even know what the Admin password to their own data file is; quite frankly we do not agree with this practice. Your books are YOUR books, just like your business is your business. You should not give that kind of control to anyone.
We have heard of instances where the business owner and the CPA/ProAdvisor has had a “falling out” and the business owner cannot perform even the simplest of Administrator functions because they do not know the Administrator password and the former CPA/ProAdvisor will not tell them what that password is. This results in the business owner having to pay for password retrieval.
Set Up the External Accountant User. QuickBooks 2009 and newer has the ability to create an External Accountant User. Create two different External Accountant Users, one that is actually for your accountant and one that is for you. Learn how to use the Client Data Review tool to monitor what is going on in your QuickBooks file when you aren’t there to see.
Who should know the Administrator password? Your CPA/ProAdvisor or in-house bookkeeper should know what the Administrator password is; otherwise you could be pulled off the jobsite to perform menial tasks.
The Administrator Account should NOT be used when entering daily transactions. The Administrator account is a special purpose user account and should be treated as such.
Each QuickBooks user should have their own QuickBooks user login account. As the QuickBooks Administrator you should create a user account for each person who will have access to your company data file, this includes a user account for yourself which you will use when entering transactions. When you create user accounts you are the one who controls who can access what information.
A word of caution for Enterprise users, the permission setting in the Enterprise version are much tighter than in Pro or Premier and you do need to be careful when setting up user permissions or you can effectively prevent an employee from performing the tasks that you do want them to be responsible for.
When should the Administrator Account be used? We recommend that you use the Administrator login account when reconciling the monthly checking and credit card accounts; and then on an “as needed” basis, as there are times when it is required that you, your CPA, or bookkeeper must be logged into QuickBooks in single-user mode as the QuickBooks administrator – such as changing companywide preferences in QuickBooks or granting permission for a third-party application to access your QuickBooks company data file.
Set closing dates and use the Closing Date Exception Report. On a monthly or quarterly basis, after you have reconciled the bank and credit card statements or after the quarterly payroll tax reports have been completed; set a closing date with a password; closing dates are found from the Edit menu -> Preferences -> Accounting -> Company Preferences tab. This will prevent accidental or unauthorized changes to previously reconciled transactions, because only those people who know the password will be allowed to make changes, and get them into the habit of using the memo field to indicate why a cleared transaction was changed. You can then run a Closing Date Exception Report, found from the Reports menu -> Accountant & Taxes -> Closing Date Exception Report.
Monitor Accounts Receivable Reports. Implement a procedure that by a specified time on Friday that you receive an Open Invoice Report, found from the Reports menu -> Customers & Receivables -> Open Invoices. You should review this report and then leave it for your mailroom clerk for Monday morning, so that she can make notes of payments received during the week and return it to you after mail time on Friday. You can then compare the previous week’s report to the current weeks report for any discrepancies. For example, the mail clerk indicates that payment for Invoice number 1001 was received on Tuesday, but the current Open Invoice Report shows that it is still outstanding.
Monitor your Accounts Payable Reports. Don’t leave it up to someone else to decide which bills get paid and which ones will be delayed….you could be in for an unpleasant surprise!
How often does your company pay its bills – weekly, bi-weekly, monthly? Implement a procedure in which you receive an Unpaid Bills Detail Report, found from the Reports menu -> Vendors & Payables -> Unpaid Bills Detail by a specified time on a certain day of the week with the current bank balance indicated.
Review the report and YOU decide who gets paid and who doesn’t; maybe even make a few phone calls if cash flow is tight. The day before it’s time to pay the bills, ask for the current bank balance and make any necessary adjustments. Leave this marked up report for your Accounts Payable clerk for the morning that they are to cut the checks. Keep in mind that taking advantage of early payment discounts could help pay for other upcoming bills.
Third Party Tools – Check out AuditMyBooks, a QuickBooks 3rd party tool, which double-checks your accounting records for problems.
The suggestions contained in this article are not designed to turn you, the business owner, into an untrusting boss but rather are suggestions to help you maintain control of your business and its financial affairs.
