Keeping track of bookkeeping/accounting tasks and the information that is required when you hire a new employee can be pretty overwhelming for a business owner or bookkeeper. In the normal rush of day-to-day activities; sometimes important items can get overlooked and come back to bite you later.
Welcome to Tuesday Training!
Tuesday Training is a new feature here on the QuickBooks for Contractors blog. While everyday focuses on training of one sort or another, Tuesday’s are dedicated to more in-depth training.
We’ll teach you the things you need to know about using QuickBooks, that you won’t find in the QuickBooks Help file, in order to successfully run your construction business and obtain accurate job costing reports; from eBooks, live webinars, and recorded training sessions.
You’ll find high-quality (budget friendly) training without having to leave the comfort of your home or office.
Bookkeeping & Accounting Tasks
We’ve compiled a list of daily, weekly, monthly, quarterly, and annual bookkeeping and accounting tasks to help you stay on track – this is also a handy checklist to provide to a new bookkeeper.
This list is geared for contractors and include items such as certified payroll reports, AIA billing draws, Worker’s Comp, and General Liability Insurance tracking reminders.
Excel format, so you can easily add other items and customize it to meet the needs of your business.
We hope that you’ve found today’s Tuesday Training items to be helpful to your business – if so please take a moment to leave a comment or share this with others on your favorite social media network using the buttons below
Download your free copy of our Bookkeeping and Accounting Tasks checklist here.
Employee New Hire Packet
What should a “New Hire Packet” contain? Federal W-4, State W-4, and Form I-9 at a minimum – but that really isn’t enough information to keep on file. You, as well as your bookkeeper needs to have more information about a new employee than what is available on these forms. Utilize our New Hire Checklist” to provide your bookkeeper with additional information about the employee.
Word format, so you can easily add additional information and customize it to suit the needs of your business.
Download your free copy of our Employee New Hire Packet by clicking here.
We hope that you’ve found today’s Tuesday Training items to be helpful to your business – if so please take a moment to leave a comment or share this with others on your favorite social media network using the buttons below.
QuickBooks Payroll, when properly set up, is capable of tracking and including the cost of your General Liability Insurance; as well as many of the other things that costly construction software does automatically – with a little more effort on your part and without the big price tag.
Tracking General Liability Insurance, when it is based on gross payroll, and getting those costs into Job Costing Reports is vital for many businesses, especially the construction industry.
NOTE: The best time to implement this procedure is when your General Liability Insurance Policy period starts.
The following instructions will allow you to track your General Liability Insurance costs when it is based on gross payroll and get those costs into your job costing reports without making complex journal entries. It will also help you be aware of how much your premium payment will be so that you aren’t in for an unwelcome surprise when the bill comes in or your policy is audited.
QuickBooks Setup for accruing the cost of General Liability Insurance
Example:
In our example general liability insurance is calculated at $6.36 per $1,000.00 in wages for field workers – realize that each type of work that you perform could very well have a different experience rate (just like Worker’s Comp).
Step 1:
Come up with a rate per $100 in wages so this can be calculated for each employee with each paycheck, if paychecks are usually less than $1,000.00 per employee per week.
- $1,000.00 divided by 10 = $100.00
- $6.36 divided by 10 = $0.636
If your policy has different experience rates for different work or employee classifications you’ll want to determine this cost for each different rate.
Step 2:
Create an Other Current Liability Account on your Chart of Accounts to track your Accrued General Liability Insurance. From the Lists menu –> choose Chart of Accounts –> click the Account button at the lower left –> click New –> select the radio button next to Other Account Types and choose Other Current Liability from the drop down menu.
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Click the Continue button and add the details for the account.
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Click Save & Close.
Step 3:
Create the Cost of Good Sold and/or Overhead accounts to track the expense to the company. A Cost of Goods Sold account would be used for field workers and an Expense Account for Overhead and Office workers. From the Lists menu –> choose Chart of Accounts –> click the Account button at the lower left –> click New –> select the radio button next to Other Account Types and choose Cost of Goods Sold from the drop down menu – OR – click the radio button next to Expense.
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Click Save & Close.
Step 4:
Create Company Contribution Payroll Items to track the costs while running payroll. From the Lists menu –> choose Payroll Item List –> click the Payroll Item button at the lower left –> choose New –> select Custom Setup –> click Next –> click Company Contribution –> click Next –> type in the name for this item and select the Track Expenses by Job option –> click Next –> choose your General Liability Insurance Carrier –> from the Liability Account drop down select the account you created in Step 2 –> from the Expense account drop down select the account you created in Step 3.
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Click Next –> Tax tracking type should be set to None –> click Next –> Taxes window should have no tax types checked –> click Next –> Calculate based on quantity window select the radio button to Calculate this item based on quantity –> click Next –> Default rate and limit window, enter the amount that you calculated in Step 1 and make sure that the This is an annual limit option is NOT checked. Click Finish.
Step 5:
Add the company contribution item(s) to Employee Defaults so all new employees who are hired will automatically have this item automatically included in their employee records.
From the Edit menu –> choose Preferences –> select Payroll & Employees –> click on the Company Preferences tab –> click the Employee Defaults button –> click into the Item Name column of the Additions, Deductions and Company Contribution section and select the item(s) you created in Step 4.
Step 6:
Add the company contribution item(s) to existing Employee Records in order to calculate your accrued liability when processing payroll.
From the Employee Center, edit each employee record going to the Payroll & Compensation tab –> click into the Item Name column of the Additions, Deductions and Company Contribution section and select the item(s) you created in Step 4.
Calculating General Liability Insurance Costs When Running Payroll
When running payroll you’ll want to open (view) the detail of each employees paycheck –> determine gross payroll ($280.00 + $1,120.00 = $1,400.00 – per the sample paycheck below) –> take total gross and divide it by 100 (1,400.00 divided by 100 = 14) –> enter 14 in the Quantity column next to the company contribution item and click Enter. QuickBooks will then calculate the General Liability Insurance for this employee and display that amount in the Company Summary section.
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By implementing and following this procedure your General Liability Insurance will be included in your Payroll Summary Reports, Profit & Loss, and Profit & Loss by Job Reports. Additionally, your accrued liability will be displayed on Balance Sheet Reports and can be viewed at any time simply by viewing your Chart of Accounts List.
One final note; when it’s time to pay your General Liability Insurance policy premium you will cut the check using the payroll Pay Liabilities function – DO NOT USE the Write Checks feature.
Setting up and tracking Union Fringe Benefits in QuickBooks can be a fairly straightforward task, after all Union Fringes are just a specified hourly dollar amount that the company pays to the Union on behalf of the employee.
Union fringes often consist of contributions to Vacation/Holiday, Health & Welfare, Pension, Training, and sometimes Travel & Subsistence, Savings, or Fund Administration. Depending upon the Union that you are dealing with, some of the fringe benefits could be subject to payroll taxes, while others are not.
Most of the time fringes are calculated and paid based on the number of hours the employee works on the jobsite, occasionally, however, they are a based on a percentage of gross pay.
Regardless of how they are paid (based on an hourly amount or a percentage of gross) or if they are taxable or not; in QuickBooks, each of these specific types of hourly fringe benefits should be set up in the Payroll Item List as Company Contribution items.
Now that you know some basic information about Union Fringe Benefits and how you would track them in QuickBooks, let’s take it a step further and explore some of the more complex issues.
Not every employee will have the same fringe benefit package or the same fringe benefit rates. This is where it becomes more complex. So before you begin setting things up in QuickBooks; take the time to plan things out and ask yourself these questions:
- Do my employees ALWAYS perform work under the same Work Classification/pay rate/fringe rate combination?
- Is the Work Classification/pay rate/fringe rate combination the same for all the jobs that employees work on?
- Is the Work Classification/pay rate/fringe rate combination the same for each of our employees?
Below are basic setup instructions if ALL of your employees fall under a single Work Classification/pay rate/fringe rate combination, nothing changes from job to job. In QuickBooks:
- You create company contribution items for each specific fringe benefit.
- Check the “Track expenses by job” option in the item setup.
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- Create or choose the Union from the Vendor List.
- Assign appropriate Payroll Liabilities account, personally I like to create a Sub-Item of Payroll Liabilities called Union Fringes, and then create Sub-Items under that for each fringe item – it just makes it easy to see what your liability for each fringe item is at any given time.
- Assign the appropriate Expense or Cost of Goods Sold Account to record the company payments; personally I like to create a Sub-Account of Cost of Goods Sold called Union Fringes.
- Choose the applicable Tax Tracking Type, based on the information you’ve received from the Union Hall.
- If a specific fringe benefit is subject to payroll taxes, check which taxes are to be calculated on the Taxes window
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- Select how the calculations are to be be performed. If the fringe rate is paid on all straight time and overtime hours worked, choose “Calculate this item based on hours”.
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- Enter the hourly rate for the benefit item and make sure that the Annual Limit option is NOT checked (by default QuickBooks always has this option selected.
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- Edit employee records and add the fringe benefit company contribution items to the Payroll & Compensation Information tab in the Additions, Deductions and Company Contributions section.
- When you create paychecks, QuickBooks automatically calculates the amounts for each employee.
Use the instructions above as a guideline for your QuickBooks setup.
Each Friday, here on the QuickBooks for Contractors blog, we will be offering a free QuickBooks related eBook, offering tips, tricks, and training – so stayed tuned, visit often or sign up to have our posts delivered daily via email.
This week’s eBook provides information and tips for setting up a system to track Subcontractors Workers Compensation and General Liability Insurance expiration dates.
When a contractor works on a construction project and he/she hires subcontractors; one of the things that he is required to keep on file is a CURRENT copy of each subcontractors Worker’s Compensation Insurance Policy and a copy of their General Liability Insurance.
Keeping track of expiration dates and making sure that you always have a copy of the current policy on hand, can be a daunting task.
ASA (American Subcontractors Association) of Arizona Shows Leadership in Securing Prompt Pay of Retainage & Final Payment.
(from Contractor Power Newsletter)
ALEXANDRIA, Va. — A new law (S.B. 1375) signed by Arizona Gov. Jan Brewer (R) on May 11, 2010, adds requirements for timely payment of retainage and final payments to the state’s prompt payment statute for construction. The law, supported by the American Subcontractors Association of Arizona and its allies representing a broad range of the state’s construction industry, establishes a payment cycle according to which non-residential project owners, prime contractors, and subcontractors normally will have to pay retainage and final payments for properly completed construction services and materials, or else pay a penalty of 1.5-percent interest per month.
The governor of Arizona has signed into law the most significant construction legislation improving subcontractor rights within the last 10 years, said ASA of Arizona President Jeff Banker, Banker Insulation Inc., Chandler, Ariz. ASA of Arizona was proud to have a leading role in helping shape the new law and the future of construction in Arizona.
The law, which applies to projects for which contracts, plans or specifications are distributed on or after Jan. 1, 2011, will require prime contractors to submit timely applications for payment according to the project’s billing cycle (normally 30 days). Unless stated otherwise in the construction plans, project owners will have to approve within 14 days, and pay within 7 days after that, proper invoices for retainage that subcontractors submit at substantial completion of their work. The law will also establish a 21-day cycle for project owners to pay prime contractors proper invoices for final payment. It will limit owners withholding of such payments to 150 percent of the reasonable costs to complete any work that is under dispute.
Prime contractors and subcontractors will have seven days from receipt of retainage and final payment to pay their subcontractors and material suppliers, except when reasons for withholding are detailed in a written notice. The law will entitle subcontractors to written notifications of retainage releases by owners once subcontractors request such notifications. It will specifically protect subcontractors from wrongful withholding for defective work or materials that are not their fault. Where subcontractors are not at fault, the law says, The Contractor shall nevertheless pay any subcontractor or material supplier … within 221 days after payment would otherwise have been made by the owner.
ASA of Arizona and its allies worked hard throughout this long legislative process to prevent damage to existing prompt payment rights and to enact these beneficial payment reforms, said ASA of Arizona Advocacy Chairman Richard Usher, Hill and Usher Insurance & Surety, Phoenix, Ariz. The volume of Arizona construction is down dramatically in all market segments, which makes protecting payment rights and getting paid promptly as important as ever to subcontractor prosperity and survival.
Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. ASA’s vision is to be the united voice dedicated to improving the business environment in the construction industry. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.
ASA Contact: David Mendes
(703) 684-3450, Ext. 1335
dmendes@asa-hq.com
Tracking retainage is a common function of percentage-of-completion contract billing using AIA Forms G-702 & G-703. To learn more about AIA Billing and how to complete forms G-702/G-703, click here.
