QuickBooks for Contractors Tip – Receiving & Applying Joint Checks

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.

QuickBooks tipsQuite 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.

10 thoughts on “QuickBooks for Contractors Tip – Receiving & Applying Joint Checks

  • Hi Terri
    So glad my post helped! Sounds like you have had quite an interesting time with QuickBooks cleanup!
    Best of luck with the rest of the cleanup 🙂

  • Terri

    THANK YOU, THANK YOU, THANK YOU!! I started working for a contractor that has a stack of Joint check transactions that have not been recorded that go back to at least 2013 that must be received in AND I also have to reconcile the checking account for every month too. I have been trying to figure out how to post & clear these JCs out for a good 3 weeks and everything I think would work- QB just won’t let me do it.
    I can’t believe QB CONTRACTOR PREMIERE doesn’t have a function to handle joint checks, Pretty pathetic. Thank Goodness for brilliant people like yourself and very kind people like yourself that share your knowledge with others like myself that are out here flapping in the wind & just can’t find the fix we need to save our jobs because others were lazy!!
    You’re a blessing!

  • Brittani Romero

    Hello Nancy,
    I just want to verify the best and most accurate way for this joint check applying. We have many joint check that we handle on a weekly basis. We send them out to the supplier with our signature, then they apply the amount owed to them for the materials and send us the remaining amount. Is the way you explained the best way to apply the deposits?
    Best Regards,
    Brittani

  • Sarah
    Done this way the company is properly recording the income (because they did bill for it) as well as the expense because they are “paying it” so essentially it’s a wash.

    Hope this helps.

  • sarah

    is there a way to make it look like it isn’t income since it’s going pretty much straight from the customer to the vendor???

  • Hello Gregory, thanks for stopping by.
    Yes, it is a little confusing because everything is done behind the scenes – so to speak.
    When you have a situation such as this:

    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.

    And you record/receive the payment of $10,000.00 against your total invoice of $45,000.00 to the special “clearing account” AND you pay the $10,000.00 bill from the vendor through that special clearing account – it affects the accounts as always (increases income while decreasing payables); the difference is that the money never hits your own checking out in QuickBooks and in real life.

    Does that help?

  • Gregory S Robbins

    Just wondering what accounts are affected by this type of transactions. Does not appear to be revenue since the check is cosigned and sent to the vendor, but the amount is part of the contract. 😯

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