A QuickBooks question and tip about handling back charges or other changes after a job is billed at 100%.
My question: I’ve got a client who uses estimates and prepares their progress billings from the estimates. They have had a couple of jobs in which the job is 100% billed out (but not yet 100% collected – there is outstanding A/R) and then the owner disputes something and they have to do a backcharge, therefore, reducing the total amount of the project. We change the estimate with a change order to reflect the decrease in the overall contract amount. We would like to “connect” that change to the invoicing/progress billing cycle on the job but since the job is all billed out, the only “invoice” that could be issued and associated with the estimate is a negative invoice which QB won’t do. So then, to correct the A/R we issue a credit memo, but that won’t tie into the estimate. So, in the end, the estimate is a little wacked out from the billings information so when the client is looking at an open WIP report, this thing shows up as a weird animal. Do you have a suggested best practice for taking care of this kind of situation? Thanks!!! Dana
Back charges after a job is billed at 100% or even a negative change order during the project makes for a lot of extra work in order to make the “numbers” add up in reports ….. it would be really nice if they didn’t happen at all!
Basically, from what you are telling me, it sounds like you are on the right track – going to the Estimate and creating a Change Order reducing the overall contract. BUT, first I think that you may want to look at that procedures.
If you are going to the Estimate and just changing a dollar amount – let’s say that you have a line item on your Estimate for Windows with a value of $2,000.00 and there is a charge back of $500.00 – if you just go and change the “windows” item amount from $2,000.00 to $1,500.00 and let QuickBooks create it’s version of a “Change Order” it really doesn’t leave an effective trail.
Now, instead, if you go to the Estimate and go to the very bottom of it to the first available blank line and pull in the SAME item you used for “Windows” in the original part of the estimate, change the description to indicate that this was a back charge on a specific date for whatever reason against the windows and make the dollar amount a negative $500.00; you’ll have a much better trail of what happened. You could even create a new item, calling it Charge Back (or even Change Order) with no dollar amount and put that between the end of the original items and before the reduction. This will clearly show the reduction to the contract and what caused it.
Ok, so that takes care of our Estimate trail.
Next let’s talk about your last Progress Invoice and any remaining open balance on the contract.
If the last Progress Invoice that you have on A/R for this job is MORE than the amount being charged back (the $500.00 in our example) – I think what I would do is to void that original invoice (making a note in the memo field as to why) and recreate it from the Estimate – billing for all the original amounts and the 2 new line items that you added. This time I would use the memo field to indicate that this was a revised billing to reflect the back charge.
This should eliminate the need for Credit Memo’s, which you are correct do not tie back to an Estimate, and your reports should now be more accurate.
Make a backup of your clients data file and play around with this method and run your reports and see if things don’t make more sense.
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