QuickBooks Pro Intro  
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Introduction
 Table of Contents
Executive Summary
 Template Features
 12 Reasons to Use
 Sample Reports
 Template FAQ
 Upgrade FAQ

Manual
 Table of Contents
 Setup Guide
 Template Users Guide
 Template Manual
 Job Cost Accounting
 Chart of Accounts
 MasterCode System
 QuickBooks Items
 Gen Cont Items List
 Spec Bldr Items List
 WIP Items List
 Customer Type List
 Job Type List
 Vendor Type List
 Class List

Reference
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QuickBooks Pro Executive Summary
  1. QuickBooks Pro is a POWERFUL accounting program that will do everything you need to keep great books and control your company's finances, but...
  2. QuickBooks Pro is also a GENERIC bookkeeping program that is not pre-configured for a construction business.
  3. The QuickBooks Pro manual, the setup routine and their sample file all do a TERRIBLE job of advising you on how to setup and use the program for a construction business.
  4. My QuickBooks Pro Template File and Manual will SOLVE this problem for you in less than 5 minutes.

General

QuickBooks Pro is an excellent bookkeeping program that will provide you with all the reports and information that you need to run your construction company.  However, as good as QB is, it isn't specifically designed or setup for a construction company.  The QB manual presents you with little actual advice, and the built-in construction company chart of accounts is not only inadequate, it's lust plain wrong.


The QuickBooks Template files will get you up to speed quickly with minimal effort.


The Setup Files

The QuickBooks Setup Files includes a file called "qbsetup.qbw", which is a QuickBooks file that is already configured for a construction company.  It contains a complete chart of accounts, numerous lists (items, customer type, job types, etc.), pre-configured memorized reports, customized templates, and a number of other features.  In short, the disc is a complete construction company without any transactions.


Getting Started

All you need to do is follow the installation instructions to let the Installation Program install the Setup Files file to your hard drive, then start QuickBooks, open the file, customize the company information to your company, and begin using the file as your company's books.


General Strategy

The primary purpose of keeping books is to provide management information to enable you to manage your company, and this is our primary goal.  Unfortunately, many builders have bookkeeping systems designed by accountants and/or bookkeepers that are designed to provide tax information as their primary goal.  While you certainly need to have the information to complete your tax returns, it doesn't make any sense and there isn't any requirement to configure your books to be a mirror image of a tax return.


Of course, if there wasn't any conflict between your management needs and your tax needs, this wouldn't be an issue.  Unfortunately, the government doesn't know anything about the construction business, their goal and their rules are focused on forcing you to calculate your profits, and thus your taxable income, in a manner that produces consistent results across all types of businesses.  In short, they only want to "box" you and limit your parameters for calculating your income so that you can only fudge your numbers to a limited extent.  None of this exercise has anything to do with managing your business!


The Chart of Accounts

The Chart of Accounts on the setup file is the result of years of using QuickBooks combined with my experience working with numerous construction clients.  As a result, it contains accounts to serve a number of purposes, including developing property, buying and managing rental properties, operating a production facility, and managing mortgages in addition to managing a construction operation.


Customer Information

Customers should be assigned four digit job numbers to keep them in chronological sequence.  Full information should be entered in to the customer database.  The "Ship To" address field has been utilized by us as the project address on invoices and statements.  The "Customer Type" and "Project Type" fields are perfect for creating P&L reports on these specific types.  For example, by using Customer Types you can create a P&L report showing your income and expenses for projects performed for real estate agents, insurance companies, private homeowners, etc.  By using Project Types, you can create similar reports showing your income and expenses for room additions, new single family residences, restaurant remodeling, etc.


Jobs under customers should be used only for those rare circumstances in which you are doing cost plus projects wherein you need to track the cost of individual change orders.  In the event you perform additional projects for the same client, each of these "contracts" should be assigned a new job number.


Vendor Information

QB should be used to keep your vendor database.  In addition to the standard info such as name and address, we have added a few special fields to track insurance policies, insurance agents and their phone numbers.  Vendors should be assigned "Vendor Types" largely to allow production of mailing labels for bidding purposes.


Items

QuickBooks uses income items to connect estimates and invoice charges to your income accounts and expense items to connect purchase orders and expenditures to your Cost of Goods Sold accounts.  Both types of items are on the same list.


Income items should be established utilizing the same numbers as your income accounts, which facilitates easy recognition.  In addition, you may establish additional income items that corresponds to your typical draws, which will then allow you to utilize QuickBooks progress billing feature.  Do not establish income items that reflect types of construction (carpentry, drywall, etc.) unless you actually bill customers in this manner.


Expense items can be established to facilitate writing purchase orders.  However, you do not need to use expense items to track construction costs because we are using the chart of accounts for that purpose.  Many builders avoid using expense items all together.


Classes

We use classes to assign the LMSR (Labor-Material-Subcontract-Rental) to job and overhead costs.  This allows reports broken down by these categories that are needed for insurance auditing, tax reporting, and estimating.


Accounts Receivable

You should create an invoice for every payment you receive from customers, including draw checks you have already received.  All checks from customers should be applied to the invoices through Accounts Payable.  This strategy will allow you to use the statement function to produce a clear and concise statement summarizing your transactions with every customer for each project at any time.  This can be an invaluable tool for managing your receivables and settling with your customer at the end of the project.


Statements

The QuickBooks statement feature provides you with an ability to monitor your transactions with individual customers.  If you are consistent in writing invoices for every payment you receive from your customers, the statement will become an excellent tool for keeping you and your customer apprised of their financial status, an especially important tool for administrating the final settlement at the end of the project.


Accounts Payable

You should enter every bill you receive from your charge account suppliers on an ongoing basis and pay the bills through Accounts Payable.  This will allow you to manage what you owe your vendors and specifically manage and control you charge accounts.  Using A/P requires exactly the same amount of effort as paying the vendors with a standard check, yet it gives you much greater control over your payables and applies the costs to the projects immediately when posted instead of later when they are paid.


Payroll

QuickBooks will do an excellent job of processing your payroll, managing your payroll liabilities and producing the required tax forms and reports.  It does a poor job of distributing the payroll burden costs to the job cost, largely to it's programming that posts individual transactions for each payroll burden category.  I recommended performing all payroll functions in a separate QB file called "payroll.qbw" and posting the payroll and payroll burden cost totals in the main books.  This procedure is known as a "Subsidiary ledger".  It is explained in great detail in the manual, and it simplifies the Chart of Accounts, the job cost accounting and the payroll processing.


Purchase Orders

Many builders choose to avoid the additional paperwork created by utilizing purchase orders.  For those of you who are prepared to undertake the additional burden, memorizing standard purchase orders can speed up the process.  A fairly typical compromise is to use purchase orders to establish draw schedules for the multi-payment subcontractors (typically the MEP contractors), thus allowing you to enter their draw schedule once at the beginning of the project which then establishes a dollar amount for the subsequent draws.


Estimating

The QuickBooks estimating module is insufficient for preparing estimates, largely because most construction projects require 50 to 200 line items.  In addition, while it might seem tempting to be able to convert an estimate into invoices and the construction budget, the reality is that builders don't get paid based upon individual line items in their estimates, but instead on progress draws.  However, the estimating module can be setup and utilized to create draw schedules and thus utilize the progress billing feature in QuickBooks.


Progress Billing

The progress billing function will allow you to enter a project's draw schedule and then periodically select all or part of any draw, in any combination, to create individual invoices throughout the course of the project.  The draws can be standard draw names such as "Slab Draw" or "Roof Draw", or they can be categories of work, such as "Concrete" and "Roofing".  The draws can be selected by fixed amounts or as a percentage.  At any time, you can review or print the draw schedule to ascertain you current status.  You can produce a progress billing invoice that is strikingly similar to the standard AIA form.


Job Cost Reports

The setup file contains four types of memorized job cost reports.  The Job Profit and Loss Report shows the job costs and gross profit as dollar amounts and as a percentage of the income.  The Job Cost Variance Report compares the actual income and job costs against the budgeted amounts as dollar amounts and as a percentage of the budget.  The Job Cost by Class divides each job costs line item into the Labor-Material-Subcontract-Rental divisions.  The Job Transactions shows every transaction associated with the project, subtotaled by account number.


Insurance Tracking

We have two methods for tracking vendor insurance expirations.  First, there is a memorized report with each vendor's agent's name, phone number and expiration date.  Second, we advise you to utilize the "To Do" function to set alarms for each vendor's expiration date.


Cost-Plus Projects

The easiest method of billing your cost-plus projects is to generate a transactions report of the project's expenses for the billing period and then attach it to a single line invoice that states something like "Project costs from 1/1/97 to 1/15/97as per attached report.  Don't get bogged down in attempting to create items for each expenditure.  You cannot use the QuickBooks "Reimbursable Expenses" feature for this task because it doesn't work for Cost of Goods Sold!


Closing out Periods

The practice of closing out bookkeeping periods is an archaic torture invented by accountants to drive the rest of us crazy.  Fortunately, QuickBooks does not require you to perform this task, which means you have the ability to fix mistakes as they may be discovered.  The IRS doesn't like this, but that's tough.


However, it does make sense to "lock" your books for each year sometime in March of the following year after you have completed your tax returns.  The password feature allows you to set a password-protected date preventing changes to transactions prior to a specified date.  This doesn't prevent you from making additional changes, but it will require you to enter the password first.


Tax Reports

There are different strategies to employ to ascertain you tax information depending upon the method you (and your accountant) use to calculate your income and expenses.


If you are using Percentage-of-Completion accounting, you should endeavor to write partial invoices dated December 31 of each year reflecting the approximate value of your unpaid work in progress.  In essence, you will use your accounts receivable to record this value on your balance sheet.  Be careful to record the expenses that correspond to the work.  For example, write a partial roof draw invoice without also entering the limber bill in your accounts payable.  Your accountant can advise you on the implications of this procedure.


If you are using Completed Contracts accounting, you will need to run a P&L report, date range set for "All", filtered by "Selected Names", then individually select the projects that you are declaring were completed in the subject tax year.  This report will give you your income and costs for those projects only, thus establishing you gross income for the tax year.  Next, you will need to run a overhead expense report for the calendar year to establish you overhead costs, which when subtracted from your gross income will yield you taxable income for the calendar year.  A similar report for your active projects will provide the value of your work-in-progress for the balance sheet.



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