QuickBooks Pro Template Manual

Introduction

The Good News

QuickBooks Pro is a great program. It’s as powerful as any of those expensive construction software packages we’ve all seen at the trade shows, at a fraction of the cost. QuickBooks will provide you with all the information you need to run your construction company smoothly, including doing many things the publisher never even thought about (like tracking subcontractors insurance expiration dates).

The Bad News

QuickBooks is a generic bookkeeping program and when you first install it it’s not set up for any specific industry. However, the problem is not the program. The problem is that the manual, the help file, the sample company file, and the Chart of Accounts that the Easy Step Interview will attempt to install for you, ALL of WHICH ARE WRONG for the construction industry.

The Solution

It’s all in how you set up your QB file. You need to know how to structure the Chart of Accounts, and how to use the many features in QB such as Items, Classes, Templates and Lists. You need to know what the program is really capable of providing, what’s it’s limitations are, and what to ignore in the QB manual. You also need to learn how to employ the procedures and strategies that will get the results you need, and what to do in the unusual situations that come up in the bookkeeping process to make your bookkeeping reports a valuable resource for making the day-to-day decisions you need to make to run your company profitably.

Setting up your QB file and employing these strategies and procedures is what this website is all about.

QuickBooks Pro Is The Right Choice

1. The Program
   1. Intuit is a big company, traded on the New York Stock Exchange, and is one of the few companies to compete head-to-head with Microsoft and win.
   2. Intuit also publishes Quicken and Turbo Tax.
   3. Microsoft does not have a competing business accounting program.
2. The Publisher
   1. QuickBooks has been in publication for over ten years and is the #1 business accounting program in the world.
   2. There are over 3 million QB users in the United States alone.
3. Future Plans
   1. Intuit spends millions of dollars each year improving, testing and de-bugging the program.
   2. Because of it’s leading position in the industry and it’s large installed base of current users, Intuit will continue to support QuickBooks for many years.
   3. QB upgrades cost approximately $100.00 per year, relatively cheap compared to the upgrade prices of most of the specialized construction accounting programs.
4. Summary
   1. QuickBooks is a bookkeeping software solution you can learn and stay with for many years and should be the last accounting program you will ever need to learn.

What QB Can Do For You

1. Bank Accounts
   1. Print and address your checks.
   2. Keep checking account balances for one or multiple bank accounts.
   3. Reconcile your account balances each month.
2. Accounts Receivable
   1. Write your invoices.
   2. Will track:
      • Who owes you money.
      • How much they owe.
      • What they owe it for.
      • For how long have they owed it.
   3. Create customer statements summarizing:
      • Everything you’ve charge them for
      • Every payment they’ve made
      • The current balance on their account.
3. Accounts Payable
   1. Will track
      • Who you owe money too.
      • How much you owe.
      • What you owe the money for.
      • How old the bill is.
      • What is the current balance on your account.
   2. Write the checks to pay bills.
4. Fixed Assets
   1. Track the complete history of every fixed asset you own.
   2. Provide a detailed equipment list.
   3. Provide you with the current book value of any specific asset.
5. Liabilities
   1. Track your loan amounts.
6. Payroll
   1. Will perform all expected payroll functions.
      • Track W/C liabilities.
      • Print paychecks and W-2’s
      • Prepare 940 and 941 forms.
      • Track payroll liabilities and payments.
      • Track vacation pay and sick days.
7. Draw Schedules
   1. Will write draw schedules or a Schedule of Values.
   2. Will Track:
      • The amount of each draw.
      • The dollar amount and percentage of prior draws (or Schedule of Value line item).
      • The remaining dollar amount and percentage of each draw (or Schedule of Value line item).
   3. Will prepare Progress Billing Invoices that summarize the status of all draws and what’s currently being requested.
8. Job Costs
   1. Job Cost Variance Report detailing your current cost against your budgeted amount with both percent and dollar amount difference.
   2. Job Profit or Loss Report comparing your income for the project against your expenses, with the profit expressed as a percent of the income.
   3. Job Cost by LMSR detailing the Labor / Material / Subcontract / Rental breakdown of each line item.
   4. Job Cost Transaction Reports detailing every check, invoice, bill and payment for each cost code.
9. Other Interesting Reports
   1. Company Phone Book
   2. Preferred Suppliers
   3. Warranty Service Suppliers
   4. Vendor Workers Comp Expiration Report
   5. Vendor Tax Information
   6. Unpaid Bill by Vendor
   7. Unpaid Bills by Project
   8. Completed Contracts P&L Report

QuickBooks Pro Limitations

QuickBooks Pro, like all software, has limitations, and while QB will perform an excellent job of keeping the books for a vast majority of construction companies, I feel it’s important to advise you of the limitations in order for you to make an intelligent decision.

Of course it’s difficult to get an accurate assessment of these limitations from the publisher, and you’re certainly not going to read the limitations on the cover of the box, so I have included a rather complete list of what I know QB will not do well, or not do at all. Please bear in mind that these limitations will only effect a small percentage of potential users.

1. Company Size
   1. The short answer: Approximately $20 million dollars per year.
   2. The controlling factor in QB is not the annual dollar volume, it’s the number of transactions. For example, a check for $10,000,000.00 uses the same space as a check for $1.00.
   3. The typical construction company company will create approximately 2,000 to 4,000 transactions per year, well within QB’s capabilities.
   4. Technically, is no limit on the size of a company you can keep books for in QB. However, as a QB file gets unusually large, you will experience an increase in the time the program takes to generate reports.
   5. As a practical matter, performance will become unsatisfactory as your file approaches 10,000 transactions per year.
   6. For the vast majority of construction companies this never becomes an issue, however, there are some strategies you can follow to keep your QB data file “lean and mean”:
      • Use the QB condense function each year to archive prior year’s data.
      • Perform your payroll burden distribution (if applicable) in a subsidiary file (please see the Payroll section of this web site for further details)
      • Use QB on a faster computer.
2. Estimating
   1. Not recommended for Builders or General Contractors. The QB estimating function simply isn’t powerful enough.
   2. OK for subcontractors.
   3. Perform your specification writing and estimating in another program specifically designed for the construction industry.
3. AIA Draw Request Form
   1. QB will not do an exact replica of an AIA draw request.
   2. QB’s Progress Billing Invoice is very similar to the AIA Draw Request form and contains all the required information.
   3. If you must submit your draw requests in this format, you may:
      • Convince the Architect to accept the QB Progress Billing Invoice.
      • Attach the QB Progress Billing Invoice to an otherwise completed AIA Draw Request form.
      • Use the QB Progress Billing Invoice to provide the numbers to be used to complete the AIA form.
4. Cost to Complete Reports
   1. If you don’t do projects that require bonds, this is not an issue.
   2. A Cost-to-Complete report shows the remaining balance of your contracts vs the remaining amount of your construction budgets for each of your projects. It’s sort of like a Balance Sheet for each project, and it’s purpose is to determine if you have enough money left in your current projects to complete them.
   3. This information is only required by bonding companies.
   4. QB cannot do a Cost-to-Complete report that has all your projects on one page.
   5. QB will produce individual reports with this information for each of your projects.
5. Payroll Burden Distribution
   1. Does not do a good job of payroll burden distribution.
6. Certified Payroll Report Form
   1. This form is only required on Federal Government projects.
   2. QB will not print a certified payroll report on the official report form.
   3. QB will produce reports with the information needed for the official report form, it just doesn’t print the report itself.
7. Construction Cost per Unit
   1. Cost-per-unit is, for example, how much you paid for a slab per square foot.
   2. This kind of “historical cost data” is valuable for estimating purposes.
   3. QB keeps track of the cost for each component, but does not have a report that will calculate construction cost per-unit.
   4. QB will provide you with the total cost for each component (slab, walls, roofs, etc.), it just doesn’t have a report that divides the cost by the number of units to yield a cost-per-unit.
   5. You can easily export the component cost data to an Excel spreadsheet to perform these final calculations.
8. Automatic Loan Amortization
   1. Loan Amoritization tables are used to “split” your loan payments into their principal and interest portions.
   2. QB does not include an automatic loan amortization function.
   3. You can use amortization tables from your lender to perform this function.
   4. In addition, you may download any one of several inexpensive ($5-$10) loan amortization programs from the internet.
9. Prevent Printing of Checks to Vendors with Expired Insurance
   1. QB will not physically stop you from writing checks to vendors who’s workers compensation or other insurances have expired.
   2. You can print a report of all the vendors whose insurance is to expire in the near future and post it near your computer.
   3. You can also set individual “Reminders” in QB (it’s like an alarm clock) to automatically remind you when a specific vendor’s insurance has expired or is about to expire.
10. If you absolutely must have one or more of these functions performed by your bookkeeping software, you might be a candidate for one of those $5,000 accounting programs specifically designed for the construction industry.

QuickBooks Versions

1. Version 5.0
   1. Released approximately 3 years ago.
   2. Added List Reports.
   3. Added ability to activate/deactivate list entries.
      • Accounts on the Chart of Accounts
      • Customers on the Customer List
      • Vendors on the Vendors List
      • Classes on the Class List
      • Items on the Item List
      • And so on for the other miscellaneous lists
   4. NOT Y2K compliant.
   5. If you’re still using Version 5.0, you should upgrade to the current Version 2000.
2. Version 6.0
   1. Released in early 1998.
   2. Added networking capabilities.
   3. Y2K status unknown.
3. Version 99
   1. Released in late 1998.
   2. Added direct link to Excel and Microsoft Word.
   3. Y2K approved.
4. Version 2000
   1. Released in January 2000
   2. Added direct link to Microsoft Outlook, Symantec ACT.
   3. On-line payroll services (this is another way for them to make money from you, so I have difficulty considering it an enhancement to the program).
   4. It is the current version.
5. Year 2000 Status
   1. Version 5.0 is not compliant.
   2. Version 6.0 status is unsubstantiated.
   3. Version 99 and 2000 are Y2K certified.
   4. Intuit recently announced the release of special Y2K upgrade kits for version 5.0 and 6.0 that are free to registered users. These upgrades can be downloaded from their website.
   5. Aren’t you tired of hearing about Y2K?

Accounting Basics

1. Basic Accounting Methods
   1. There are two basic methods of keeping bookkeeping records:
      • The Cash Method
      • The Accural Method
   2. The Cash method posts income and expenditures only when the money actually changes hands.
   3. The Accrual method posts income and expenditures when an obligation is created, i.e. a bill is received or an draw is earned and billed.
   4. The Accrual method provides better management reporting because costs and income are included in the reports immediately when entered, instead of later when they are paid.
2. Basic Reports
   1. There are three basic types of reports:
   2. Balance Sheet reports that show the company’s assets and liabilities at a specific moment in time (today, end of year, etc.).
   3. P&L Reports that show the movement of money and totals for each P&L account, (i.e. income, costs, overhead, etc.) across a specified period of time (by month, year, etc.).
   4. Transaction Reports that show the individual transactions in a specified account.
3. Tax Reporting
   1. There are two basic types of tax P&L Reporting:
      • Percentage of Completion
      • Completed Contracts
   2. Percentage of Completion (POC) recognizes job income and expenses as they are incurred.
   3. POC reporting provides better management information in QuickBooks Pro because it allows you to use the power of the P&L reports while the project is being constructed.
   4. Completed Contracts accounting recognizes job income and expenses only on the one day that you consider the project to be completed.
   5. Using CC accounting, you record income for a project as a liability and the construction costs as an asset until the day you deliver the finished project, upon which you make a general journal entry to post the income, the expenditures and the profit all on that one day.
4. Management vs. Tax Information
   1. Many builders are confronted with bookkeeping systems designed to prepare tax returns, not provide management information.
   2. There is no requirement that your books look like a tax return.
   3. The only requirement is that your books can provide you with the information necessary to prepare your tax returns.
   4. Indications of a tax oriented chart of accounts:
      • Balance Sheet report contains large entries for Work in Progress and Construction Draw Liability.
      • Income Statement (P&L Statement) totals direct costs by Labor, Materials, Subcontract and Rental.
5. Job Cost Descriptions vs. LMSR
   1. LMSR = Labor / Material / Subcontract / Rental
   2. Labor means Payroll.
   3. Job Cost categories are descriptions of installed products.
   4. LMSR are descriptions of legal mechanisms by which you procured the goods and services.
6. Your Accountant’s Role
   1. Prepare your Local, State and Federal Tax Returns.
   2. Advise you of tax strategies.
   3. Assist you in preparing loan applications.
   4. Render general business advice.
7. Paying Your Accountant Twice
   1. Generally speaking, you shouldn’t need to pay an accountant to keep a separate set of books just for tax purposes.
   2. Your QB reports can provide all the information necessary to prepare all sorts of tax returns.
   3. Nevertheless, I know personally of a number of builders who deliberately pay their accountant to prepare a separate set of books, based entirely on the activity in their checking account, for the sole purpose of preparing the Builder’s tax returns.
8. QuickBooks Terms
   1. Direct Construction Costs are called Cost of Goods Sold(COGS).
   2. Overhead Costs are called Expenses.
   3. Invoices are requests for payment you send to your customers.
   4. Bills are requests for payment you receive from your vendors.
   5. On checks and bills, the Expenses tab allows you access to the entire Chart of Accounts, not just the Expenses accounts, thus it can be utilized for many functions such as transferring money between accounts, making loans and loan payments, and recording the purchase of assets, etc.

General QuickBooks Strategy

Basic Strategy

1. Should be designed to provide management information.
2. Should be designed to provide an accurate and informative view of your construction company’s financial situation from your perspective, what numbers do you need to know.

Accounts vs. Items

1. Accounts vs. Items
2. Accounts provide better job cost and job cost variance reports because the accounts based Budget vs Actual report provides full cost code descriptions as well as the job cost code.
3. Items based Estimate vs Actual reports can only provide the Item number, not the full cost code name, thus you are left to interpret the item number or code when reviewing the reports.

Using Lists

1. Customer Type is used to filter reports based upon they type of customer, i.e. New home buyer, Commercial property owner, etc.
2. Job Type is used filter reports based upon the type of project, i.e. Custom Home vs. Remodeling. Allows reporting of profitability of different divisions of the company.
3. Classes are used to distinguish between Labor, Material, Subcontract or Rental. Use for tax and insurance reporting.

Tracking Job Costs

1. There are three basic strategies for tracking job costs in QuickBooks Pro.
   1. Accounts
   2. Items
   3. Classes
2. Accounts
   1. Job Costs are posted directly to job cost codes on the Chart of Accounts.
   2. Provides the best P&L reports with gross profit as a percentage of income.
3. Items
   1. Job costs are posted to items which are each connected to the Chart of Accounts.
   2. Item reports cannot provide a vertical P&L report.
4. Classes
   1. Job costs are posted to classes.
   2. Can provide reasonable P&L reports.
   3. Not used for job costs because we use for LMSR instead.

Lists

Chart of Accounts

1. The Chart of Accounts contains two basic types of accounts.
   1. Balance Sheet accounts that measure the money in storage any specific instance in time.
   2. P&L Accounts that measure the flow of money across a designated period of time.
2. Follows Generally Accepted Accounting Principals (GAAP)
   1. 1000  Assets
   2. 2000  Liabilities & Equity
   3. 3000  Income
   4. 4000  Direct Costs (Cost of Goods Sold)
   5. 5000  Overhead (Expenses)

Special Purpose Accounts

Customer Types

1. Used to filter reports based upon types of customers.
2. Example Customer Types:
   • Homeowner
   • Commercial Tenant
   • Condo Association
   • Government Agency

Vendor Types

1. Used to filter mailing lists.
2. Example Vendor Types:
   • Lumber supplier
   • Electrician
   • Framing Carpenter

Items

1. All Items are connected to an account on the COA.
2. Income items are used to assign invoice charges to income accounts. (Because we don’t have a choice)

Classes

1. Used to distinguish between procurement methods.
2. Classes used:
   • Labor (Payroll)
   • Materials
   • Subcontract
   • Rental
3. Do NOT add any additional classes (i.e. Fees, etc.)
4. Do NOT classify (it’s OK to leave blank) any expenditure if it does not fit one of these descriptions (like building permits, impact fees)
5. Do NOT classify income (leave blank)

Job Numbering Systems

1. Don’t create a job numbering system that incorporates the year the project was started and/or finished.
   1. There’s no governmental requirement that you have to incorporate the year in a project number.
   2. There is no governmental or insurance company report that requires you to incorporate a year in your project numbering system.
   3. Adding additional digits to a job number for no reason simply add keystroke work without any benefit.

Activities Menu

Invoices

1. Create invoices for all payments received from customers, INCLUDING situations where you already have the check in hand (like when you receive a deposit check or a bank draw)
2. Use the item that corresponds to the correct income account.
3. Examples:
   1. Item #3000 Construction Revenue = Account #3000 Construction Revenue
   2. Item #3100 Land / Lot Sales = Account #3100 Land / Lot Sales
   3. Item #3200 Residential Construction = Account #3200 Residential Construction
   4. Item #3300 Remodeling = Account #3300 Remodeling
4. Write separate invoices for different charges. (Draws, Change Orders, Allowances, etc.)
5. Keep each invoice to a single issue.
6. Enter a single line description of the invoice charge into the memo field.
   1. Contract Deposit
   2. Slab Draw
   3. Roof Draw
   4. Drywall Draw
   5. Lighting Fixture Allowance Adjustment
   6. Plumbing Fixture Allowance Adjustment
   7. Change Order #43554
   8. Change Order Dated 3/24/00
   9. Extra Work as per Change Order #5406
   10. Construction Costs from 3/1/00 to 3/15/00 as per attached report

Estimates

1. Do not use QuickBooks Pro to do estimates
2. It’s not powerful enough for the typical builder.
3. Use estimates only to enter a draw schedule in the event you want to use the progress billing

Receive Payments

1. Use to apply a customer payment to an outstanding invoice.
2. Use to deposit money received from Customers.
3. Always enter “Payment Received” into the memo line.
4. Will automatically deposit the payment into the designated checking account.

Make Deposits

1. Use to deposit money received from non-customers, for example:
   1. Sale of an asset.
   2. Received a loan check.
   3. Refund from Vendor.
   4. Transfer Funds.

Credit Memos And Refunds

1. Use to make adjustments to a customer’s account.
2. Allowance credit. (Actual amount less than allowance)
3. Negotiated settlements at end of job (you got screwed)

Statements

1. Provides a summary of all your transactions with a specified customer.
2. Great tool for reminding customer of where they are with respect to draws, allowances, extras, etc.
3. Perfect for settling with customers at the end of the project.
4. Do on an as-needed basis for individual customers.
5. Always enter a date range that is bigger that the project to get a complete statement.
6. Preview before printing.
7. Now you see why you entered a description into the memo field of the invoices.

Write Checks

1. This is self-explanatory.
2. Enter class in the far right column (if applicable).
3. Don’t use this to write checks to pay bills in Accounts Payable (that’s what Pay Bills is for)
4. Don’t use to write checks to pay off payroll liabilities (Tax Deposits, SUTA returns, etc.) (Use Activities | Payroll | Pay Liabilities)

Transfer Money

1. Use to move money between accounts (checking to savings, etc.).
2. Do not use if the transaction was conducted by check.

Enter Bills

1. Enter vendor bills as they are received.
2. Date is the date on the bill, NOT the date you posted it.
3. Reference No. is the bill / invoice / ticket number.

Pay Bills

1. Use to select bills for payment.
2. Always set to Show All Bills and Sort by Vendor.
3. QB will create the checks and send them to the Checks to be Printed list to wait until you actually want to print them.

Credit Card Charges

1. Use to enter credit card charges.
2. Be sure to select the correct credit card account each time.
3. Identical to entering a bill.

Make Journal Entry

1. Used to make bookkeeping entries that don’t result from transactions, for example:
2. Opening Balances / Balances carried forward.
3. Depreciation / Casualty write-offs.
4. Should be used in conjunction with your accountant’s advice.

Payroll

Separate seminar.

Inventory

NOT USED

Setup Budgets

1. Budgets are target numbers only. They have no effect on your tax or financial reports.
2. You may enter budgets for anticipated income as well as expected job costs.
3. You may also enter budgets for overhead expenditures, which allows you to monitor overhead expenses by month.
   1. Menu Path = Activities | Setup Budgets
   2. Select account (Job Cost Code)
   3. Select Customer/Job
   4. Leave class blank
   5. Enter budget amount in January of year job started.
   6. Select Save to continue entering additional budgets.
   7. Select OK to save and close the dialog box.

Using Purchase Orders

1. Not recommended for most builders because the additional paperwork.
2. Some builders use a limited PO system to control multi-payment subcontractors (electrician, plumber, framers, etc.)

Reconcile

1. Used most commonly to reconcile checking accounts.
2. Any Balance Sheet account can be reconciled.

QuickBooks Menu

File Menu

1. Open Company
   1. Used to open another QuickBooks company file.
2. Company Info
   1. Used to enter company name, address as you wish it to appear on reports, invoices, etc.
   2. Add company phone and fax numbers on the last line of the address to facilitate their appearance on all invoices, purchase orders, etc.
3. Set up Users and Passwords
   1. Used to enter master password and sub-passwords. Needed to utilize Freezing of prior bookkeeping periods.
   2. Password protection not required in single-user environment.
4. Preferences
   1. Used to control how QB operates.
   2. Select File | Preferences on the menu.
   3. General
      • Pressing Enter moves between fields = Checked
      • Automatically place decimal point = Unchecked
      • Automatically recall last transaction for this name = Unchecked
      • Hide Qcards for all windows = Checked
5. Icon Bar
   1. Show text only = On
6. Accounting
   1. Use account numbers = Checked
   2. Show lowest subaccount only = Checked
   3. Require accounts = Checked
   4. Use class tracking = Checked
7. Printer Setup
   1. Used to set default printers for different tasks (dedicated check printers, for example)
   2. To change default check font from the default 9 point Times New Roman to a larger font.
8. Import
   1. Import function will not work properly if the two QB files have conflicting custom fields.
9. Export
   1. Used most commonly to export customer and vendor lists to another QB file.
   2. When activated, you select what lists you want to export (usually just the customers and vendors), then QB will prompt you to enter a name for the temporary file.
10. Accountants Review Copy
    1. Used to create a duplicate copy of your QB file for your accountants review.
    2. You can continue to use your QB file for your daily bookkeeping tasks.
    3. You accountant can make entries into his copy that can later be merged into your copy.
11. Edit Menu
    1. Most of the Edit menu is self-explanatory.
    2. The Edit Menu selections will change depending upon which type of document you have on the screen.
12. Memorize
    1. Use to add the currently displayed transaction to the memorized transaction list for future re-use.
13. Change Account Color
    1. Use to change the color of any ledger or check.
    2. Used most often to match check colors on screen to actual checks colors.

Customer/Jobs

1. The Customer field at the top of the dialog box is for internal reference only.
2. Create one customer for each project.
3. You do not need to create jobs under each customer except as provided below.
4. Creating a job under each customer (like the QB manual suggests) only makes your Customer:Job list unnecessarily long
5. If you perform another job for the same customer, then enter that job as another Customer:Job with a new job number.
6. You may wish to enter jobs under individual customers in the following circumstances:
7. You are a subcontractor who performs multiple jobs for the same customer.
8. You are performing a cost-plus project and you need to provide your customer with separate job cost for each change order, in which case you would create jobs under the customer named:
   1. Main Contract
   2. Change Order #1 (and for each additional change order)
9. You want to provide your customer with separate statements for the construction draws, the allowances, and the changes, in which case you would create three jobs under the customer:
   1. Allowances
   2. Main Contract (or Bank Draws)
   3. Extras (or Change Orders)
10. Customer/Job name format:
    1. Job Number, then…
    2. Customer last name, then…
    3. Single word description of job.
11. Example Customer:Job names:
    1. 1044  Jones Residence
    2. 1047  Smith Addition
    3. 1065  321 Main Street Bldg
    4. 1068  Lot 43, Winding Hollow
12. If the customer is a husband and wife, enter both names in the First Name (i.e. Bill & Sue), then…
    1. The Billing address is the Customer’s current address.
    2. The Ship To address is the project address or legal description.
    3. These may in many instances be the same address.
    4. If possible, make a selection for Customer Type and Job Type.
    5. Use of other fields is optional and many may be left blank.

Vendors

1. Enter the Vendor’s full legal name in the Vendor field at the top of the dialog box.
2. Account Number is the account number the vendor has assigned to your account.
3. Terms should be left blank.
4. Tax ID is the vendor’s Social Security Number or FEIN.
5. Check “Vendor Eligible for 1099” if applicable. Note: This setting may be made later or changed at any time.
6. Enter insurance expiration dates beginning with the three letter abbreviation for the month. Example:
   1. NOV/12/99
   2. AUG/23/00

Other Names

1. Everybody you transact business with must be entered on one of the four QuickBooks Lists.
2. This list is for names that don’t fit the other three lists.
3. Example of Other Names:
   1. The IRS and other tax authorities.
   2. Loans to other than vendors, customers or employees.
   3. Credit card providers.
4. You can move a name from the Other Names list to any of the three other lists, but not the reverse.

Templates

1. Templates are QB forms you can create, modify, and save for different purposes.
2. You can make template forms from Invoices, Estimates, Purchase Orders, Credit Memos and Statements.
3. Templates allow you to select fields, move fields around, draw lines, change fonts, etc.
4. Use the Templates feature to re-name the standard invoice to Request for Payment.
5. The QuickBooks Template File contains a number of Template forms we’ve already customized you your immediate use.

Other Lists

Special Strategies and Procedures

Tracking Vendor Insurances

1. There are several strategies you can employ to track the expiration dates of your vendor’s Workers Compensation, General Liability, Vehicle and other insurances.
   1. You can filter a vendor list report by the expiration dates of various insurances, such as who is expiring next month.
   2. You can set Reminders to notify you when a specific vendor’s insurance is about to expire.
2. In the Vendor Database, I’ve added several custom fields specifically for recording insurance information, for example:
   1. W/C Expire
   2. G/L Expire
   3. Auto Expire
3. Use these fields to record the applicable insurance expiration dates using the first three letters of the month instead of the month number. For example:
   1. NOV/12/99
   2. AUG/01/99
4. Create a list report of your vendors that includes one or more of these fields.
5. Filter the report on one of these fields to produce a report of vendors who’s insurance is to expire within a certain month. Set the filter for just the three letters of the desired month.

Loans And Loan Payments

Each loan should be given it’s own account number on the Chart of Accounts. Each loan payment should be split between the principal and interest using an amortization schedule from the lender.

As a practical matter, you may wish to use a memorize a loan payment with the same principal/interest split for the 1st 11 months of a year, and use the last payment of each year to make adjustments to the totals for the entire year.

Cost-plus Billing

1. Enter bills and checks according to standard procedures.
2. Each billing period (week, bi-monthly, etc.) prepare a job cost transactions report:
   1. Filtered by Name = Customer/Job
   2. Filtered by Entered/Modified for applicable billing range dates.
3. Attach report to invoice with the description Construction costs from [date] to [date] as per attached report.
4. Add additional line items to the invoice for markup.

Progress Billing

1. QB will track your draws, what you’ve already billed, and what you have remaining.
2. Progress billing works with a Schedule of Values or a fixed draw schedule.
3. To use Progress billing:
   1. Use a QB Estimate to enter the draw schedule.
   2. Select Activities | Create Invoices.
   3. Select project.
   4. Select Yes at Customer has estimate…
   5. Select Create invoice for selected items or for different percentages of each item.
   6. Show Quantity and Rate = Checked
   7. Show Percentage = Checked
   8. Enter percentage or amount of desired draws.
   9. Select OK to create invoice
4. You may append the original draw schedule by:
   1. Changing the draw amounts.
   2. Adding change orders as additional draws.

Tracking Customer Allowances

1. QB will track your customer’s actual allowance expenditures against budgeted allowance amounts (by cost code). This report may be produced at any time for the customer’s review.
2. The procedure is as follows
   1. Enter each Allowance amount as a budget in QB corresponding to the correct cost code.
   2. Post bills and write checks as normal.
   3. At any time you may open an standard Job Cost Variance Report and filter it by Selected Accounts and then individually select the allowance cost codes.
   4. The resulting report will compare the known expenditures vs. the budgeted amount, with a running balance.
3. QB will also track what allowances you have billed the customer, what remains unbilled, and the status of all open and paid invoices.
4. This procedure is conducted in the Accounts Receivable portion of QB, as follows:
   1. Create a Job named Allowances under the Customer in the Customer/Job list.
   2. Note: This procedure may result in the existing transactions being placed in another Job under the customer.
   3. Each time you invoice the customer for an allowance schedule item, make sure the invoice is assigned to the Job Allowances under the customer name.
   4. At any time, you may create a Statement summarizing the allowance charges and payments received for the customer’s review.
   5. This statement may be filter just for the Job Allowances, or it may be a section of a more comprehensive statement encompassing the entire project.

Using Purchase Orders

1. Instituting a full purchase order system will create a lot of additional work for you and your staff.
2. Many builders use QB without using purchase orders at all.
3. A good compromise is to use purchase orders for major purchase with lengthy lead times (trusses, cabinets, etc.) and to track multi-payment subcontractors (plumbers, electricians, etc.)
4. If you want to use a purchase order system, consider these options:
   1. Consider using hand written purchase orders to authorize small field purchases.
   2. Don’t attempt to enter every line item from a quotation into a purchase order. Instead, make one entry to summarize the quotation, as follows:
      • Framing package as per attached quote OR
      • Masonry work as per attached proposal.
5. Don’t enter purchase orders for zero amounts.
6. Use COGS and/or expense items only on purchase orders.
7. Don’t accidentally assign income items (3000-3999) to purchase orders.

Taking Discounts From Bills

1. Do not take the discount when you 1st enter the bill into Accounts Payable.
2. The procedure is as follows:
   1. Select Activities | Pay Bills
   2. Select a bill to pay.
   3. Select Discount Info
   4. Amount of Discount = The amount you want to deduct
   5. Discount Account = 3960 – Discounts Taken

Entering Fixed Assets

1. As beginning entry when 1st setting up the QB file:
   1. Menu Path = Activities | Make Journal Entry
   2. Date = Beginning date of this set of books.
   3. Entry No. = Fixed Assets
   4. Account = 1800 to 1840, select to match category of asset.
   5. Enter asset value as credit.
   6. Memo = Name and serial number of asset.
      • Example: ACTX Laptop #5406AR33″
      • Example: Makita Table Saw #MK5075343″
   7. Move down to next line of entry.
   8. Account = 2900 Owners Equity
   9. Enter corresponding amount as debit.
   10. Continue until all assets are entered.
2. When purchased by check, credit card or charged on account.
   1. Select the split window of the transaction (check, credit card charge, bill, etc.).
   2. Account = 1800 to 1840 (select to match category of asset).
   3. Amount = Purchase price of asset.
   4. Memo = Name and serial number of asset.
      • Example: ACTX Laptop #5406AR33″
      • Example: Makita Table Saw #MK5075343″

Entering Depreciation

1. Depreciation is the reduction of the value of an asset over time.
2. Depreciation is an expense, but not a cash expense.
3. In other words, you do not actually receive a bill for depreciation or write a check for depreciation.
4. Nevertheless, your fixed assets do loose value over time, and you are entitled to deduct that loss of value as an expense.
5. Within certain parameters, you can manipulate your net profit by varying the amount of depreciation you take.
6. Depreciation rules can be complicated and generally you should rely on your tax advisor’s advice when calculating depreciation.
7. Entering depreciation as general journal entry:
   1. Menu Path = Activities | Make Journal Entry
   2. Date = Last day of tax year.
   3. Entry No. = Depreciation
   4. Account = 1800 to 1840 (select to match category of asset)
   5. Enter depreciation amount as credit.
   6. Memo = Name and serial number of asset.
   7. Name = [tax year] Depreciation (entered as Other Name)
   8. Example: 1999 Depreciation
   9. Class = Leave blank
   10. Move down to next line of entry.
   11. Account = 2900 Owners Equity
   12. Enter corresponding amount as debit.

Micro Payroll

1. The Micro Payroll procedure is a simplified payroll process that incorporates memorized paychecks.
2. This procedure is suitable for situations where there are only one or two employees, all of whom work in overhead functions.
3. The procedure is as follows:
   1. Create and memorize a paycheck for each employee.
   2. Pay is assign to the corresponding overhead account (Office/Clerical, Owner’s Salary, etc.)
   3. FICA and tax withholdings are assigned to the corresponding liability accounts, and are entered as negative numbers.
   4. Memorize the check, and use it each pay period to pay the employee.
   5. You may change the memorized amounts as needs may require (short payweek, change in pay rate, etc.)
   6. Pay withholdings by check, crediting the corresponding liability accounts as required.

Printing Lien Releases on Check Stubs

1. The Procedure is as follows:
   1. Use one-check-to-a-sheet checks with the blank middle and bottom stub.
   2. Design a lien release in any word processing or spreadsheet file that prints on the middle check stub around where QB is going to print the information.
   3. Pre-print the lien release onto your blank checks.
   4. Whenever you print a check in QB, the lien release will already be on the check stub, ready for signature.

Closing Out Reporting Periods

1. Officially Closing an accounting period was a necessity back in the days when books were kept with pencil and paper.
2. Computer bookkeeping programs allow more flexibility.
3. QuickBooks does not require you to Close accounting periods.
4. The overwhelming number of users prefer to the benefits of being able make retroactive changes as the need becomes necessary.
5. Nevertheless, there are certainly situations wherein you would want to prevent another user to accidentally change prior data without authorization.
6. For example, many users would want to restricted changes to their QuickBooks entries after the numbers have been finalized for tax reporting.
7. To prevent changes to previous date, use passwords to prevent changes to data on or before the date you set.
8. This will prevent anyone else from making changes to the data.

Entering Hand-Written Checks

1. You may enter checks that were hand-written or written in another program into your check ledger at any time, by either of these two methods:
   1. You may enter it in the Write Check screen, OR
   2. You may enter it directly into the ledger.
2. To enter the check in the Write Check screen:
   1. Menu Path = Activities | Write Checks
   2. Enter the actual check date and number.
   3. Enter the other information.
   4. Select OK to record the check.
3. To enter the check in the check register:
   1. Menu Path = Lists | Accounts
   2. Select the correct bank account.
   3. The ledger will open with a new blank entry at the bottom.
   4. Enter the actual check date and number.
   5. Enter the other information.
   6. Select OK to record the check.

Reports

General

1. You can create almost any report you may need by starting with the correct basic report and using customize and filters.
2. You should explore the possibilities and experiment with the options.
3. Nothing you do to a report will change the underlying data.

Using Template Reports

1. The term Template Reports is not a QuickBooks term and it is not in the QB manual.
2. Template Reports are memorized reports you’ve customized and formatted but have not filtered or titled.
3. Template Reports are used to save time because you’ve already set them up, they just need to be filtered and titled.
4. Template Reports are useless until you filter and title them.
5. Procedure for using a Template Report
   1. Remember procedure FTM (Filter-Title-Memorize)
   2. Menu Path ‘ Reports | Memorized Reports
   3. Select the desired Template Report
   4. Filter | Name = Customer/Job
   5. Header/Footer | Report Title = [Job Name] [Title of Report]
   6. Memorize as a New report. (Remember: You don’t want to replace the template report because you’ll want to use it again).
   7. Enter memorized report name = Use the suggested name, which is the same as the report title.

Insurance Expiration Date Report

This is a great report of examining and tracking the insurance policies, most notably the Workers Compensation policies, of your subcontractors.

1. From standard QB lists report:
   1. Menu Path = Reports | List Reports | Vendor | Contact List
   2. Select Customize
   3. Select only the following columns:
      • Vendor
      • Vendor Type
      • W/C Expire Date
      • Ins. Agent Phone
   4. Select Header/Footer
   5. Report Title = W/C Expiration Date Report
   6. Select Memorize
2. To filter for a specific month
   1. Select Filters
   2. Select W/C Exp Date
   3. Enter three letter abbreviation for desired month.

Vendor 1099 Information Report

This report identifies what vendor information you have or need to obtain from you vendors prior to printing the year-end 1099’s.

1. From standard QB lists report:
   1. Menu Path ‘ Reports | List Reports | Vendor Contact List
   2. Select Customize
   3. Select only the following columns:
      • Vendor
      • Vendor Type
      • Tax ID
      • Eligible for 1099
   4. Select Header/Footer
   5. Report Title = Vendor 1099 Report
   6. Select Memorize

Job P & L Reports

1. From standard QB report:
   1. Menu Path = Reports | Profit & Loss | Standard
   2. Dates = All
   3. Customize | Other Columns | % of Income ‘ Checked
   4. Filter | Name = Customer/Job
   5. Header/Footer | Report Title = [Job Name] Profit & Loss
   6. Memorize if desired.
2. From a pre-memorized Template Report:
   1. Remember procedure FTM (Filter-Title-Memorize)
   2. Menu Path = Reports | Memorized Reports
   3. Select Template – Job Profit and Loss
   4. Filter | Name = Customer/Job
   5. Header/Footer | Report Title = [Job Name] Profit & Loss
   6. Memorize in accordance with Template Report procedures.

Job Cost Variance Reports

1. From standard QB report:
   1. Remember procedure FTM (Filter-Title-Memorize)
   2. Menu Path = Reports | Budget Reports | Budget vs. Actual
   3. Dates = All
   4. Columns = Job/Job
   5. Filter | Name = Customer/Job name
   6. Header/Footer | Report Title = [Job Name] Profit & Loss
   7. Memorize if desired.
2. From a pre-memorized Template Report.
   1. Remember procedure FTM (Filter-Title-Memorize)
   2. Menu Path ‘ Reports | Memorized Reports
   3. Select Template – Job Cost Variance Report
   4. Filter | Name = Customer/Job
   5. Header/Footer | Report Title = [Job Name] Job Cost Variance Report
   6. Memorize in accordance with Template Report procedures

Job Cost By Class

1. From standard QB report:
   1. Menu Path ‘ Reports | Profit & Loss | Standard
   2. Dates = All
   3. Filter | Name = Customer/Job
   4. Filter | Account = All cost-of-sales accounts
   5. Header/Footer | Report Title = [Job Name] Job Cost by Class
   6. Columns = Class
   7. Memorize if desired.
2. From a pre-memorized Template Report:
   1. Remember procedure FTM (Filter-Title-Memorize)
   2. Menu Path = Reports | Memorized Reports
   3. Select Template – Job Cost by LMSR
   4. Filter | Name = Customer/Job
   5. Header/Footer | Report Title = [Job Name] Job Cost by Class
   6. Memorize in accordance with Template Report procedures.

Completed Contracts Reports

1. To establish Income, Direct Costs and Gross Profit for the tax period:
   1. Menu Path = Reports | Profit & Loss | Standard Dates = All
   2. Filters = Name | Selected Names…
   3. Select all projects that were completed in the prior tax period.
2. This report will give you your total income and direct costs for the selected projects, with the difference being your gross profit.
3. To establish you Overhead expenses for the tax period:
   1. Menu Path = Reports | Profit & Loss | Standard
   2. Dates = The tax period (typically the past year)
   3. Filters | Accounts ‘ All ordinary expense accounts
   4. This report will establish your overhead expenses for the tax/calendar year.
4. To establish your Work in Process and Construction Draw Liabilities:
   1. Menu Path = Reports | Profit & Loss | Standard
   2. Dates = All
   3. Filters = Name | Selected Names…
   4. Select all the current ongoing projects.
5. This report will give you your total income and direct costs for the selected projects.
   1. The income is your Construction Draw Liabilities
   2. The directs costs total is your Work in Progress.
6. To enter your Work in Process and Construction Draw Liabilities into your Balance Sheet:
   1. Menu Path = Activities | Make Journal Entry
   2. Date = Today.
   3. Entry No. = Leave Blank
   4. Account = 4000 Construction Costs – enter as Credit.
   5. Account = 1790 Work in Progress – enter as Debit.
   6. Account = 2390 Construction Draw Liability – enter as Credit.
   7. Account = 3000 Income – enter as Debit.
   8. Select OK.
   9. Print balance sheet report.
   10. Delete the above general journal entry after printing the balance sheet report.

Bookkeeping Tips

Bookkeeping Productivity

It’s somewhat difficult to project the exact number of manhours you should anticipate to keep your books because of a number of variables in your bookkeeping requirements. Nevertheless, in response to the many questions I get on the subject, I will provide you with a reasonable “rule of thumb”.

Generally speaking, using the full spectrum of QB’s features including AR, AP, basic payroll, checkbook balancing, credit card purchases, and producing accurate job costs reports, you should expect to apply one man hour for every $1,000.00 in gross sales.

This figure equates to the following:

1. A construction company with an annual volume of $500,000 per year, which is an average of $10,000 per week, will require approximately 10 hours of bookkeeping every week.
2. A construction company with an annual volume of $1,000,000 per year, which is an average of $20,000 per week, will require approximately 20 hours of bookkeeping every week.

Controlling Paperwork

1. Use the Four Bin System to control paperwork.
   1. Put a shelf on the wall above your computer or make another convenient location accessible to your computer.
   2. Install and label four bins as follows:
      • Bin #1   Unopened Bills
      • Bin #2   Coded and Approved
      • Bin #3   Posted in QB
      • Bin #4   Paid
   3. As bills and similar notices are received from your vendors via mail or hand-delivered, they are deposited in Bin #1.
   4. As bills are examined, stamped and coded, they are moved to Bin #2. Note: This process may be performed by all personnel from Field Supervisors to Office Managers.
   5. Bookkeeping periodically removes the bills from Bin #2, enters them into QB Accounts Payable, stamps each such bill with the Posted in A/P stamp, and deposits the bill to Bin #3 to await payment.
   6. On a periodic basis, typically once a week, bookkeeping should print an Unpaid Bills by Vendor report for management consideration.
   7. After bills are selected for payment that week, the checks are printed, and the bottom check stub is stapled to the source document and deposited in Bin #4.
   8. At the beginning of each month, collect all the paid bills from Bin #4 and insert them into an accordion envelope with the month and year written on the side. File as desired.
   9. Bills may move from one to another bin at any time. For example ,a bill could get paid immediately and the original bill and the check stub deposited directly into Bin #4.
   10. With this system, everyone in the company knows where to look for any bill that’s still in your bookkeeping process.

Filing Paid Bills

1. File paid bills by the month, NOT by vendor or project.
   1. Filing paid bills by the project or by the vendor requires too much sorting and filing with little benefit.
   2. Filing paid bills by the month is easy because all you do is filed the paid bills once per month.
   3. 95% of all the information you might need from the actual bill is already entered into QB. In the rare event that you actually need to retrieve the original source document, all you need to do is flip through the monthly folder and find the original paperwork.

Starting a New Company File

Opening New Company File

1. 1. Select New Company…
   2. Select Next twice, then skip the EasyStep Interview.
   3. Enter your Company Name and Address.
   4. Under Creating New Company select No Type.
   5. Close the Navigator.

Entering Customers

1. See earlier section titled Customer/Jobs
2. Menu Path = Lists | Customer:Jobs
3. Select the Customer:Job button in the lower left corner.
4. Select New to open the New Customer dialog box.
5. Under Customer, enter a job number, two spaces, then the job name.
6. Enter the other requested information.
7. Select OK. (You change this information at any time.)

Enter Your Vendors

1. 1. See earlier section titled Vendors
   2. Menu Path ‘ Lists | Vendors
   3. Select the Vendor button in the lower left corner.
   4. Select New to open the New Vendor dialog box.
   5. Under Vendor, enter the vendor name. Enter the other requested information.
   6. Select OK. (You change this information at any time.)

Setup Your Checking Account

1. Menu Path = Lists | Chart of Accounts
2. Select account # 1000 on the list.
3. Select the Account button in the lower left corner.
4. Select Edit to open the Edit Account dialog box.
5. Enter the name of your bank in the Name window.
6. Select OK.

Enter Your Beginning Balance

1. Find your most recent bank statement.
2. Menu Path = Lists | Chart of Accounts
3. Select account # 1000 on the list.
4. Select the Activities button in the lower left corner.
5. Select Use Register to open the checking account register.
6. On the 1st line, enter the beginning date from the bank statement.
7. Replace the $1.00 under Deposit with your checking account’s beginning balance.
8. Press Enter to record the new entry.

Enter Your Previous Checks

1. Find your most recent bank statement.
2. Menu Path = Activities | Write checks
3. Enter Check #, Date, Payee and Amount of the 1st check on the statement.
4. Enter Account #, Amount, Customer:Job (if applicable) and class.
5. Select Next to record the check.
6. Repeat the process with each check on the statement.
7. Close the Write checks window when finished.

Enter Your Previous Deposits

1. Menu Path ‘ Activities | Make Deposits
2. Enter the deposit date, Received From (customer), the amount of the deposit, From Account (income account #3000 or related), check number (if known) and payment method. Leave Class blank.
3. Select Next to repeat the process for each deposit.

Balance Your Checking Account

1. Enter any bank charges as Checks with no check number.
2. Your balance in QB should equal your bank statement.
3. Enter all outstanding deposits and checks as described above.
4. The balance in QuickBooks is your current bank balance.
5. QuickBooks is now ready to use!