To set up QuickBooks for a construction company, you need to know the proper configuration required for a chart of accounts, which lists all of a company’s accounts and their balances. It is a pillar supporting all of the organization in QuickBooks, as it enables you to view not only the balances but also transaction history.
In this article, you’ll learn how to set up QuickBooks for a construction company.
Understanding the Chart of Accounts
Since the chart of accounts lists all of the accounts and their balances, you’ll find a long list of each account created in QuickBooks. You can go to the account history of any of the accounts to get more information about the balance and transaction history.
You can categorize a transaction into four categories:
- Assets: These are items like vehicles, buildings, equipment, etc owned by the business.
- Liabilities: Money recorded but not yet paid by a business.
- Income: revenue and payment received on a day-to-day basis. Includes sales revenue.
- Expenses: Money spent on day-to-day business operations, such as rent, office supplies, and advertising.
Setting up QuickBooks for a Construction Company
Workflows often required by construction companies include:
- Scheduling a project/job schedule
- Creating estimates for a project/job
- Tracking the budget of the job against the estimates
- Managing requests for change
- Bid collection from various vendors
Step #1: Creating lists
Since a chart of accounts is used for listing all types of transactions, including Assets, Liabilities, Income, and Expenses, you should use all these types in order to get the most benefit.
To access the chart of accounts, you can:
- Select the Lists menu.
- Click on Chart of Accounts.
In the chart of accounts, you need to create accounts to record the Cost of Goods Sold. These accounts may be titled labor, material, subcontractor, etc.
Create Items List
Your clients are likely to record the estimates of a job on a prince of paper or microsoft excel. These items and their estimates should be listed in QuickBooks.
To do so, you can:
- Click on the Lists menu.
- Select Items List.
Here, you need to select items for the service type, inventory, non-inventory, etc.
Only make the lists as detailed as the clients want because the client will have to record data according to the fields created. If you create very detailed lists, then your client may not be able to follow up, understand, or record data accurately. So consult with your clients before creating lists.
Step #2: Change Preferences for Jobs and Customers
You need to set a job on the basis of the customer. If the customer is too large, then you’ll have to create multiple jobs. For instance, if your customer is a large retailer with stores in multiple locations, then you’ll have to set a job for each of the stores.
The customer center provides the options to create both customers and jobs.
If you need to work at a single site, then you don’t have to create jobs under customers. You can simply create a customer and post a transaction to that list.
To create customer or job type in QuickBooks, follow the steps provided below:
- Go to the Lists menu.
- Select Customer & Vendor Profile lists.
- In the Customer Center, select a Customer or job.
- Go to the Additional Info tab.
- Assign the type (construction, remodel, or any other service.)
If you want to add details to a particular job, follow the steps provided below:
- Go to the Customer Center.
- Select a Job and click on Edit Job.
- Add the details in the fields provided. You can add the following:
- Start date
- End date
- Other details
Entering details related to a job can help you in remembering them at a later date. These details are necessary for creating in-depth reports that can be filtered easily.
Step #3: Create Estimates for a Job
Estimates can help you keep the growing cost of a job in check. You can rely on them to make sure that the cost doesn’t eat into your profits.
To create an estimate, you can:
- Go to the Home Page.
- Select Estimates.
- Enter the Customer or Job.
- Assign the cost to each item that you created in the steps provided above.
- Enter both price and quantity for each item.
- Enter the Markup price and profit.
Once you’ve entered all of the data, you can start tracking your costs with the Budget vs. Actual reports. This report will show you how much you’ve spent in comparison to the estimate.
Whenever you record an expense using Write Check or Bill, you should rely on the Items tab and select the appropriate items. If you do so, you can track the expenses against the estimates quite easily via the Job Estimates vs Actual reports.
Step #4: Creating a Workflow for the Invoice
You’ll have to send invoices to your customer/client on a regular basis. So it’s important to create a workflow that is accurate and efficient.
Invoicing at Stages
You may have to create invoices at different stages of a project. Whenever a particular stage finishes, your client may want to send the invoice to his or her customer.
To create invoices in particular stages, follow the steps provided below:
- Go to the Edit menu.
- Select Jobs and Estimates.
- Go to the Company Preference tab.
- Select Yes for Progress Invoicing.
You’ve now activated progress invoicing, so you can send an invoice to your customer as soon as a particular stage of the project is over.
Note: Select a Progress Invoicing Template when creating an invoice for progress invoicing.
Step #5: Reporting
As with anything else in accounting, reporting is essential for a construction project. Reports enable you to analyze different aspects of the project, helping in minimizing cost and maximizing profit.
Several reports are available in QuickBooks Desktop for contractors, including:
- Job Estimates vs. Actual Summary and Detail
- Job Profitability Summary and Detail
- Profit & Loss by Job
- Committed Costs by Job (QB Enterprise)
- Job Work in Process Summary (QB Enterprise)
The summary reports contain the most important charts and tables, whereas the detailed reports contain everything related to the project. If you simply need an overview of the data, then a summary report is preferable. If you’re looking for a deep dive, then go for a detailed version.
It’s quite challenging to work with reports and set up templates appropriate for the construction industry.
If you find the task challenging, then reach out to our QB experts who can help you with the same.
Contact us at our LIVE CHAT
Q. Can I track the cost of the project?
A. Yes, you can. Once you’ve created estimates for a particular job, you can track the actual cost against the preset estimates. This enables you to keep the cost of the project in check. Several other reports are available in QuickBooks Desktop, both in summary and in detail. You can analyze the data and effectively curtail the costs of a job.
Q. Can I send invoices after a part of the project is complete?
A. Yes, you can. You need to enable progress invoicing for the Job. Once that’s done, you can simply send an invoice to your customer after completing every stage of the project. This ensures that you’ve funds available to you and that the customer pays up all the dues. It’s really beneficial to set up if you’re working with a new customer.
Q. How much time does it take to set up QuickBooks for the construction industry?
A. The time taken usually depends on your knowledge of QuickBooks and Bookkeeping. You can follow the steps provided in this article, but if you find it difficult to set up QB for constructors, then you can get in touch with our experts.