Accounting for Time in QuickBooks

 

If you sell services to your customers, you’ll need to understand how to use QuickBooks’ time-tracking features.

Small businesses that sell products have to do a constant balancing act. Keep too much inventory on hand, and you’re sitting on potential profits. If you don’t order enough and you run out, your customers may go to a competitor. QuickBooks provides tools and reports that can help you manage this ongoing challenge.

Selling time and services is a different story. There’s no real inventory tracking involved — except in terms of knowing how much manpower you have available at any given time. But just like you wouldn’t want customers to walk off with merchandise they haven’t bought, you don’t want any billable minutes or hours to be ignored. Both scenarios eat into your profits.

Gone are the days when you had to count on employees to fill out detailed timecards and hope that they remembered to document everything. QuickBooks can help ensure that you’re getting paid for all time and services rendered. 

Building Your Records

Before you can ask employees to start tracking the hours they put in, you need to create a record for every time-based activity so that QuickBooks knows how much to charge when billable time is entered. The software creates and stores these in the same way it builds records  for physical inventory items.

Start by clicking on the Items & Services icon on the home page (or go to Lists | Item List).  Click the down arrow next to Item in the lower left of the screen that appears, and then select New from the menu (or right-click in the main part of the screen and select New).

 

Figure 1: Once you’ve created a record for a service item, you can use it throughout QuickBooks.

A list of options will drop down under TYPE. Select Service. Type in the Item Name/Number and click in the box to the left of Subitem of if the time item should be grouped under another. In this example, the relationship is Labor/Removal (labor). U/M Set is not an option in your version of QuickBooks.

Note: If you will be working with subcontractors, let us help you set up these services. It’s a little more complicated.

Enter a description for your service and a rate, then click on the drop-down arrow and select a tax rate if appropriate (click on <Add New> to create one on the fly). Select an Account from the list. It should be some kind of income; in this case, it’s Construction Income. Ask us if you have any doubts here. Click OK when you’re done. Now this service will appear in your Item List.

Tracking Time

When you want to create a record for a work session, click the arrow to the right of Enter Time on the home page and select Time | Enter Single Activity (or open the Customers menu and select the same). Make sure the date for the activity is correct; you can click on the calendar and select if it’s not. Click on the arrow in the field below to select the correct employee.

 

Figure 2: You can either start the timer to record an activity’s duration or simply enter it in the box.

Click the arrows next to the CUSTOMER:JOB and SERVICE ITEM fields to open those drop-down menus and select the desired options. If you want to time the activity, use the Start, Stop, and Pause buttons below the duration box, or simply enter the amount of time it took. The CLASS and NOTES fields are optional.

If the time spent is billable, be sure that there’s a check in the box next to Billable in the upper right corner. If it’s not, click on the box.

Data you enter here will automatically appear on timesheets. You can enter time directly on timesheets by clicking Enter Time | Use Weekly Timesheet.

When you start an invoice for a customer who has accumulated billable time, you’ll see this message:

Figure 3: If you’ve entered billable time for a customer, this message will appear the next time you create an invoice for him or her.

Make sure that your employees understand the importance of documenting every billable minute. Lost time can eat into profits, and that has an impact on everyone in the company.

Reasonable Comensation for Sub S Shareholders

This is a HOT button for the IRS.

We want less compensation and more distributions to keep payroll taxes lower; the IRS wants the opposite.

We have formulas and ideas to protect you.

First, get over yourself and take salary and it has to be different than $24,000 or $36,000.

This shows the number is a guess and not based on time spent, and replacement cost for your service.

Let’s write it up and put it in the corporate minutes book.

Get ready they are coming after us all!

THINGS GET LOST OR FORGOTTEN OVER TIME

Things get lost or forgotten over time. Take a minute–

Make a list of all your assets and their beneficiaries–

  • Retirement Accounts
  • Bank Accounts
  • Investments
  • Insurance Policies

Also make a list of all your online logins and passwords–

  • Bank Accounts
  • Credit Cards
  • Cell Phones
  • Social Media and other Website Accounts

Keep your lists in a specific place that you will remember!

Check state records for unclaimed property for yourself and older or deceased family members.

Social Security is a big topic these days, so it is important we know where we stand. Go online to SSA.gov and “My Social Security”.

Set yourself up and check the details. You will need 40 credits (used to be quarters). Credits are based on your income, so make sure all your earnings have been recorded properly.

It is your information — Protect it!

Preventing Data Theft in QuickBooks

 

Be proactive about the security of your QuickBooks company file, and you’ll be less likely to encounter data theft.

Thanks to the internet, privacy has been on the wane over the last few years. We assume that our addresses and phone numbers are public information, thanks to sites like Switchboard and 411.com. We hopethat our dates of birth are private (though the number of birthday wishes on Facebook makes that doubtful), and we assume that our Social Security numbers are hard to get.

Your customers trust you enough to provide you with additional private information, like credit card numbers. And you’ve seen what an uproar occurs when major corporate entities like Target and Home Depot get hacked.

Your small business may not have hundreds of thousands of customer information files, but you can still be targeted by external hackers and even your own employees. Are you taking measures to ensure the security of that data stored on your hard drive and/or in the cloud?

 Your Inner Circle

The last thing you want to imagine is that one of your own employees has been tampering with your QuickBooks company data. It happens, though, and you need to protect yourself from potential internal attacks.

One of your internal controls, then, should include the establishment of boundaries for every employee who has access to QuickBooks. You can restrict each staff member to specific areas of the program instead of sharing a master password and giving everyone free rein. Go to Company | Set Up Users and Passwords | Set Up Users to do this.

Figure 1: If you click on Selective Access in this window, you can restrict your employees’ activities to specific areas and actions.

The User List window opens, which will display all users who have been set up already, including you as the Admin. Click Add User and enter a name and password. Click the box in front of Add this user to my QuickBooks license, then click Next. Click on the button in front of Selected areas of QuickBooks. Click Next.

The next 10 screens break QuickBooks down into separate activities and activity areas, like Sales and Accounts Receivable, Checking and Credit Cards, and Sensitive Accounting Activities. On each screen, click on the button in front of the correct option:

  •  No Access
  •  Full Access
  •  Selective Access (lets you specify what areas and actions will be allowed for that employee)

Other Internal Controls

QuickBooks’ Audit Trail is your friend. It records everything that is entered or changed in the software, by whom, and precisely when. To view it, open the Reports menu, then click on Accountant & Taxes, then Audit Trail. Like all QuickBooks reports, it can be customized to display the entries you need to see.

Figure 2: QuickBooks’ Audit Trail provides a detailed history of all activity in the software.

There are other reports that you should review frequently, and some that we should create and analyze for you at least every quarter, if not monthly. We can suggest reports that would help you look for fraud, and tell you what to look for.

Common Sense Practices

  • It goes without saying that protecting your entire hardware/software/cloud configuration will help keep your QuickBooks company file safe from external marauders. You must employ state-of-the-art antivirus and anti-malware applications and keep them updated. Talk to us if you need recommendations and/or help implementing them.
  • If you’re a sole proprietor or you work from your home, restrict the computer where QuickBooks resides to business software and websites only. Never let anyone install applications, play interactive games, etc. on it.
  • Change your own QuickBooks password at least every 90 days, and do backups to secure drives or websites.
  • When you run into problems with QuickBooks’ functioning, please let us help. Even a computer troubleshooting specialist will not understand the program well enough to solve problems, and he or she may compromise your data file further.

As security software and systems get smarter, so do the hackers. Don’t let your company and its customers be victims of data theft.