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ConnectStratJamison
February 21, 2020

QuickBooks Online for Consulting Firms

  • February 21, 2020
  • 1 reply
  • 0 views

Hello!

 

I have a consulting firm where most of the consultants are 1099 contractors (a few just receive referrals and pay a commission back to the firm). I am trying to set up QuickBooks Online to track this well.

 

As a general example a consultant might have 10 total clients. They work with each a few days per year. The cost to the firm is ordinarily comprised of the subcontracting cost of the dedicated consultant plus possibly some reimbursable expenses. To date I have very little else to expense on a per-client basis. 

 

Also, each consultant pays a monthly fee to be part of the firm, so they are both a CUSTOMER and a CONTRACTOR at the same time, which is painful. I have a few questions/challenges and I'd love your thoughts.

 

  1. Can I have the same company (the consultants are all LLCs) be both a CUSTOMER and a CONTRACTOR? My research says no. I need to enter all the same information twice and have one character in the name slightly different. What a pain.
  2. I am using QuickBooks Payments to collect the monthly fees (and any referral fees) from the consultants when they owe me money. I am debating what to use when I owe them. They are contractors, so I have played with Gusto to allow both contractor and payroll features, but it feels like QuickBooks Bill Pay (bill.com) will handle the contractor payments just fine within the same system with 1099 reporting. Thoughts on this?
  3. I would love to have reporting by CLIENT and by CONSULTANT. I just upgraded to the PLUS version of QuickBooks Online. This adds two things: PROJECTS and CLASSES. I am really wondering how to handle this. As mentioned, each client has a dedicated consultant, but I could see at some point crossover where a second consultant helps an existing client. I am wondering if it makes sense to setup each client engagement as a unique project. I would then have decent reporting on per-client profitability. I would also like to see profitability per consultant. Maybe I use classes for that? But I understand classes don't appear to cover labor. I'd love some insight here, it's an interesting challenge.

Thanks to anyone who chimes in. I am excited to get all this working well.

    1 reply

    S
    smallbiznumbers
    February 24, 2020

    Hi ConnectStratJamison,

     

    Sounds like you got a lot going on. While I’m sure it will not solve all your challenges, I’m happy to offer my thoughts on the situation.

     

    1

    If you use the Invoice or Sales Receipt forms to record the monthly fee, you will have to create a Customer. As a workaround, you record the fees using Deposits, which will allow you to record under the Vendor name. Note that for Invoices/Sales Receipts, you are tracking the fee as a product or service; with Deposits, you are recording the fee directly to the income account.

     

    2

    I have some experience with BillPay, and you can use it to for payments to 1099 contractors. You just have to be sure that the consultants should be treated as 1099 contractors rather than a statutory employee (https://www.irs.gov/businesses/small-businesses-self-employed/statutory-employees)

     

    3

    You can use Projects if you do various specific jobs/projects for each client. However, if the engagement is ongoing, you don’t necessarily need to use the Projects feature. Instead, you can use the setting Track expenses and items by customer. This feature will allow you to allocate expenses by customer when creating Bills/Checks/Expenses.

    1. Select Gear icon at top right corner -> Accounts and Settings
    2. In the Expenses tab, select the pencil icon in the Bills and expenses section
    3. Select the checkbox to Track expenses and items by customer
      1. If you want to include expenses in invoices/sales receipts to customers, also select Make expenses and items billable
    4. Select Save and Done

    To view profitability by customer, run a Profit and Loss report and date it for the period you want to review. In the Display columns by dropdown above the report, select Customers.

    The Class feature can be considered an option to track profitability (income and expenses) by consultant.

    1. Select Gear icon at top right corner -> Accounts and Settings
    2. In the Advanced tab, select the pencil icon in the Categories section
    3. Check box to Turn on classes
      1. You have the option to assign classes to each row of a transaction (i.e., each line item) or to the entire transaction. Since work for each customer is typically done by one consultant, you may want to select the option to assign class to the entire transaction. Select Save and Done
    4. Select Save and Done
    5. Select Gear icon at top right corner -> All Lists
    6. Select Classes
    7. Select New button to create classes; you will create one for each consultant (since you have a Plus subscription, you can create up to 40 classes)

    The Class section will now appear on sales and expense transaction forms. To allocate the income and expense to a certain consultant, simply select the appropriate consultant (class) from the Class dropdown in the transaction form.

     

    To view profitability by consultant (class), run a Profit and Loss report and date it for the period you want to review. In the Display columns by dropdown above the report, select Class.

     

    Regarding, “classes don't appear to cover labor”, is this referring to payroll? I believe you can use class tracking for payroll. Admittedly, my experience with Gusto is limited, but if you’re syncing it with QBO, I think you can use map Gusto departments to QBO classes.

     

    Best regards!

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