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jackals
December 19, 2019
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How to have billable time show in COGS Desktop version

  • December 19, 2019
  • 3 replies
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I created a Service item with the Expense account pointing to the correct cost of goods sold account.

 

I’ve tried four methods to get this to work:

  1. Time/Enter Single Activity for an Employee– selecting the applicable Job and the service item.
  2. Time/Enter Single Activity for an Other Name – selecting the applicable Job and the service item.
  3. For this particular job, time is charged at cost, so I tried simply adding the charge directly to the invoice, i.e. hours and selecting the Service item.

These three all work in every other respect except having the time appear in the COGS.

4. I tried a fourth option just to see that it would update COGS, even though I knew it would be impractical. I created a vendor referring to the employee name, added a bill from that entity, and it worked. However, this is impractical as this “vendor” is an employee and doesn’t get paid what the client is being charged and is compensated through the normal method – so I have a vendor that never gets paid, therefore impractical.

 

Pleased assist with ideas on how to make billable time appear in COGS.

Best answer by jackals

I'm still working on this, so not yet resolved. Next week I'm meeting with someone who has worked with this before and will report back thereafter.


Thank you all for your input. It all pointed towards the crux of the matter, but  stated specifically by @BigRedConsulting:

"Time won't show up on your financial statements until it is used in some way on a transaction."

 

My problem was caused by the fact that LLC members don't get paid salaries, so no payroll. But, to meet the need for a transaction, I'm having to create a spurious payroll to make sure the amounts end up in COGS, even though that's not the basis for charging the client nor for paying the members. 

3 replies

Kayla H
Kayla H
December 19, 2019

Good morning, @jackals.

 

Great to see you in the Community. I can assist with the information needed for COGS in QuickBooks Desktop.

 

Time for employees is an expense that you keep track of, COGS is only for the Cost of Goods Sold.

 

Functions for this in Quickbooks are:

  1. Inventory Accounts
  2. Average Cost

 

COGS Tracking can be tough and I'm here to help at any time. Reply to this post if further assistance is needed.

J
jackalsAuthor
December 19, 2019

Thanks @Kayla H, understood that's how things normally work; just that for this particular client and job I was hoping to be able to reflect it in the COGS. I assume from your answer that there is no practical way to do that.

    C
    Catherine_B
    December 19, 2019

    I replicated the first step you provided above and it showed in my COGS account, jackals. 

     

    It'll reflect in your COGS account if you applied the billable time to a sales transaction (invoice or sales receipt) and employee's paycheck. For your Service item, when you checked the This service is used in assemblies or is performed by a subcontractor or partner box, you can associate your Expense account to COGS. 

     

    Create the Single Time Activity, and make it billable to the job. Enter an Invoice it'll show in your COGS account. 

     

    You can run the COGS account QuickReport to review the transactions. Let me show you how: 

    1. Go to Accountant menu and click Chart of Accounts. 
    2. Choose the COGS account and click the drop-down arrow beside Reports. 
    3. Select QuickReport. 
    4. Modify the details to view the transactions you need. 

    If you need anything else, please let me know. 

      BigRedConsulting
      BigRedConsulting
      December 19, 2019

      Time won't show up on your financial statements until it is used in some way on a transaction.

       

      For example, it will appear when it is pasted into a payroll checks when using time for payroll, or onto a check paying a vendor. 

       

       

       

        J
        jackalsAuthor
        December 20, 2019

        Thank you @BigRedConsulting , @MaryLurleenM, @Catherine_B, for your insights. As I understand, there has to be an associated transaction.   I'll mull over it and experiment over the weekend before replying again, as what I want to achieve doesn't fit neatly into standard, e.g. one aspect is that members of an LLC are Other Names, not Employees, as they aren't paid salaries and therefore aren't paid through payroll, and what they are paid doesn't equate to their billed labor earnings.

        Have a great weekend.

        J
        jackalsAuthor
        January 2, 2020

        I'm still working on this, so not yet resolved. Next week I'm meeting with someone who has worked with this before and will report back thereafter.

        J
        jackalsAuthor
        November 6, 2020

        Subject to correction as it was quite some time back that I implemented a working solution to this and I simply looked at my completed entries to document this, here are  the specifics:

         

        EXAMPLE DETAILS/PROCESS

         

        In Chart of Accounts

        create:

        50000 COGS

        50100 Direct Labor

        50110 Direct labor - member 1

         

        Create Service item:

        Lists --> Item List / Item --> New

        First:

        5.1 Pro services

            Tick This services is used in assemblies or is performed by a subcontractor or partner

            Expense Account 50100

            Description of Sales Item e.g. Labor Hours

            Income Account (the income/revenue account tied to the customer)

         

        Second:

        Member's name as a subitem of 5.1 Pro services

            Tick This services is used in assemblies or is performed by a subcontractor or partner

            Cost (enter the hourly cost [if T&M possibly this is the same as Sales Price below])

            Expense Account 50110

            Description of Sales Item e.g. something more specific to this member's services.

            Sales Price (enter the hourly cost billed to the customer)

            Income Account (the income/revenue account tied to the customer)

         

        Create Payroll item

        Employees --> Manage Payroll Items --> View --> Edit Payroll Item List

        (I get an error in the process if I try to create a new one, so I found pre loaded ones in the list and simply amended them)

        Double click the selected item to be changed to open it.

        Change the name to what you want and make sure it is not marked as inactive.

        Next screen, select 50100 Direct Labor as the tracking account, and Finish.

         

        Create employee

        In Employee Center, Create New Employee.

        Fill in all applicable info

        On the Payroll Info tab, enter payroll schedule and an Earnings Item, e.g. Direct Labor Hourly, with the hourly rate that the Member earns (the cost, not what you charge the customer).

        And add any other applicable items

        Tick Time Data To Create Paychecks.

         

        Entering time

        Employees --> Enter Time and select Weekly Timesheet or Single Activity.

        Select Customer Job

        Select the service item - this is the 5.1 above.

        This creates the entries that can then be selected when creating the invoice to send to your customer.

         

         

        VERY IMPORTANT: TIME AND PAYROLL IS RUN WITH THE EMPLOYEE ENTITY - WHEN SUBSEQUENTLY WRITING A CHECK TO THAT PERSON, IT IS NOT PAID TO THAT EMPLOYEE ENTITY BUT TO AN OTHER NAMES ENTITY THAT YOU CREATE UNDER LISTS --> OTHER NAMES LIST.

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