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DomainCleaning
March 14, 2024
Question

How to categorize supplies I purchase for customer, which they pay back to me in their monthly invoice

  • March 14, 2024
  • 1 reply
  • 0 views

Greetings!

 

I am starting out a cleaning business and would like to know how to categorize supplies I purchase on behalf of the customer. For example, I purchase toilet paper to restock and then add that cost of the toilet paper to their monthly invoice. I want to avoid getting taxed the entire invoice as income since a part of thar is the toilet paper and something I am not marking up or making profit on.

 

Which accounts should I use to register my bank transactions for the supplies purchases and which account should I add the income (pay back from customer)?

1 reply

A
AnneMariee
March 14, 2024

Welcome to the Community, DomainCleaning.

 

I'm here to help you categorize your transactions so you're being taxed accurately.

 

To start, we can use the Categorize feature in QuickBooks to ensure that expenses are in the correct categories. When categorizing, ensure that you've marked the expense as billable. A billable expense means that it's an expense incurred for your customer. By recording billable expenses, you allow your customer to reimburse the expenses when they receive their invoice.

 

To record billable expenses, let's turn on billable expense tracking. Here's how:

 

  1. Click the Gear icon on the top right corner.
  2. Select Account and settings.
  3. Go to the Expenses tab.
  4. Click the pencil icon in the Bills and expenses section.
  5. Turn on the following:
    • Show Items table on expense and purchase forms
    • Track expenses and items by customer
    • Make expenses and items billable
  6. Click Save, and then Done.

 

Then, let's head to the Bank transactions page. You can follow the steps below to categorize expenses as billable.

 

  1. On the For review tab, locate and click the expense. 
  2. Select the Categorize option.
  3. Add a vendor, category, and customer.
  4. Tick the Billable box.
  5. Click Confirm.

 

For more guidance on which category to put an expense under, I recommend consulting an accountant for tailored advice specific to your business needs. They'll also be able to advise you on which specific accounts to use to register purchases and sales.

 

Here are some resources for more information on categorizing transactions and billable expenses:
 

Lastly, here's an article on reconciling to ensure your QuickBooks accounts match your real-life ones: Reconcile workflow.
 

If you have any other concerns about categorizing and managing transactions in QuickBooks, please don't hesitate to leave a reply below. I'm here to help you.

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