Tracking Time in QuickBooks, Part 1
When you sell a product to a customer, you know it. It goes away, and your inventory count in QuickBooks is reduced by one. This tracking helps you know what is selling and what is not, and it signals when a reorder is due.
If your business provides services to customers, though, you are selling your employees’ time and skills. There’s no inventory count; you can sell as many hours as you have workers to fill them. Tracking time accurately and comprehensively, though, is as important as knowing how many hard drives or tote bags you’ve sold.
QuickBooks contains tools to help you record the hours employees spend doing work for customers, so you can bill them for services rendered. You can also use these same features to enter employee time for payroll purposes. The software offers two options here: single-activity records and timesheets.
Building the Foundation
QuickBooks’ Preferences have been many times before. The software was designed to support small businesses with a wide variety of structures and needs, so it needs to be flexible. For that reason, we always recommend that you check in with your “Preference” options before you explore new features.
To get to the preference options open the Edit menu and select Preferences. In the left vertical pane, click on Time & Expenses, then on the Company Preferences tab at the top. Take a look at the top part of the window that opens:
Figure 1: The Company Preferences window for Time & Expenses displays multiple options.
To make sure that QuickBooks’ time-tracking features are turned on before you start, click the button next to Yes under Do you track time? Specify the First Day of Work Week by opening that drop-down list. If you know that all your time entries will be billable, click in the box in front of that statement.
The other options in that window will be discussed next month in Part 2.
Creating Service Items
Before you can start tracking billable time, you have to create a record for each service offered–just like you would for a physical product. Click the Items & Services icon on the home page or open the Lists menu and select Item List. The window that opens will eventually display a table containing all the items and services you’ve created.
To define a service item, click Item in the lower left corner, then New, to open a window like this:
Figure 2: You can create numerous types of items in QuickBooks; Service is one of them.
Click the down arrow in the field under Type to see your options here. There are many, ranging from Service to Inventory Part to Sales Tax Group. Select Service. In the field under Item Name/Number, enter a word or phrase and/or number that describes the service, and that won’t get confused with another.
If you had already created an item like “New Construction Services” and you wanted “Carpet Installation” to appear as a subitem of it, you would click in the box in front of Subitem of to create a check mark, then open the drop-down list below it and select “New Construction Services.”
Ignore the Unit of Measure section. If this designation is important to your business, call the office about upgrading your version of QuickBooks. Contact the office as well, if the service you are defining is used in assemblies or is performed by a subcontractor or partner, as these are more advanced situations.
Enter a brief Description in that box and your hourly charge–to the customer–in the field to the right ofRate. Click the down arrow in the field next to Tax Code to select the item’s taxable status.
It is very important that you get the next field right. QuickBooks wants to know which account in your company’s Chart of Accounts should be assigned to this item. In this case, it would be “Construction Income.” If you are not yet familiar with the concept of assigning accounts, please call to set up a session with a QuickBooks pro in the office to deal with this and other basic knowledge you should have.
When you are done, click OK.
Stay tuned for next month when the focus is on entering time items in records and timesheets.
Tracking Time in QuickBooks, Part 2
Last month, we learned about getting QuickBooks ready for time-tracking by activating it in Preferences and creating a record for a service item. This month, the focus is on using that record in the two different ways you will be using it in QuickBooks: to pay employees for their hourly work and to bill customers for services.
Recording Employee Hours
There are two ways to enter hours for your employees who provide services to customers and are paid by the hour. The first is to create a work ticket for a single activity. Click Enter Time on the home page, and then Time/Enter Single Activity to open this window:
First, check the date to make sure it displays the day when the work was actually done, not recorded. Click the arrow in the field next to Name and select the employee’s name from the drop-down list that opens, then do the same in the Customer:Job field below. The Service Item field needs to display the name of the service performed by the employee.
If you want to time a period of activity, use the Start, Stop, and Pause buttons under Duration. You can also replace the 0:00 that appears by default with the number of hours and minutes that were worked.
In the middle column, select the correct Payroll Item from the drop-down list. You can add a new employee if necessary without completing his or her entire record, but be sure to go back and complete it before your next payroll.
Hidden behind the drop-down menu is a field titled WC Code, which stands for Workers’ Compensation Code. It will only appear if you are using QuickBooks Enhanced Payroll and have that feature turned on.
Tip: If these two fields do not appear, you have selected an employee who is not timesheet-based.
In the upper right hand corner, you will see a field labeled Billable. Be sure you click in the box to create a checkmark if you will be invoicing a customer for the work done.
Save the activity record when you have completed it.
QuickBooks offers a second option for entering employee hours: timesheets. You will notice that there is a Timesheet icon in the toolbar of the Time/Enter Single Activity window. If you click on it with a completed record open, a new window opens containing a graphical representation of a paper timesheet.
If you enter employee hours in a single activity record, they will appear on a timesheet, and vice versa. There are two advantages to entering hours directly on the timesheet, though. The first is that it is faster. Second, you can click the Copy Last Sheet icon if you are just going to duplicate an employee’s previous pay period’s hours. If you want to go there straight from the home page, click Enter Time | Use Weekly Timesheet.
Billing Customers for Time
QuickBooks makes it easy to transfer billable hours worked by employees to the corresponding customers’ invoices. After you have entered blocks of time spent on services, open an invoice form and select the customer. This window will open:
By default, Select the outstanding billable time and costs to add to this invoice? is checked. When you click OK, a new window opens displaying a grid that contains all of that customer’s billable time. You can Select All or click in front of each entry you want to include. You will notice here that there are also tabs on the grid for Expenses, Mileage, and Items that can be billed back to the customer.
If you choose not to carry billable hours over to the invoice at the present time, you can always add them by clicking Add Time/Costs in the invoice’s toolbar.
Questions? One of our QuickBooks experts is always available to help ensure that you are billing customers for all costs they incur–and to talk about any other element of accounting that affects your cash flow.