• Track costs & profitability with 18 Job Costing reports, including 6 new advanced reports
• Learning Tools explain how to easily set up & use job costing
• Get a profitability snapshot with the Job Costing Center

Run Your Business More Efficiently & Accurately

• Charge different billing rates for different employees
• Track and apply customer deposits more easily
• Improved Expert Analysis of your business

Keep All Your Job Details in One Place

• Create invoices formatted as letters

Easy for Contractors to Learn & Use

• Use Learning Tools to get more from QuickBooks

Manage Accounting Tasks More Easily & Accurately

• Preview and choose reports faster in the Report Navigator
• Download transactions from over 500 institutions more efficiently
• Process payroll and calculate Worker's Comp premiums. Offer employees the convenience of Direct Deposit

You cannot use the sample company file for your own financial transactions. You must set up a company file just for your business.

To set up a company file
Please refer to the QuickBooks Startup Guide for more complete information, including a list of data you need to set up your company and where to find it.

1. From the File menu, choose New Company.
2. In the Create a New Company window, either select a predefined company file or choose to create your own company file from scratch:
   • Use the predefined company file to jump-start your setup. This will create a company file that is very similar to the Construction sample company, but without transactions. The predefined company file provides an item list with construction industry job phases, a specialized chart of accounts, a list of classes for categorizing and tracking types of job costs, and a payroll item list customized for contractors.
     If you select a predefined company file, you will next be asked to name your company file. Use the .QBW file extension. You will then go to the EasyStep Interview, which will guide you through steps to further customize your company file.
     If you wish to just use the default settings from the predefined company file, click Leave at any point during the EasyStep Interview to skip past it. (Note that only the QuickBooks Administrator can return to the EasyStep Interview later.)
   • Create your own company file from scratch. This step takes you directly to the EasyStep Interview without first setting up defaults for contractors. The EasyStep Interview guides you through the process of setting up your company file and entering the data specific to your company. The Interview also provides industry-specific tips for contractors. You will learn a bit about some QuickBooks features as you go through the EasyStep Interview.
3. Follow the onscreen instructions for the EasyStep Interview.
4. Customize your new company file to suit your needs. Final customization tasks include setting your start date if you didn't set one in the EasyStep Interview, modifying the chart of accounts and lists, and entering your historical transactions. For information on how to complete your company setup, see the company setup checklist. This checklist will appear in QuickBooks (not this Help window) when you click the link.

QuickBooks Report Templates For Contractors
Other QuickBooks users have developed specialized reports for their construction and contracting businesses. Some of these reports are available online as templates that you can use to recreate the report, basing it on your own financial data. Each template is tailored to produce a particular kind of report. You save time because you don't have to experiment with report filter and customization settings to create the report on your own.

Click the following link to go online and find the available construction and contracting reports.
http://templategallery.quickbooks.com/templatesearch.asp?Template=1&CategoryID=47&FormTypeID=&Search=

Job Costing Overview
Job cost tracking is an extremely important part of a contractor's business. Job costing means tracking the expenses for a job, and then comparing those expenses to the job's revenue. This tells you which jobs are making money and which are not.

Why is job costing so important?
With the QuickBooks job costing tools you can easily see exactly how much money you spent-and made-on each of your jobs. You won't have to wait until you do your taxes at the end of the year to see how your business is doing. Plus, you'll be able to see which types of jobs are winners and which are losers, so you'll know which jobs to take in the future.
Job costing in QuickBooks can also help you estimate more accurately. Estimating may be the most important-and most difficult-part of running a contractor business. But unless you compare your estimated costs to your actual costs after the work is complete, you have no way to know if you are estimating too high or low, and no way of improving your ability to estimate in the future. The QuickBooks job cost reports make it easy for you to compare your estimated costs to actual costs.

To use job costing to its full advantage
Job costing in QuickBooks Contractor Edition is easy. You are probably already entering most, if not all, of the information you need into QuickBooks. If you follow a few simple steps, full job cost reports will be at your fingertips whenever you need them.

1. Set up a Customer:Job for each of your jobs.
   Even if you have only one job for a particular customer, it's a good idea to set up an individual job for that customer. This allows you to keep track of your income and expenses on a job-by-job basis, and it can simplify your bookkeeping if you add another job for that customer in the future.
2. Set up your items to optimize for job costing.
   The level of detail in your Item list determines the level of detail in your job cost reports.
3. Assign all your expenses to jobs.
   To get a complete job cost picture, make sure to assign all your expenses to jobs. QuickBooks makes this easy-simply make sure you select the appropriate job in the Customer:Job column whenever you enter a bill, check, or timesheet. Overhead expenses that aren't specific to a job can be assigned to a "dummy" job, as described in the link above.
   You can use the Expenses Not Assigned to Jobs report to check that you haven't missed any expenses.
4. Enter your estimates in QuickBooks.
   The link above outlines different strategies to do this. You can create your estimates directly in QuickBooks. If you prefer to create estimates with a spreadsheet or outside program, you can just bring summary estimates into QuickBooks. Finally, if you create estimates outside of QuickBooks, but you create invoices in QuickBooks, you can simply enter your invoice information in the Create Estimates window and then automatically turn your estimates into invoices.
   You can use some job costing reports without QuickBooks estimates. However, if you enter estimates in QuickBooks, you'll be able to use the full range of QuickBooks job cost reports to make sure your project budget is on track and to evaluate how accurate the estimates are and adjust them appropriately for future projects. Estimating more accurately can in turn help you make more money from each job and win more jobs in the future.
5. Create invoices in QuickBooks, and select the right Customer:Job on the invoice form.
   If you create your invoices outside of QuickBooks, enter at least a summary of each invoice into QuickBooks so the revenue is included in the job profitability reports.
6. Use the QuickBooks job cost reports to learn how your business is doing on a job-by-job basis.

The Job Costing Center
Use the QuickBooks Job Costing Center to see a summary of some of your most important job costing data, including your 3 most and 3 least profitable jobs, plus links to job costing reports.
From the Contractor menu, choose Job Costing Center.

In the Job Costing Center, you'll see:

• The profit (or loss) of your three most and least profitable jobs
• A graphical representation of the relative revenue and costs for those jobs
• Links to job costing reports
• Job Costing Highlights, which show your actual costs in comparison to your estimated costs, expenses that are not assigned to any jobs, and the total of your outstanding bills due to vendors. You can click on any dollar amount link in this section to see more detailed information in a report.

Creating And Categorizing Job Types
If you are using job tracking, you can use job types to track information about your projects and jobs that you think is important. Tracking job types gives you an idea of the profitability of each kind of job you do. It can also help you determine what proportion of your time is spent on different types of projects or jobs. You can filter any of the Project reports to show information organized by job type.

About Job Types
Job types give you a way to classify your jobs so you can group and subtotal similar jobs on your reports. By using them, you'll be able to determine which kinds of jobs are the most profitable for your business.

What should your job types be? It's up to you to decide. Here are a few examples:

• In construction: Decks, Kitchens, Bathrooms
• In graphic arts: Logos, Brochures, PR
• In real estate: Brokerage, Property Management

How do customer types fit in? Customer types let you categorize your customers independently of the types of jobs you do. They are useful for grouping your customers into categories that are meaningful to your business. Some examples: Wholesale and Retail; Commercial, Residential, and Industrial; From Advertisement, By Referral. You can use customer types in addition to job types. You can also use job types without customer types, customer types without job types, or neither.

For example, you can set up job types to:

• Track types of work you perform. Some examples include:
  • An engineering firm might have job types for Civil Engineering, Structural Engineering, and Survey work.
  • A real estate agency might have job types for Brokerage work and Property Management.
  • A construction company might have job types for Remodeling and New Construction. Remodeling jobs might have subtypes such as Kitchen, Bath, or Addition.
• Track the invoicing methods you use for jobs. For example, you can set up job types for Fixed Price and Fee for Service (or Time and Materials) invoicing. This will allow you to track what proportion of your income, costs, and gross profit relate to the way you invoice your customers.

Whenever you get a new job, you can choose which job type the job falls under. Then later (for example, at year end), you can run reports that evaluate job type profitability, which can help you make better future business decisions.

Creating Items For Job Phases
You can use service items to divide jobs into phases of construction. In order to get a detailed job cost report in QuickBooks, you should create a list of items that match your standard list of project phases. For example, if you use a specific list such as the 16 CSI (Construction Specifications Institute) divisions to generate estimates, you can create that list in QuickBooks using service items.

To create a new job phase service item

1. From the Lists menu, choose Item List.
2. From the Item menu button, choose New.
3. In the Type field of the New Item window, choose Service.
   Selecting the Service type allows you to use the item for Labor, Materials, Subcontractor, Equipment Rental, and Other (LMSE&O) costs.
4. Enter an item name or number; for example, 01 Fees & Permits.
   What you enter here appears on the job cost reports. Enter a name or number that will help you distinguish this item from all the others on the list.
5. Important Make sure to select the "This service is performed by a subcontractor, owner, or partner" checkbox, and choose expense and income accounts for the item.
   For Expense Account, select your Job Related Costs account. For Income Account, select your Construction Income account. Then each time you use the item, the cost of the item is linked to your Job Related Costs expense account, and the customer invoice for the item is linked to your Construction Income account.
6. Fill in other fields for the item, as appropriate, and click OK.

Understanding Job Cost Reports
You can create reports and do special mailings that are based on your vendor types. For example, if you own a construction company and use subcontractors, you might want to use the ones closest to each job. You could create a QuickBooks report that shows the subcontractors in each geographic area.

You can use job reports in QuickBooks to learn which jobs are making money and which jobs are losing money. These reports help you invoice customers, create better estimates, analyze how well each job is progressing financially, and identify problem jobs before it's too late.

These reports are available from the Reports menu, on the Job Costing submenu. They are also available from the Contractor or Jobs, Time & Mileage submenus.

• Job Profitability Summary and Detail reports
• Job Estimates vs. Actuals Summary and Detail reports
• Job Costs by Vendor and Job (or by Job and Vendor) reports
• Cost to Complete by Job Summary and Detail reports
• Job Costs Detail report
• Unpaid Bills by Job and Unpaid Job Bills by Vendor reports
• Expenses Not Assigned to Jobs report
• Job Progress Invoices vs. Estimates report
• Item Profitability report
• Item Estimates vs. Actuals
• Profit and Loss by Job

Tracking The Costs Of Spec Houses Or Developments
When you build a spec home or a development, you want the costs of construction to be contained in your profit and loss statement in the same time period as the income from the sale of that home. Prior to the sale, you want to treat the costs your company has incurred as assets, since you have not yet received any income against those costs. These assets will appear on your balance sheet. Once the home is sold, you transfer the construction costs out of the asset account into a cost of goods sold account.

Tracking costs of construction
To track the costs and income for each individual home, set up each home or property as a customer in QuickBooks. If you have multiple properties in a single development, make the development the Customer and set up the properties as individual Jobs.

If you want to track the costs of construction by phase or division, create classes and subclasses for each division and stage. For example, the General division would be a class and the Survey phase a subclass. (If tracking costs by major division is sufficient, then don't create the subclasses.)

Create items to track the costs for different services, materials, and other charges. Using items makes reports comparing estimates to actuals more meaningful. (Costs for items are listed by item, whereas expenses are grouped as a whole.) Set up the new items to contain both purchase and sales fields. For the Account field on the purchase side of the window, assign the item to an "other asset" account called Development Costs.

Entering costs
As you incur construction costs (cost of the land, building permits, and so on), you want to consider these costs as assets. The Development Costs asset account (the "other asset" account you created) lets you track these costs as you pay them. By treating the building costs as assets, they appear in your balance sheet, not in your company's profit and loss statement.

When you write checks for construction work or other construction costs, you should enter them under the Items tab in the check's detail area. Also choose the name of the home in the Customer:Job field.

Recording The Sale Of A Spec Home
When selling a spec home, there are several transactions that must be recorded:

• The selling price of the home
• The pay-off of the construction loan or note
• Other closing costs for items such as real estate commissions, title fees, credits to the seller, credits to the buyer, and so on
• The transfer of the capitalized costs of the home out of an asset account (Development Costs) to a cost of goods sold account

Overview of steps when you sell a spec home
This method uses four separate transactions and a "dummy" checking account named Closing Account. The dummy account keeps dummy entries out of your real checking account and helps you avoid confusion when reconciling your real account. The balance in the dummy account will be zero if you properly enter all transactions dealing with the sale of a home.

Before completing the following steps, you should make sure you have created these accounts in QuickBooks:

• A "dummy" checking account called Closing Account.
• An "other asset" account called Development Costs.
• A "cost of goods sold" account called COGS-Homes.
• A liability account called Construction Loan.

To account for the sale of a spec home

1. Create a sales receipt for the sales price of the home.
   The first line item should be a service item called "home sale," where the amount equals the selling price of the home.
2. On the next two lines of the sales receipt, you need to transfer the capitalized costs from your Development Costs asset account to your cost of goods sold account (COGS-Homes).
   You do this by entering two line items which offset each other: The first line item is a positive number, and decreases the amount in the Development Costs account by the amount of your construction costs. (Because you are selling the home, you want to decrease the asset account down to zero.) The second line item is a negative number, and increases your cost of goods sold account by an equal amount. (This transfers the costs of construction to your COGS account.)
   The net amount of the receipt is for the sale price of the home, which you deposit directly into the dummy checking account (Closing Account).
3. Create a general journal entry for the construction loan payoff by choosing Make General Journal Entries from the Banking menu. Debit the Construction Loans liability account, and credit the Closing Account dummy checking account.
   This decreases the balance in each account.
4. Enter the other seller costs and credits from the closing of the home sale by writing a dummy check from the Closing Account checking account. (At the actual closing, checks were written directly to the other parties, so you want to create and not print a dummy check.)
   • Make the check payable to an "other name," such as Other Closing Costs.
   • Write the check for the net amount of all remaining closing costs and credits.
   • In the Items tab of the check, enter costs for real estate commission fees, recording fees, title fees, and so on. If you as the seller gave credits to the buyer, enter these as negative amounts.
   • The balance in the Closing Account should equal the net proceeds to the seller.
5. Write another dummy check from the Closing Account, depositing the net proceeds to the seller to a real checking account.

If you follow this procedure, you may want to use the following reports to report on your home profits:

Setting Up And Using Class Tracking
Classes are one of the "containers" QuickBooks gives you to earmark transactions and retrieve them later in useful reports. Classes are accessible from almost every transaction in QuickBooks.
Your tax preparer can also use classes to get information to prepare your tax return. Whether you're a sole proprietor, partnership, or corporation, your tax return has a section for Cost of Goods Sold. In a construction company, that's a job-related cost. The Cost of Goods Sold section on the tax return asks for a summary of your job costs by Labor, Materials, Subcontractors, Equipment Rental, and Other (LMSE&O). If you break out your classes into these categories, you can easily produce the reports your tax preparer will need.

To set up class tracking

1. Turn on class tracking.
   1. From the Edit menu, choose Preferences.
   2. In the scroll box, select the Accounting icon.
   3. Select the Company Preferences tab.
   4. Select "Use class tracking" and click OK.
2. Create the classes you want to track. From the Lists menu, choose Class List. From the Class menu button, choose New.
3. Enter a name for the new class.
4. If you want more detailed information, such as a breakdown on labor, set up a subclass. Select the "Subclass of" checkbox and enter the appropriate subclass name.

To use class tracking

1. Assign a class for every income and expense transaction. If you enter a bill, write a check, enter a credit card charge, or create an invoice, be sure to choose a class for every item from the Class drop-down list.
2. If you're using the QuickBooks payroll feature, assign a class to each payroll item on a paycheck or to the entire paycheck.
   1. From the Edit menu, choose Preferences.
   2. In the scroll box, select the Payroll & Employees icon.
   3. Select the Company Preferences tab.
   4. Set "Assign one class per" as follows:
      • Select "Entire paycheck" to assign a class for an entire paycheck. For example, if you have a single class for all labor, you can assign the employee's entire paycheck to that class.
      • Select "Earnings item" to assign a class per earnings item. This lets you assign a different class to each payroll item for the employee. For example, suppose you want to break down the labor class into Finish Carpentry and Rough Carpentry. If an employee has done work for both in the same pay period you can assign each payroll item to the appropriate class.
   You assign the class for the paycheck or the payroll items when you generate the paycheck.

Getting Class Information On Reports
If you use classes for tracking Labor, Materials, Subcontractors, Equipment Rental, and Other job-related costs (LMSE&O), you can get a report by class. It is important in construction that costs are broken down into LMSE&O because a number of entities will need these totals. For example, your tax preparer will need the total LMSE&O for your tax return. Or, your worker's compensation insurance carrier may need a list of all subcontractors used during the year for their annual audit.

If you're using classes for tracking LMSE&O, follow the procedures below to generate these reports.

To prepare a year-end tax report for total LMSE&O

1. From the Reports menu, choose Company & Financial, then Profit & Loss by Class.
2. In the Dates field, select This Fiscal Year or enter the dates of your tax year.
3. Make sure nothing appears in the Cost of Goods Sold section under the Unclassified heading. If something appears here, double-click the amount listed, open each transaction, and allocate each transaction to a class. (Note that all Expenses, however, should show up in the Unclassified column.)
4. Adjust the column widths in order to fit the report on one or two pages.
5. Click Print to print the report.

To prepare a worker's comp audit report for subcontractors

1. From the Reports menu, choose Custom Transaction Detail Report.
2. In the Total By field, select Vendor.
3. In the Dates field, enter the dates the auditor gave you for the audit beginning and ending dates.
4. Click the Filters tab.
5. In the Choose Filter drop-down list, select Class.
6. In the Class drop-down list, select Subcontractor.
7. Click OK. The generated report shows each transaction you entered for the year by vendor.
8. Click Print to print the report.

Including Labor Burden In Job Cost Reports
It is important to include labor and labor burden in your job cost reports. If either gets left off, then your job will look more profitable, which could be misleading to the estimator, project manager, and owner.

Labor burden
The hourly wage you pay for labor isn't your hourly labor cost. Your total "labor burden" also includes payroll taxes, insurance, and employer-paid benefits like sick, vacation, holiday, and union benefits.

The table below is an example of a more accurate assessment of true labor cost. Percentages in the second column are percentages of the hourly wage (the percentages for your locale may vary from the example here).

The workers compensation rate for each employee will vary depending on their workers compensation classification, which is based on the type of work the employee performs. If you create your own table like the one above, and the employee has two or three classifications, then you would average those rates and use the average workers compensation rate in the table.

Your liability insurance is based on the rate your insurance carrier has given you for payroll. Not all liability insurance is based on payroll; some of it may be based on your gross receipts.

If you offer sick, holiday, or vacation pay, then you would need to add those categories to the table above.

In the example above, the labor rate for someone making $20 per hour ends up costing $28.07 per hour when labor burden is included. This is why it is extremely important to include labor and labor burden in your job cost reports. If either gets left off, your job will look more profitable, which will be misleading to the estimator, owner, and project manager.

To include labor burden in job cost reports

1. From the Edit menu, choose Preferences.
2. Click the Payroll & Employees icon and select the Company Preferences tab.
3. Select the "Job Costing, Class & Item tracking for paycheck expenses" option. (The exact wording of this preference varies depending on whether you enabled class tracking, time tracking, or both.)
   When you set this preference, your payroll taxes and medical insurance will be automatically disbursed to the job cost reports when you create paychecks.
4. If you are using the Workers Compensation feature, select the Track Expenses by Job checkbox on the Workers Compensation payroll item record.
   You can similarly mark other company contribution payroll items (such as union benefits) so that they also appear in job cost reports.