QuickBooks + Separating Funds For Different Jobs

JohnHomeMatters

Hi. Sorry if this is a dumb beginner's question.

My wife and I are struggling with the accounting. We didn't get help with the setup of QB so the structure could be wrong.

One high priority is to find a way to separate the funds of various jobs, either physically (like with different checking accounts) or virtually (like with sub-accounts under the business checking account in QB).

I haven't found the solution in QB. Is it there?

Thanks,

John

Mike Finley

You'll need to explain why you need to "separate the funds" from jobs. I think you might be confusing the issue. Please explain in detail why and what you are trying to achieve.

rbsremodeling

you enter in each customer/job in Quickbooks after that when you do a transaction you assigned it to the appropriate customer/vendor etc.

Thats the simple answer.

Buy quickbooks for contractors book, hire an accountant or bookeeper

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JohnHomeMatters

THanks for responding,

The way we have QB setup doesn't allow us to track the balance of funds for specific jobs. For example, if Joe has paid us a $30,000 installment on his project, and Mary has paid us a $5,000 deposit to start her project, our checking balance in QB shows only the total $35,000, plus whatever general funds balance may exist. I want to more accurately track the existing balance available for a client's project. Having the funds comingled in one checking account in QB makes this difficult.

I believe there are many accounting controls and procedures we're not doing right, and we intend to consult a professional when we can afford the fee. In the meantime I'm looking for ways to gain control over client's funds and prevent us from dipping into them when we shouldn't.

I hope that helps. Thanks again.

rbsremodeling

Quickbooks has many report features to show what is happening. You would pull up a customer report(s) to obtain the information you are looking for.

So you setup a customer job and a starting amount (contract is 100K for John Smith)

Then you make an entry (draw 1 demo and framing) received 30k smith job

you can also break it down further 15k demo 15k carpentry etc

Smith balance 70k

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Mike Finley

Okay, you're getting closer. Please explain exactly why this is an issue and why? Often the answer to your question can be explained once we know the destination you are trying to arrive at.

I suspect the invoicing options of quickbooks may be where you are heading but we need more info.

JohnHomeMatters

Here's a hard example: we recently spent into available funds on one large job without knowing it. Other than that job, we had a very slow August and some unexpected bills. We have to make it up by borrowing from Peter to pay Paul, and that's a very slippery slope.

I think if we had an improved system for monitoring the balance of funds in a given project it might help us recognize when our general funds are too low. I'm looking for a "red flag" to tell me I have to make a decision about cash flow to prevent dipping into the balance of a job.

Thanks for hanging with me on this...hope I'm not being too thick.

John

Mike Finley

Okay, the real solution is for you to begin building up a general cash fund or your operating capital fund.

You absolutely cannot run a business with no additional cash on hand. You can't for example take in $20,000 in sales, and pay out $19,900 in expense each month and survive. You probably suspect this.

The problem is harder because each month doesn't start with a clean slate of expenses, you are always carring expenses forward each month also.

Your answer isn't so much an accounting method rather than a balance of cash on hand or float, or operating capital or whatever you want to call it.

You said it yourself Your monthly profit and loss statement (report in quickbooks) will show you a picture or the big picture so to speak of how you are doing. The bottom number should be your profit, and this should help you build a cash reserve to opearte out of.

Back to your issue you are trying to solve - you really shouldn't be trying to operate in a way that you have to keep track of how much money you are taking from each job. I don't know of anybody who can operate that way, you simply have a huge cash flow problem if you are operating this way and the solution is to fix the cash flow problem first.

(This is a much different problem then job costing. You should know your profit on a job before it even starts by doing your job costing properly) What you should be keeping track of during the job is not having enough money to pay this or that from the deposits, but are your expenses for the job staying inline with what you estimated - but that's a different issue.

If you have the contractors addition of quick books there are some reports like profit and loss by job which can show you the income taken in so far on a job for example a $10,000 deposit and show you the JOB expenses (I say job expenses because you should have 2 types of expenese (1) if expenses directly related to the job, such as $500 worth of 2x4s and you should have (2) fixed expenses such as your telephone bill)

So you might see

$10,000 job deposit
-$2000 sink faucets
-$5000 in 2x4s
-$3000 dump truck rental
-$3400 labor
----------
<-3400> job profit

Which would show you that you have currently spent $3400 more on the job then you have taken in.

Ed the Roofer

Wow!!!

Timely post in reference to Sarah's recent topic.

You MUST read this thread before you proceed.

http://www.contractortalk.com/f16/managing-your-business-45051/

It's short so far, but ask and tell what you can and see if you fit the mold being discussed.

Ed

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JohnHomeMatters

What you're writing makes sense. We've known we're too close to the vest with the operating balance. Obiously, managing profitability is a key component to maintaining such a balance. We also have to manage our personal finances better to allow the company to grow.

I think we have two significant challenges (at least):

1. not using QB as we should be using it. We do have the contractor's version and my wife uses it for all the cash management, but I haven't made the time to learn how to use it properly for estimating, scheduling and other aspects of job costing. So QB can't give us a clear picture of a job's profitability. I have to ween myself off of my hommade Excel worksheets and commit to QB. And we need a pro to tell us of our QB is set up right. I'm sure it's not.

2. I haven't mastered our pricing and I'm inclined to cut us short in order to get a "yes" out of an estimate. There's another thread on this site I read earlier today about pricing according to your own requirements, not comparing to others in the market. I've heard others say "whatever you're charging, double it." While that seems cavalier and I don't have the courage to go that far, I probably need to improve my pricing methods and dare to raise prices.

You've been very helpful. I'd welcome more discussion, but don't want to wear you out. Thanks very much.

John

JohnHomeMatters

I'll check it out right now. Thanks for writing.

Ed the Roofer

Check out th other thread that has continued to be exuberant, but more recently in the upper 30 through 45th posts have gone on to challenge the pricing mentality that is prevalent in contractor mindset.

It is the one called;
"What Is The Hardest Sales Objection To Overcome".

It is really getting some great points and counter-points across.

Ed

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Mike Finley

Don't give up your excel spread sheets for job costing too quickly.

I find QB to suck ass for job costing in some regards. If you are trying to job cost a single job you'll be fine, but try doing it for a period of time and you'll run into trouble. For instance lets say you want to look at the 1st quarter of the year. Jan, Feb, Mar

You pull the job costing detail report and you will notice costs and expenses left out of jobs that started in Dec but ran into Jan and jobs that started in Mar and ran into April. For instance if you had a $2000 deposit for the job that started in Dec and ended in Jan you won't see the 2000 in the total.

Very inaccurate and I have seen no way to pull job costing on multiple jobs to get averages and getting complete income and expenses on them if they have any income or expense incurred outside the months you are querying.

JohnHomeMatters

Great observation.
I'll have to play with that. I'd like get out of Excel only because I spend too much time on admin. I'd like to streamline my procedures.

RCPainting

Check your local Builders Association or Vocational/Tech school. I was in same position 2 years ago. Got into a "Custom Fit" program. About $100 and included meeting with my accountant, who is a trainer. He set my books up and I was able to call,email and take my laptop in to learn often.

mark@hometowngc

John, I think you have gotten some very good advice from Mike. I wouldnt give up those excel spreed sheets to quickly either. If you have a good template it save alot of time and be very accurate. I have not read the other threat mentioned yet (and I will) but one thing not mentioned here is the job costing. Cost of Goods are not expenses, they are, well the cost of doing the job...labor and materials. Expenses are the over costs you incur to run you business. Everyone has different overhead expenses and needs to understand that overhead needs to be added included in your estimate before you calculate your markup. I have run into to many contractors who don't understand the difference between "mark up" and "Profit Margin". If you take a job based on anothers contractors "low" bid you are using his overhead costs. He may be working out of his van. You will lose every time that way.
Mark

JohnHomeMatters

Mark,

You're right -- Mike has been great. As have others. This is an invaluable website. My local remodelor's council isn't well organized and I've needed a mentor for a while.

Re the Excel sheets -- understood. Yes, what I"ve customized in Excel is accurate and probably a lot more relevant to my business than what I'd get from QB. But in these discussions I"ve learned a lot about what's missing from my equations -- how to value overhead, direct expenses, profit, etc.

To RCPainting and others I would ask -- if you were in my place two years ago, what is your situation now. Do you feel in control of these things and like you're family is secure with your finances? I'm worried about my family's security, especially if I fall off a ladder.

It's so good to hear from others who are ahead of me. Thanks to all.

J

RCPainting

I think you are on the right track, you know you need help!
2 years ago it was just my husband and I. He paints, I do all the paperwork. When we got paid for a job we put the check in our personal account an hoped we had enough to pay the bills! I have attended every seminar I could, joined the local HBA, read every post on here and PT. I enrolled in the custom fit, got a lawyer and acct. Now we both draw a nice salary from our corporation, I know exactly what our costs are, we have two full time employees. We still work our butts off marketing, doing estimates and everything else! We do not have kids and our home was paid off before started, (we are in our late 40's).
The best thing you can do is educate yourself. I just attended a Builders Expo that offered classes on OSHA, contracts and liens. There was a lot of good info!