Tracking work performed by subcontractors

Sometimes we all need a hand on a project. If you hire subcontractors for a customer job, you can track the income and expenses for work performed by subcontractors in QuickBooks. First you set up service items for the work your subcontractors perform and indicate that each item represents subcontracted work. Once you’ve set up the items, you can pay your subcontractors and pass on subcontracted expenses to your customers.

Setting up items for subcontracted work

Setting up items specifically for subcontracted work helps you manage your books more effectively. When you use these items, QuickBooks records expenses and income for subcontracted work in separate accounts. Then you can create reports that show the profitability of subcontracted work to your business.

1. Create a new item by choosing Lists > Items and click the + at the bottom of the list.
2. In the New Item window, choose Service from the Type list.
3. Select the “This service is performed by a subcontractor” checkbox.
4. Enter descriptions for purchasing and sales. QuickBooks uses the Purchase description for purchasing transactions and the Sales Description for sales transactions. You can enter a different description for each or keep them the same.
5. Enter an expense account for tracking the cost of this subcontracted work and an income account for tracking sales to a customer.
6. Enter a cost and a sales price.

• If your costs vary, you can leave either or both prices as 0.00.
• If you have set a standard markup percentage (choose QuickBooks > Preferences and then click Sales & Invoicing, and then enter a number for Default Markup Percentage), QuickBooks uses it to calculate the sales price when you enter the cost. To set a different sales price for the item, edit the calculated amount.

Now that your items are set up, you are ready to pay subcontractors when they do work for you.

Paying subcontractors

When you pay a subcontractor who does work for you, enter the payment to the contractor in QuickBooks using the item you set up for the subcontracted work.

1. If you paid the contractor by check, user Write Check in QuickBooks to record the payment. Or, if the contractor sent you an invoice, you can use Enter Bills and Pay Bills to record the bill and your payment.
2. In the top part of the form, fill in the name of the subcontractor and the date.
3. At the bottom of the form, click the Items tab.
4. In the Item column, enter the service item you set up for this type of subcontracted work.
5. In the Cost column, check the amount QuickBooks filled in. If the cost is incorrect for this job, change it.
6. In the Qty column, enter the appropriate quantity. For example, if the subcontractor charges an hourly rate, you would enter the number of hours. If the Qty column doesn’t apply to this work, leave it blank.
7. In the Customer:Job column, enter the name of the job (or customer) for which the work was done.

It’s important that you enter the customer:job name. You’ll be able to invoice the customer for the work later. Also, you’ll be able to create reports that show your costs and revenue from the work.

Invoicing customers for subcontracted work

Now you’re ready to invoice you customer for the work your contractor did.

1. Create an invoice for the customer:job.
2. Because you’ve entered your payment to the subcontractor and included the customer:job name, when you select the customer:job name, QuickBooks tells you that you have billable time/costs for this customer.
3. Click Time/Costs and go to the Items tab.
4. In the Use column, select the service items for the subcontractor’s work. QuickBooks adds a check mark next to each item you select. The check mark indicates that the cost will appear on the invoice.
5. (Optional) If you want the costs you selected to be summarized in a single line item when you print the invoice, select the “Print selected time and costs as one invoice item” checkbox. When you view the invoice on your screen, you’ll see a separate line for each cost; when you print the invoice, only the total for the entire group of costs appears. Important: Do this only if you are certain you want the printed invoice to show only the total of the costs (and not a line by line listing of each cost). Once you record the invoice, you will not be able to print the costs separately.
6. Click OK to return to the invoice.
7. Make any needed changes or additions to the invoice and sent it to your customer.

So that’s it

And that’s how you track subcontractor expenses in QuickBooks. Because you assigned the cost of the contractor to a customer:job, they are included in any job-related reports, so you’ll have an accurate view of how much a job costs you.