How to Use QuickBooks For Job Costing – Setting Up Payroll

Many companies believe that setting up payroll in QuickBooks for job costing is frustrating and difficult. It’s true that there are several steps that need to be taken in order for payroll to flow properly to the job costing reports, especially if you want to include payroll taxes and benefits, but the step-by-step instructions below will help guide you through the setup.

Since labor is usually the biggest expense for most companies who are doing job costing, it is vitally important that it be included in your job cost reports. If you don’t, then jobs will look more profitable than they really are. Even worse, some of them might even be losing money without you even knowing it. This not only affects your present situation, but can lead you to create inaccurate estimates for future jobs.

So here are the steps for setting up payroll for job costing in QuickBooks:

Set up Preferences:

1. Go to Edit > Preferences > Company Preferences and select Payroll & Employees

2. Select “Full Payroll” or “Complete Payroll Customers”

3. Check “Job Costing, Class and Item tracking for paycheck expenses”

4. Go to Time & Expenses

5. Select Yes under “Do you track time?”

6. May also want to check “Create invoices from a list of time & expenses”

Set up Payroll Items:

1. Go to Lists > Payroll Items

2. Edit every Addition and Company Contribution item to ensure that “Track expenses by job” is checked

3. Payroll items can only map to one expense account, so you may want to setup separate ones for COGS and overhead payroll expense

Set up Employee Records:

1. Go to the Employee Center and double-click on employee name

2. Change Tab to Payroll & Compensation Info

3. Check “Use time data to create paychecks”

Set up Default for New Employees:

1. Go to the Employee Center and select Manage Employee Information > Change Employee Default Settings

2. Check “Use time data to create paychecks

Set up Workers Comp:

1. Setup workers comp at Employees > Workers Compensation > Setup Workers Comp

2. Setup your workers comp codes at Employees > Workers Compensation > Workers Comp List

3. Go to Lists > Payroll Items to double-check that the Workers Comp payroll item has “Track expenses by job” checked

Using Timesheets

1. Go to Employees > Enter Time > Use Weekly Timesheet

2. Complete all information including both a payroll item & a service item (these are different) – mark as billable if you do time & material billing

3. You may want to add a customer:job for overhead

4. Consider using Time Tracker or WorkTrack Time Card so employees can enter their own time