Search Results

Entering Payroll Transactions using Spreadsheet Sync Entering transactions from Payroll providers, outside of QuickBooks Online, requires special transaction entry to correctly post and process payroll. Your payroll provider is responsible to make direct deposits to your employees or otherwise issue checks to the employees on behalf of your business, as well as meet due dates for all payroll liabilities on behalf of the business. The financial statements of your business need to reflect all movements of funds to and from the business. Payroll is an accrual transaction for most businesses. Using spreadsheet sync requires QuickBooks Online Advanced. If you have QuickBooks Online Plus, request that your payroll provider import transactions to your custom forwarding email in QBO, at least 3 days in advance, where you will be able to attach each transaction to the correct employee bill for payroll. Use the totals report of all employees in a payroll run to reconcile all liability accounts monthly and match gross wages and taxes data to the profit and loss statement of gross wages and taxes or otherwise hand enter the information from your provider to a Bill (with discounts for doing so). Use a plus (+) for payroll expense and a minus (-) for payroll liabilities to distribute the transactions to either the Profit and Loss or the Balance Sheet, as described below. If using Spreadsheet Sync: Start by opening Excel and sign in to Spreadsheet Sync. Choose the option to add and edit data, then select template, invoices and bills, Add new records to QuickBooks. Input the necessary details such as Post? Bill Date, Due Date, Bill Number, Transaction Type (Bill), Vendor (payroll provider), Description (employee name and pay period for Net Pay), and Category (or Item for Payroll Expenses if set up in product and services as billable). Remaining information can be used by the business owner once the transaction is on a Bill in QuickBooks Online for Invoicing purposes and GAAP accounting practices. Then, enter the amount owed for the payroll services provided. If there are any additional notes or reference numbers related to the bill, include them for easy tracking. Double-check all the information for accuracy before saving or submitting the bill for sync to QuickBooks Online. Finally, ensure that the bill is approved according to your company's internal procedures before proceeding with payment. The Payroll Provider will process payroll according to the business owners' instructions for hours, salary, bonus, overtime, et.... and employee W4. Using the Bills Template in Spreadsheet sync, enter payroll as follows and send to the business owner for approval at least 2-3 days prior to payroll processing ensuring funds are available. (-) numbers Credit Payroll Liabilities and (+) numbers Debit Payroll Expenses on the Bill *Be sure the employee's name and workdays are noted in the description* Spreadsheet Sync Below is an example of the Bill for one employee: Joe Blow, just entered to QuickBooks Online from the Spreadsheet sync Bill Template. As you can see this Bill transaction is easily utilized by the business owner to field the expense to a customer, mark as billable to a specific job, or attribute to a specific class or location. A separate bill should be completed for each employee , using a separate bill number and synced to QuickBooks Online. This ensures that only 'billable' employees are represented on an invoice. Bill A transaction journal is available by selecting the feature at the bottom of the Bill. This transaction journal shows the balance sheet payroll liability distribution account, and the profit and loss payroll expense distribution of the Bill. A payroll liability payment should not be withdrawn from your bank account sooner than necessary (usually monthly or quarterly) and the liabilities reduced (debited) as funds are withdrawn from your bank account and appear in the bank feed based on your payroll tax frequency. Wages payable and garnishments are the immediate cash requirement and will come through the bank feed first. While this transaction Journal appears to be a Journal entry, it is not. It will appear on the Journal report rather than the Adjusting Journal report. Transaction Journal As you can see the payroll processors fee is an A/P credit and should be paid when all payroll liability accounts have been processed through the bank feed. If you are a quarterly filer, each pay period will show as due to the payroll provider until all net paychecks and quarterly payroll liabilities have been satisfied. Payroll Provider Fee A/P Following this process will create a profit and loss statement with payroll costs, for all employees in a payroll run posted to the correct period and can be matched to the invoice for services, billed to your customer and is GAAP compliant. Gross Wages and Payroll Tax Expense The Balance Sheet will reflect appropriate payroll liabilities for all employees in a payroll run, and subsequent payment history, reflecting correct accounting procedure while also maintaining historical transactions, by employee. Wages payable and any garnishments is the immediate cash requirement, payable to the employee and will come through the bank feed on the payroll date. Each Direct Deposit, Check or Payment to each employee, will match to the spend transaction in the bank feed, ensuring your employees have been paid. (checking is credited and the Wages Payable and Garnishments debited) All other liabilities will be reduced based on your payroll tax filing frequency. When liabilities are paid and withdrawn from your bank account, apply the spend transaction from the bank feed to the appropriate liabilities. (checking is credited and the liability is debited). Payroll Liabilities *you can make employee payroll expenses billable by using the billable time feature with a QBO Payroll Subscription . This feature is available in QuickBooks Online Plus and Advanced, allowing you to allocate specific payroll expenses to a customer and include them on an invoice.  Additional Notes: Paying Vendors/Contractors: Several Ways to pay/process A/P: In the world of QBO this should be the starting place:  Bill (or job completion notification) sent to Transactions > Receipts > your intuit email :  for new Bill approval or attachment to recurring Bill transaction.  The incoming Bill should be matched to the outstanding bill or recurring transaction bill which will create a bill payment (select account to pay from and wait for bank feed match)  If you have a new vendor you would have to add the vendor by one of the methods below to request the vendor/contractor bill pay info: YOU MUST HAVE THE VENDOR EMAIL! 1.) Payroll > Contractors > Add Contractor OR   2.) Unlimited next-day direct deposits for your first 20 contractors, plus $2 per additional contractor. 1099 e-filing included. OR   3.)   Expenses > Vendors > Prepare 1099s > Vendor Requests ** Review your profile also OR   4.)   Expenses > Bills > Schedule Payments  Following the above process will ensure your vendors/contractors are paid in a timely manner and your 1099 year end documentation up to date. 1099 contractors and vendors will be able to view and update their current information, and retrieve 1099s year end. See Also: The Costly Mistake: Bi-Weekly vs Semi-Monthly Payroll See also: Exploring Alternatives: Journal Entry Accounting for Sales and Expense Transactions See also: Uncovering the Truth: Exploring the Impact of Fraudulent Accounting Practices Entering Payroll Provider Transactions using Spreadsheet Sync

One Big Beautiful Bill Will Reshape Payroll Taxes On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA)  into law, ushering in sweeping changes to the U.S. tax code. While the bill covers nearly 900 pages of reforms, some of the most immediate and impactful changes center around employee payroll —especially for tipped and hourly workers. Provisions are still be rolled out. I suggest bookmarking this page as it may be updated over time. From the White House: https://www.whitehouse.gov/obbb/ Makes the 2017 Tax Cuts and Jobs Act tax cuts permanent No Federal Income Tax on Overtime and Tips One of the headline provisions is the temporary elimination of federal income tax  on: Overtime Premium Pay: An above-the-line federal income tax deduction  for qualified overtime compensation . This applies only to overtime required under the Fair Labor Standards Act (FLSA) —Only federally mandated overtime  qualifies—not state-specific rules or union-negotiated overtime. Overtime premium pay is the additional compensation paid to non-exempt employees and self-employed individuals, with proper documentation, for working hours beyond their standard workweek, typically 40 hours. This premium is usually calculated at 1.5 times the employee's regular rate of pay, commonly referred to as "time-and-a-half". The purpose of overtime premium pay is to compensate employees for the extra effort and time they put in beyond their normal schedules, and it also serves as an incentive for employers to manage work hours effectively. Employees can deduct up to $12,500  annually single filers ( $25,000 for married joint filers) from their taxable income for the premium portion of overtime pay. Phasing out for income above $150,000 single and $300,000 married joint filers. Reporting Requirements: Employers must itemize qualifying overtime  on Form W-2 . IRS will provide transition relief  for 2025, allowing “reasonable approximations” What Doesn’t Count Overtime required only by state law  (e.g., California’s daily OT rules). Holiday pay , shift differentials , or contractual bonuses . This means that, for example, where a non-exempt employee’s hourly rate is $10.00 (and the corresponding overtime rate is $15.00 per hour) and the employee works one hour beyond 40 hours in a work week (so, a total of 41 hours), the available deduction is only for the $5.00 of overtime premium for that one overtime hour – and not for the $10.00 of regular straight time pay. Still subject to FICA taxes  and state income tax . How the One Big Beautiful Bill Will Reshape Payroll Taxes "No tax on tips" provision (2025-2028) Qualified Tips: A Deduction, Not an Exclusion: A deduction of up to $25,000 for qualified tips is introduced for the 2025-2028 tax years. While this is a deduction from federal income tax, tips remain subject to income and payroll taxes, and potentially state and local taxes. Who Qualifies? Employees and self-employed individuals in occupations that customarily received tips before 2025 may be eligible, with the IRS expected to publish a list of eligible occupations. Income Limits: The deduction phases out for those with a modified adjusted gross income over $150,000 ($300,000 for joint filers). Reported Tips: Tips must be properly reported on Form W-2, Form 1099, or other employer statements, or reported directly on Form 4137. BLS-WAITERS AND WAITRESS State Minimum Wage Laws What This Means for Employers No Immediate Payroll Changes : Employers will continue withholding federal income tax, Social Security, and Medicare taxes as usual  either Semi Monthly or Bi Weekly. The deductions apply when employees file their tax returns. Start tracking qualified overtime and tips now  to catch those 2025 deductions. TAX PLANNING is always recommended see why: 2025 Comparison Tax pdf Keep in mind: FUTA (ER) SUI (ER), Garnishments (EE), State Income Taxes (EE) Holidays and Vacation Time (usually 14 days), are not included with these comparisons. *Self Employed and S Corp are responsible for the total 15.3% Social Security and Medicare, 1/2 can be deducted at the end of the year . Includes a sample budget with Lending rule 28/36: Calculate your Buyability with Zillow ! OR Calculator.net OR Realtor.com Home Affordability Calculator OR Motto Mortgage (In question: Should Social Security and Medicare be calculated on taxable wages or gross wages? we says "on taxable wages".) The calculations below use gross wages calculations SS & Med. *Speak with your investment advisor regarding the type of 401K and other deductions from your paycheck to determine SS & Med taxation. Avoid double taxation See Pub 525 and 401K Resource Guide Married Single Commentaries: 1.) Committee for a Responsible Federal Budget. (2025, July 24). Retirees face an $18,100 benefit cut in 7 years . https://www.crfb.org/blogs/retirees-face-18100-benefit-cut-7-years 2.) Richards, K., & Rosinplotz, N. (2025, June 5). It’s time to end joint tax filing . Roosevelt Institute. https://rooseveltinstitute.org/publications/its-time-to-end-joint-tax-filing 3.) Joseph, C. E. (n.d.). What is marital status discrimination?  Working Now and Then. https://www.workingnowandthen.com/marital-status-discrimination Contact Bookkeeping Business Online for assistance New Reporting Requirements : Starting in 2026 , employers must report qualified overtime and tips separately  on Forms W-2 and 1099. Payroll systems will need updates to comply with this change. Effective Dates by Provision Provision Effective Date Overtime Pay & Tip Deductions Retroactive to January 1, 2025  and lasts through 2028 Child & Dependent Care Tax Credit Begins January 1, 2026 Dependent Care FSA (DCAP) increase Begins January 1, 2026 Employer-Provided Child Care Credit (45F) Begins January 1, 2026 Paid Family Leave Credit Begins January 1, 2026 Above-the-line Charitable Deduction Begins January 1, 2026 MAGA Retirement Accounts Covers children born 2025–2028 , accounts open starting January 1, 2026 No Tax on Car Loan Interest New deduction : Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.) Available to non-itemizers  and itemizers  alike Maximum annual deduction is $10,000. Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers). Qualified interest : To qualify for the deduction, the interest must be paid on a loan that is: Originated after December 31, 2024 Used to purchase a new vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify) For a personal use vehicle (not leased or for business or commercial use) and Secured by a lien on the vehicle. If a standard auto loan on a qualifying vehicle is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction. Qualified vehicle : A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States. Taxpayer eligibility : Deduction is available for both itemizing and non-itemizing taxpayers. The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed. Reporting: Lenders or other recipients of qualified interest must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year. The IRS will provide transition relief for tax year 2025 for interest recipients subject to the new reporting requirements. Income Phase-Out Full deduction for: MAGI ≤ $100K (single) MAGI ≤ $200K (married filing jointly) Deduction reduced by $200 per $1,000 over threshold Fully phased out at: $150K (single) $250K (MFJ) Example: Buyer with $44K loan at 6.5% interest could deduct ~$3,000 in year one In 22% tax bracket, that’s a $660 tax savings Child and Dependent Care Credit (CDCTC) Starting in 2026 , the CDCC gets a serious upgrade: Enhanced standard deduction  and child tax credit  from 35% to 50%  of qualifying expenses for low-income families. You can claim up to $3,000 for one child  or $6,000 for two or more . The income threshold for the lowest 20% credit jumps to $206,000 for joint filers  and $103,000 for individuals , meaning more middle-income families qualify. Estimated 4 million families  will see a $900 increase  in their credit. Dependent Care Flexible Spending Account (DCAP) Families with access through a participating employer will be able to set aside up to $7,500 in pre-tax dollars per year into a Dependent Care FSA (Flexible Spending Account) - thereby reducing their taxable income.   Note: Funds set aside in a Dependent Care FSA are "use it or lose it," so it is important that participants set aside no more than they are sure they will spend during the applicable tax year. Employer-Provided Childcare Credit (45F) Businesses get more incentive to support working parents starting in 2026: Credit rate jumps from 25% of qualified childcare facility expenditures and 10% of qualified childcare resource and referral expenditures. Maximum credit increases from $150,000 to $500,000–$600,000 . Small businesses can now pool resources  to offer childcare solutions. More information is available:   https://www.irs.gov/businesses/small-businesses-self-employed/employer-provided-childcare-credit Education & Workforce Reforms to student loan repayment  (limits, fewer plans, stricter deferments) Eliminates most existing income-driven repayment (IDR) plans , including SAVE, PAYE, and ICR. Replaces them with just two options  for new borrowers (loans disbursed after July 1, 2026): Standard Plan : Fixed monthly payments over 10–25 years , based on loan balance. Repayment Assistance Plan (RAP) : Income-based payments (1%–10% of AGI), with forgiveness after 30 years . Borrowing Caps Grad PLUS loans eliminated . New limits: Graduate students : $20,500/year, $100,000 lifetime. Professional/medical students : $50,000/year, $200,000 lifetime. Parent PLUS loans : $20,000/year, $65,000 lifetime. Changes for Existing Borrowers Can keep New IBR  (10% of income, 20-year forgiveness) if enrolled before July 1, 2026. Must switch to IBR or RAP by July 1, 2028 —or be auto-enrolled in the Standard Plan. Deferment & Forbearance Restrictions Economic hardship and unemployment deferments eliminated . Borrowers may use forbearance for up to 9 months  in any 24-month period—but interest continues to accrue. Public Service Loan Forgiveness (PSLF) RAP payments count toward PSLF , if all other criteria are met. Parent PLUS loans disbursed after July 1, 2026  are excluded  from PSLF eligibility. Impact on Graduate & Professional Students Loss of Grad PLUS loans and tighter caps may push students toward private loans . Could affect access to high-cost programs like medical and law school. Changes to Pell Grant eligibility Tighter Eligibility Rules No Pell Grant  if a student receives non-federal aid  (state, institutional, or private) that fully covers their cost of attendance . Students with a Student Aid Index (SAI)  exceeding twice the maximum Pell Grant award  are now ineligible . Foreign income  must now be included in AGI when calculating Pell eligibility—no more discretionary exclusions by financial aid officers. Access for Workforce Training Workforce Pell Grants  for short-term, accredited programs: Must be 8–15 weeks  long and 150–600 clock hours . Programs must lead to stackable, portable credentials  or prepare students for jobs with a single recognized credential. Must meet 70% completion and job placement rates . Tuition must be below graduates’ median value-added earnings . Must be approved by the state governor  as aligned with in-demand jobs. Funding Boost Provides $10.5 billion  to fully fund the Pell Grant reserve and address shortfalls projected for FY2025–2026 These changes kick in July 1, 2026 , and are designed to shift Pell Grants toward career-focused, high-return programs  while tightening rules for traditional aid recipients. Compare OBBB vs Current FAFSA rules I recommend following Candidly for the latest news Paid Family and Medical Leave Credit Made permanent : The credit, originally set to expire at the end of 2025, is now a permanent fixture. Expanded eligibility : Employers can now claim the credit for a portion of premiums paid  for paid family leave insurance policies , not just direct wage payments. Treat premiums the same as direct wages for credit purposes. Employee tenure requirement  drops from 12 months to 6 months , making more workers eligible. Credit range : Employers can claim 12.5% to 25%  of qualifying wages or premiums, depending on the percentage of wages replaced. Written policy required : Employers must maintain a formal family leave policy to qualify. No double-dipping : Businesses can’t deduct the cost of premiums and also claim the credit. What Are Insurance-Based Leave Programs? Employers buy group insurance policies  from private carriers or state programs. The policy pays employees while they're on family leave, parental leave, or medical leave . Employers don’t have to budget for leave payouts—they pay premiums , and the insurer handles the rest. Dependent Care Assistance Program (DCAP) Dependent Care Flexible Spending Account (DCFSA) OBBB permanently raises the annual contribution limit: From $5,000 to $7,500  (or $3,750  for married filing separately). Contributions are pre-tax , reducing taxable income and helping families budget for care. Funds go into a dedicated FSA  that you use to pay for: Child care After-school programs Day camps Nursery school and preschool (if care-related) Deduction for Seniors For most middle-income seniors, this deduction wipes out federal tax on Social Security benefits . Nearly 88% of seniors  will owe zero tax  on their Social Security income High earners won’t benefit—but for retirees with modest pensions or part-time income, it’s a game-changer. Senior Deduction Highlights Amount : Up to $6,000  per qualifying individual age 65+ . Married couples where both qualify can claim $12,000 . Eligibility : Must be 65 or older  by the last day of the tax year. Must include Social Security Number  on the return. Must file jointly  if married. Income Phase-Out : Begins at $75,000  (single) / $150,000  (joint). Fully phased out at $175,000  (single) / $250,000  (joint). Stackable : Can be claimed in addition to  the standard deduction. Available whether you itemize or not . Timeline : Applies to tax years 2025 through 2028 . MAGA Retirement Accounts Short for Money Accounts for Growth and Advancement—are a new type of child-focused savings vehicle. While not as tax-advantaged as Roth IRAs or 529 plans, MAGA Accounts offer universal access , early compounding , and flexibility . While not directly a business perk, employers who contribute could position this as a unique family-friendly benefit. Employer Contributions to MAGA Accounts Employers can contribute up to $2,500 per year per child  (indexed for inflation). These contributions are excluded from the employee’s taxable income . The business can deduct the contribution  as a fringe benefit expense—similar to DCAP or educational assistance programs. Contributions count toward the $5,000 annual cap  on MAGA Account deposits. Key Features of MAGA Accounts $1,000 federal seed deposit  for every U.S. citizen born between 2025 and 2028 . Parents, relatives, and even employers can contribute up to $5,000 per year  until the child turns 8 . Funds are invested in low-fee, diversified U.S. equity index funds —no leverage allowed. Tax-deferred growth ; qualified withdrawals taxed at long-term capital gains rates . Withdrawals allowed  starting at age 18  for: Higher education or credentialing First-time home purchase Starting a small business Potential Growth With full contributions and average market returns, accounts could grow to: ~$128K by age 18 ~$350K by age 31 $7M+ by age 70  if untouched fact check: Calculator.net $5000 per year for 7.3 years Permanently expands the above-the-line charitable deduction   For taxpayers who don’t itemize—a major shift aimed at democratizing philanthropy. Before OBBB, only itemizers (about 10% of taxpayers) could deduct charitable gifts. This change opens the door for 90%+ of filers  to get a tax benefit for giving. It ’s modeled after a temporary COVID-era provision that saw 90 million taxpayers  claim a similar deduction. Starting in 2026 , non-itemizers  can deduct: Up to $1,000  for single filers Up to $2,000  for married couples filing jointly This deduction is above-the-line , meaning it reduces your adjusted gross income (AGI)  even if you take the standard deduction Only cash donations  to qualified 501(c)(3) public charities No deductions for: Donor-advised funds (DAFs) Private foundations Non-cash gifts (e.g., clothing, furniture, stock) Limits and Phase-Outs Only the premium portion  of overtime (the extra 1/2 of time and a half pay) qualifies—not the full time-and-a-half rate. Mandatory service charges  and automatic gratuities are excluded from the tip deduction. The deductions begin to phase out  for individuals earning over $150,000  ($300,000 for joint filers). Deduction Phase-Out Threshold Max Deduction Notes Overtime Premium Pay Deduction $150K (single) / $300K (MFJ) $12,500 (single) / $25,000 (MFJ) Applies to federally mandated overtime only Tip Income Deduction $150K (single) / $300K (MFJ) Up to $25,000 Only for cash/charged tips in approved occupations Senior Bonus Deduction $75K (single) / $150K (MFJ) $6000 single/ $12,000 MFJ Applies to taxpayers age 65+ Strategic Planning Tips Income Shaping : Because many of these benefits phase out based on income, adjusting your taxable income —like increasing 401(k) contributions—could help you qualify for a larger credit in 2026. Fringe Benefit Optimization : Boost DCAP limits to $7,500 , reducing taxable income for employees Layer in student loan repayment exclusion , MAGA contributions, and childcare credits for rich benefit stacks Integrating insurance-based leave programs  means employers can offer paid family or medical leave  not by directly paying wages out-of-pocket, but by purchasing insurance policies  that cover a portion of an employee’s leave compensation. Asset Allocation Tactics : MAGA accounts grow tax-deferred—introduce compounding concepts early in client education Charitable Giving Strategy : For clients who don't itemize: promote annual “micro-gift plans” that hit the $1K/$2K caps efficiently and cleanly The One Big Beautiful Bill is poised to reshape payroll practices and tax for millions of workers and employers. While the full impact will unfold over the coming years, now is the time for businesses to prepare for new reporting standards and explore how these changes might affect their workforce. More on what you need to know from Working Now and Then: Joseph, C. E. (n.d.). What is marital status discrimination?  Working Now and Then. https://www.workingnowandthen.com/marital-status-discrimination/ Additional Provisions of OBBB include: Agriculture & Rural America Updates to Price Loss Coverage (PLC)  and Agriculture Risk Coverage (ARC) Expanded base acres  eligibility Enhanced Dairy Margin Coverage (DMC) Increased commodity loan rates Investments in conservation , trade , research , forestry , and energy Defense & Armed Services Funding for: Military quality of life Shipbuilding , munitions , air/missile defense Cybersecurity , Indo-Pacific readiness , and nuclear forces Authorized military construction projects Expanded ICE and border enforcement budgets   Energy & Environment Repeals of Inflation Reduction Act  climate programs Expanded oil, gas, coal leasing Streamlined pipeline permitting Strategic Petroleum Reserve reforms Repeal of EPA/NHTSA emissions rules Health Care Medicaid reforms: Stricter eligibility verification. Able bodied adults without dependents will need to prove they're working 80 hours per month. ( exceptions under 19 or over 64, pregnant or a veteran with a disability) Reduced retroactive coverage Limits on gender transition procedures  for minors ACA Exchange fraud prevention Delayed DSH payment cuts Expanded orphan drug exclusions Medicare payment updates Read more about how this could affect cancer patients: LiveStrong Technology & Communications Spectrum auctions and modernization AI and IT infrastructure investment See Also: https://waysandmeans.house.gov/2025/07/03/passed-the-one-big-beautiful-bill-the-largest-tax-cut-in-american-history/ See Also: “H.R. 482 — 119th Congress: No Tax on Tips Act.” www.GovTrack.us. 2025. July 19, 2025 See Also:   IRS: One Big Beautiful Bill Act: Tax deductions for working Americans and seniors See Also: Tip recordkeeping and reporting See Also: Fringe Benefit Guides: https://www.irs.gov/pub/irs-pdf/p15b.pdf https://www.irs.gov/pub/irs-pdf/p5137.pdf See Also: Employee Reimbursed Expenses How the One Big Beautiful Bill Will Reshape Payroll Taxes

Understanding Payroll Deductions: A Guide to Managing Your Take-Home Pay Payroll deductions are a fundamental aspect of every employee's financial life. Whether you're a seasoned professional or just starting your career, understanding these deductions is crucial for managing your finances effectively. What are Payroll Deductions? Payroll deductions refer to the money that is withheld from your paycheck by your employer before you receive it. These deductions serve various purposes, including taxes, benefits, and voluntary contributions. While they may seem like a reduction in your earnings, many deductions are mandated by law or contribute to essential benefits that support your financial well-being. Types of Payroll Deductions: Taxes: Federal Income Tax ( W4 Employee Withholding Certificate ), and State Income Tax (State Withholding Election Form) are typically withheld from your paycheck based on your earnings and the information you provide on your W-4 form. Additionally, you may have deductions for Social Security and Medicare taxes (941, 943, 944). Your employer is responsible for matching your deduction. The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total. These deductions fund government programs such as retirement benefits and healthcare for seniors. Your employer is also required to pay FUTA (940) tax. The Federal Unemployment Tax Act (FUTA) provides for payments of unemployment compensation to workers who have lost their jobs. FUTA is NOT a deduction from employee wages, rather FUTA is an employer expense. The current rate is 6% of the first $7000 earned, with a credit for State Unemployment Insurance of up to 5.4%. FUTA tax rate of 0.6% (6.0% - 5.4% = 0.6% or .006). Some states take Federal Unemployment Trust Fund loans from the federal government if they lack the funds to pay UI benefits for residents of their states. If a state has outstanding loan balances on January 1 for two consecutive years and does not repay the full amount of its loans by November 10 of the second year, then the FUTA credit rate for employers in that state will be reduced until the loan is repaid. Benefits: Many employers offer benefits such as health insurance, retirement plans such as 401(k), life insurance, and disability insurance. The cost of these benefits is often shared between you and your employer, with your portion deducted from your paycheck. These deductions are either: Voluntary (health, disability, insurance, retirement plans, job related expenses) Pre-Tax ( not taxed ) (medical and dental benefits, 401K retirement plans, group-term life insurance) Post-tax (taxable) (wage garnishments, Roth IRA retirement plans, union dues) Why Payroll Deductions Matter: Understanding and managing payroll deductions is essential for several reasons: Budgeting: Knowing how much of your paycheck will be deducted allows you to budget effectively and plan your expenses accordingly. Compliance: Ensuring that the correct taxes are withheld, and other deductions are made in accordance with legal requirements helps you avoid penalties and compliance issues. Benefits Enrollment: Understanding the cost and coverage of employer-sponsored benefits enables you to make informed decisions during open enrollment periods. Financial Planning: Maximizing contributions to retirement accounts and other savings vehicles through payroll deductions can help you build long-term financial security. Knowing your payroll pay frequency will assist you in personal budgeting. (Total Working hours a year 2080)  Monthly (12p=173.33 hrs),  Semimonthly (24p=86.67 hrs),  Biweekly (26p=80 hrs same day every week)  Weekly (52p=40 hrs) or  Daily (260p=2080)  and what day of the week are paychecks issued? Tips for Managing Payroll Deductions: Review Your Pay Stub: Take the time to review your pay stub regularly to understand how much is being deducted and where it's going. This can help you spot any errors and ensure accuracy. Update Your W-4: If your personal or financial situation changes (e.g., getting married, having a child), update your W-4 form to reflect these changes and adjust your tax withholding accordingly. Take Advantage of Benefits: Explore the benefits offered by your employer and take advantage of those that align with your needs and goals. This may include health insurance, retirement plans, and other perks. Automate Savings: Consider setting up automatic deductions for savings and retirement contributions to ensure consistent and disciplined saving habits. Payroll deductions play a significant role in shaping your financial picture, affecting everything from your take-home pay to your long-term savings and retirement goals. By understanding the types of deductions, their purposes, and how to manage them effectively, you can take control of your finances and make informed decisions to secure your financial future. Remember, knowledge is power when it comes to managing your money, so empower yourself with the information you need to thrive in today's complex financial landscape. See also: Tax Brackets 2024 See also: Tax Brackets 2025 See also: IRS Tax Withholding Estimator See also: Employment Tax Due Dates *be sure your employer is in compliance See also: Employee Reimbursed Business Expenses and Taxation See also: Fringe Benefits Guide See also: Unemployment Insurance Tax Topic See also: IRS: Employment Taxes See also: https://www.irs.gov/filing/adjusted-gross-income See also: Tip Recording and Reporting See also: How One Big Beautiful Bill will reshape Payroll Taxes Understanding Payroll Deductions: A Guide to Managing Employee Take-Home Pay

Ecommerce app mapping to QuickBooks Online: What every seller needs to know. if you have multiple sales channels, multiple job phases, or multiple service segments, map each item to the respective (class), then a product and service income category type on the chart of accounts. This ensures your Income Statement is not complicated by multiple income line-item categories for each segment (class) and customer. Report filtering is utilized to break down class, location and customer.   Location:  in QuickBooks Online - Origin Location is a (warehouse, inventory, store, business office, employees, tradeshow, or sellers' location) Origin defines how, when and where sales tax is due. Determine Sales Tax NEXUS : The QuickBooks system first checks the sales document for Ship to destination states (buyer's location) , then Ship From Location (Origin) sellers' location. Origin based: sales tax is based on the seller's location or the point of origin of the sale. Destination-based states: Sales tax is determined by the buyer's location or the destination where the product is received. The Quickbooks Sales Tax Module utilizes the location field (Origin) for calculating Sales Tax NEXUS **be sure to check the location field for correct NEXUS, change to buyers location in destination states. See example below. Origin Based Sale Tax System NOMAD States-No Sales Tax Arizona New Hampshire Illinois Oregon Mississippi Montana Missouri Alaska New Mexico Delaware Ohio Pennsylvania Tennessee   Texas   Utah   Virginia California (is considered a "mixed sourcing state" city, county and state sales taxes are origin-based, while district sales taxes - supplementary local taxes - are destination-based) Note: Many purchasers are unaware of the obligation to pay use tax in their home state when purchasing tax free items and returning to their home state.   Structuring Ecommerce Sales: Items:  ecommerce app integration with QuickBooks Online Products and Services Items in QuickBooks Online are: Inventory Products e commerce app integration with QuickBooks Online Non-Inventory Products *for Shipping Income (check local jurisdiction laws) Services Bundles (multi-product) Some notes about bundles: Bundle Item (Multi-Inventory Items) (Income = Sales for Invoices, and the Purchase/Expense = COGS for Bills/Expenses) Predetermined by item being bundled. Bundles can have up to 50 items (last I checked with QBO and requested an increase). ( The National Association of Home Builders estimates that over 3,000 components are used in constructing a house, in 6-10 Phases. Therefore, a Job Phase may include as many as 6-10 bundles.) There is no additional markup or change in price for bundles. (Bundles aren’t assemblies) Rather the price of a bundle = The total price of all its finished goods  inventory items. (Inventory Lot, for instance, a complete kitchen) Bundles can be used for estimating projects and job phases (e.g.: kitchens, bathrooms, et...) by using Job Phase Bundles when estimating. This process is GAAP compliant and conducive to efficient and accurate inventory and project management (and associated accounting collaboration) as well as planning and analysis. For a complete description of the use of Bundles to track inventory in construction and manufacturing (applies to all businesses utilizing bundles) see: ( Manufacturing Assemblies and Construction Contracting ) Products and Services Items are associated with: Inventory Assets (products populated from PO to Bill *mark billable) Service Expenses : Cost of Sales with average cost (COS) COGS/Inventory Expense Item: with average cost (COGS) *optional Vendor Name and SKU Income-Sales with average sales price (taxable or non-taxable) add Sales Tax (Taxable based on location of the buyer (ship to-destination) or default to (origin-based ship from), or custom rate from the sales tax module. add Quantity and Price of items in stock (*NEW import from Sales Channel or Spreadsheet Sync: Do not overwrite inventory in stock. It could constitute fraudulent asset manipulation, update prices only ) For price updates use ( Average Costing ) for inventory updates use (inventory valuation report worksheet to compare with sales channel reports or conduct a physical count) Enter at least an average sales price/rate and purchase/expense cost to each item to maintain GAAP matching principles if no bill is attached to the invoice or sales receipt at the time of sale. Attach bill to invoice (from unbilled charges report) (COGS does not populate from the sales document to the income statement without it) Reconcile from a BOM (Bill of Materials) report monthly and file to My Documents > Shared folder to maintain historical records. I suggest that you request QBO engineers to complete the system, updating the (cost) in products and services with each successive new bill for inventory. Gear Icon > Feedback Category Other Fees:   Ecommerce Providers setup: (Turn on per line class, or per document for your sales documents from the Accounts and Settings Menu > Company > Categories > Track Classes, assign one to each row or the entire sales document. Ecommerce Providers are set up as classes and fees will be associated with that class on your sales document for the types of products and service fees and expenses, or shipping income category) Payment Processing Fees Platform or Marketplace Fees Shipping Fees Expense Shipping Fees Income Currency Conversion Fees Return and Refund Fees Subscription or Membership Fees Integration Fees Advertising Fees Storage Fees Discounts and Refunds (contra income) = Credit Memos and Refund Receipts *credits (decrease) to checking, income, sales tax and inventory. Vendor Credits *debit (increase) checking and apply to original bill (A/P) and correct vendor and inventory item if applicable. et...... Customer Name:  A critical component of any business! NEXUS tracking (Tax Exempt Requires a Tax Exempt or Resale Certificate) 1.     Revenue Generation 2.     Profitability 3.     Brand Reputation 4.     Market Feedback 5.     Brand Loyalty 6.     Business Growth 7.     Adaptability 8.     Competitive Advantage 9.     Repeat Business 10.  Customer-Centric Culture Payment Method: Cash/ACH Credit Card On Account (Accounts Receivable/Use an Invoice, not Sales Receipt) See: Revenue Recognition for Ecommerce and Store Front Retail Cryptocurrency and Bitcoin Zelle/ACH   Document Mapping: 1.    Data import from your ecommerce provider to a Sales Receipt, deposited to undeposited funds , per sale (or per day: batch close) 2.    Followed by a deposit to bank account: (from undeposited funds ) and bank feed matching! *Sale receipts-sales tax is due on receipt, even if funds are undeposited. Always deposit to undeposited funds and match the bank feed transactions from the Ecommerce provider. Reconcile the undeposited funds monthly. QuickBooks Online Sales Receipt 3. If Products and Service Items are returned your payment processor should match the transaction to Refund Receipt and the original sale + sales tax should be issued directly to your customer following the same steps as above on the sales receipt and applied to the correct customer transaction. A refund issued from your bank account will appear and can be matched in the bank feed to the account specified on the refund receipt. This will: reduce any sales tax liability (you will need to verify if the sales tax was already paid to the State. If so claim the credit on the next sales tax report), increase inventory on hand (debit) and is a credit (decreases) your checking balance Refund Receipt-Return of Products and Services Items Note: A credit memo is a bad debt expense, not a customer refund and return of inventory. Follow Consistent Accounting Procedures: Accounting in QuickBooks follows a specific and structured process. As an accrual-based system that complies with GAAP standards, following consistent accounting procedures is imperative. Proper setup of products and services, including standard sales and purchase prices, is essential for calculating COGS when no bill is linked to an invoice. The primary goal of GAAP accounting is to align expenses and bills with the revenue generated from invoices, creating a clear audit trail to connect all transactions seamlessly and produce accurate financial statements. The accounting process is: Estimate (optional) to PO (optional) to Bill Item or Expense Item (marked billable, attach receipt) to bank feed (transaction) matched to bill or expense, will populate the Unbilled Charges Report, adding Inventory (quantity) and COGS (amount) to your financial statements. When invoiced (add billable items to the invoice from the suggested transaction pop out drawer). This process Bill + Invoice is critical for correct accounting of Sales, COGS and Inventory, is GAAP Compliant and produces accurate financial statements. My accounting preference is to GAAP accounting (matching purchase with revenue to calculate accurate Gross Profit) following correct workflows . If you are pre-entering vendor or store receipts that will be billable to a client, use a Bill (marked billable/see unbilled charges report), then match in the bank feed (bank transactions) These bills will remain on A/P until paid, from a bank feed transaction or otherwise. (from the receipts menu upload receipt or vendor invoice and create a bill from there, mark billable if applicable) Pre-entered bills will dictate whether the expense/purchase is for: Item dropdown lines  for products and services purchased for resale, typically billable items sold to a client and matched to an invoice and will remain in Unbilled Charges until sold out OR Category dropdown lines  for indirect overhead expenses, asset purchases, liability payments, and are typically non-billable . You can enter a bill or expense for COGS directly to the Income Statement, using the category field, for cash accounting transactions only    < not recommended , especially where inventory is concerned, and valuations are necessary. Always add, customer or job, class and location to each document for NEXUS tracking. The rule of COGS calculations: An invoice (income) + bill attachment (Item: COGS) with markup = gross profit. An invoice (income) + bill attachment (Item: COGS) and no markup is a reimbursement = zero gross profit.   An invoice with no bill or expense attachment will not calculate COGS (if not stated in your products and services), increasing your stated gross profit-income, and your tax liability. An Invoice with only a receipt attachment may not calculate the true COGS, or COGS at all, to your income statement (from the receipt) if the price and cost are pulling from the products and services and no billable expense item is attached. Increasing gross profit income and your tax liability. Sales, Inventory and COGS should be reconciled EOM. Create a (BOM) monthly and save to My Accountant > Shared Documents, maintaining a historical record of Inventory, COGS and Sales. Use caution with Excel spreadsheet sync or import from sale channel. Do not overwrite quantities on hand and be sure to maintain a bill of materials (BOM) production report at regular intervals to My Accountant > Shared Documents. This report is necessary for reconciliation and serves as a historical record of Sales, Inventory and COGS. (avoid the potential for fraudulent asset manipulation, and inventory theft) My open letter to Intuit QuickBooks and Marketplace Facilitators and Providers 12/30/2024 Gear Icon > Feedback. You should too! Journal Entry accounting for ecommerce is inefficient and inappropriate, providing very little useful information to a retailer and does not reflect appropriate accounting standards or accurate financial reporting. Ecommerce mapping should follow QuickBooks accounting process for income, inventory and cogs recorded on the correct document. *See above Integrating Your Ecommerce App with QBO Please review the correct process of data import. Ecommerce sales should follow the same procedure: Estimate (optional) to PO (optional) to Bill marked billable to Bank feed (bank transaction) and then a received unpaid Bill, but still not Invoiced, will show on the Unbilled Charges Report to be Invoiced (in the case of Ecommerce, to a sales receipt) When the sales receipts are paid, the attached bill and sales receipt will distribute the inventory asset to cogs and the income to the income statement. My request to Intuit was to please provide the same (suggested transactions) drop down list to sales receipts, as is available to an invoice so that the Unbilled Charges can be attached for correct inventory accounting. The undeposited funds (other current asset) has recently been removed from the reconciliation screen. It is necessary to map transactions to the undeposited funds account, match in the bank feed and to reconcile EOM. Please return the undeposited funds account to the reconciliation screen . Customer Credit Memos and Refund Receipts. Both should be enabled to be matched in the bank feed. Typically, a seller will process the transaction, entering either a credit memo (for canceled orders or bad debt expenses) or refund receipts (for completed order returns). Both are credits (decrease) to the checking account when coming from a Provider or Facilitator and need to be matched and recorded in the bank feed, reducing income and sales tax liability , as well as increasing inventory on hand , and should be posted to the correct customer account. especially with concern for ecommerce, eliminating inventory theft. Vendor Credits: These debits (increase) to the checking account need to be matched in the bank feed and applied to A/P and the appropriate vendor (inventory item). Please enable bank feed matching to vendor credits. Inventory adjustment receipts need to include a customer name and an option to be marked billable, accounting for the loss of inventory. Sales Tax Adjustments need, class, location and customer fields. See Also: Understanding Your Form 1099K See Also: Mapping Marketplace Facilitator and Payment Processors Revenue to the Undeposited Funds Account See Also: Fifo vs Lifo vs Average Costing See Also: Sales Tax Holidays Integrating Your Ecommerce App with QuickBooks Online: A How-To Guide for Marketplace Facilitators and Payment Processors

In the dynamic realm of e-commerce, various entities play distinct roles, each contributing to the seamless flow of transactions. Understanding the differences between a remote seller, a marketplace facilitator, a marketplace provider, and a payment processor is crucial, especially when it comes to the complex landscape of sales tax obligations. 1. Remote Sellers: Remote sellers are businesses that engage in transactions with customers without a physical presence in the customer's location. These sellers typically operate online, leveraging the vast reach of the internet to connect with customers globally. As they operate remotely, the responsibility for remitting sales tax often falls on the remote seller. 2. Marketplace Facilitators: Marketplace facilitators, such as Amazon, eBay, or Etsy, are platforms that connect buyers and sellers. They actively participate in the sales process by managing transactions, handling product listings, and often providing additional services. In many jurisdictions, marketplace facilitators are deemed responsible for collecting and remitting sales tax on behalf of the sellers using their platform. 3. Marketplace Providers: While the term "marketplace provider" is used more broadly, it generally refers to entities that offer platforms for sellers to list their products or services. Unlike facilitators, providers may not actively participate in the transaction process. The sales tax responsibility for marketplace providers can vary, with some jurisdictions holding them responsible and others placing the onus on individual sellers. 4. Payment Processors: Payment processors, such as PayPal or Stripe, focus on handling the financial aspects of transactions. Their role is to securely process payments, deduct any applicable fees, and transfer the remaining funds to the seller. Payment processors are typically not responsible for remitting sales tax, as their primary function is facilitating the monetary exchange between buyers and sellers. 5. Money Transmitters:   These services typically involve the transmission of funds or the issuance of stored value, such as traveler's checks or electronic stored value cards. Money transmitters facilitate the transfer of money between individuals or entities, often across different locations or jurisdictions. They are regulated entities and must comply with various legal and regulatory requirements, such as obtaining licenses, implementing anti-money laundering measures, and reporting certain transactions to authorities. Examples: Western Union, MoneyGram, PayPal, Venmo TransferWise (now Wise) Revolut, Mercari, Square Cash (Cash App), Zelle and many others. Sales Tax Responsibility: The question of who is responsible for remitting sales tax often hinges on the level of involvement in the transaction process. In many jurisdictions, the responsibility falls on the shoulders of the entity that has the most direct interaction with the customer during the sale. This means that in cases where marketplace facilitators actively participate in the transaction process, they are frequently tasked with collecting and remitting sales tax. The rationale behind this distribution of responsibility is to streamline the tax collection process and ensure compliance in an ever-expanding digital marketplace. By assigning the responsibility to the entity with the most direct connection to the end consumer, tax authorities aim to create a more efficient and transparent system for tracking and collecting sales tax in the digital age. In conclusion, as e-commerce continues to evolve, it's essential for businesses and consumers alike to comprehend the roles of remote sellers, marketplace facilitators, providers, and payment processors, as well as the associated responsibilities for sales tax remittance. This knowledge empowers stakeholders to navigate the e-commerce landscape with clarity, ensuring compliance and contributing to a fair and effective taxation system in the digital era. See Also: Economic Nexus by State E-Commerce Roles: Unraveling the Differences and Sales Tax Responsibilities

Understanding Commingling Commingling occurs when personal and business finances are mixed in a way that makes it hard to distinguish between the two. This can happen when: You use a business credit card for personal purchases. You deposit personal funds into a business account without documentation. You pay for business expenses from a personal account. You transfer money between accounts without proper records. You may even buy a new car on a loan paid by the business, that is titled in your personal name. A vehicle must be titled in the owner's name. What is Inventory Commingling? Commingled inventory refers to the practice of mixing together identical products from multiple sellers in a shared storage space, typically at a fulfillment center like Amazon's FBA. This means that when a customer purchases a product, it may be fulfilled with an item from any seller who has commingled their inventory, rather than specifically the seller who made the sale. Key Aspects of Commingled Inventory Mixing of Products: Identical products from different sellers are stored together, regardless of who owns them. No Seller-Specific Tracking: Individual items are not tracked back to their original seller once commingled. Potential Risks: Commingling can create issues for sellers, such as the possibility of receiving negative reviews if a customer receives a damaged or counterfeit product that originated from another seller's inventory. Benefits for Some Sellers: Commingling can save time and effort on inventory preparation, as it eliminates the need for individual product labeling. VAT Implications: Commingling can also have VAT implications, particularly in international sales, requiring careful accounting and potentially multiple VAT registrations. Example: On Amazon, if two sellers both sell the same brand of coffee with the same UPC, Amazon may commingle their inventory. When a customer buys the coffee, it might be fulfilled with a product from either seller. How to Avoid Commingling Open Separate Accounts Maintain distinct bank and credit card accounts for your business. This separation is crucial for tracking your finances accurately. Document Everything Keep detailed records of all transactions, especially if you transfer funds between personal and business accounts. Proper documentation can save you from potential legal troubles. Use Inventory Control Software Implement inventory control software, barcoding, and accounting software. These tools help you categorize expenses and maintain clean records of inventory, COGS, sales, vendor orders, and customer purchases, including sales tax. Pay Yourself Properly If you're a business owner, take a salary or owner's draw rather than dipping into business funds ad hoc. Document all inventory adjustments and adhere to tax requirements. Follow Company Policies If you're an employee, never use company cards for personal expenses unless explicitly allowed and documented with receipts. Following company policies can prevent misunderstandings and potential conflicts. The Importance of Keeping Finances Separate Commingling funds or inventory assets might seem harmless—especially in the early stages of a business—but it can manifest into serious legal and financial issues. By keeping your personal and business finances separate, you protect your company, your reputation, and your future. Conclusion In conclusion, understanding the risks of commingling is vital for any business owner. It's not just about maintaining a good practice; it's about safeguarding your business's future. Commingling can lead to complications that may jeopardize your business's success. Therefore, take the necessary steps to keep your finances separate. Commingling Funds in Business: Why It’s a Risk You Can’t Afford

Effective financial management is the backbone of any successful business. It empowers leaders to make informed decisions, optimize resources, and drive growth. Mastering financial management strategies can transform how a company operates, helping it navigate challenges and seize opportunities with confidence. Understanding and applying the right financial principles is essential for maintaining stability and achieving long-term goals. This article explores key financial management strategies, explains what business financial management entails, and offers practical tips to enhance your decision-making process. Essential Financial Management Strategies for Business Success Implementing strong financial management strategies is crucial for maintaining control over your company’s finances. Here are some foundational approaches that can help you manage your business finances effectively: 1. Budgeting and Forecasting Creating a detailed budget allows you to plan your expenses and revenues accurately. Forecasting future financial performance based on historical data and market trends helps anticipate cash flow needs and avoid surprises. Set realistic revenue targets based on past performance and market conditions. Allocate funds for fixed and variable costs to maintain operational efficiency. Review and adjust budgets regularly to reflect changes in the business environment. 2. Cash Flow Management Cash flow is the lifeblood of any business. Managing it well ensures you have enough liquidity to cover day-to-day expenses and invest in growth opportunities. Monitor cash inflows and outflows daily to maintain a healthy balance. Implement strict credit control policies to reduce late payments. Maintain a cash reserve for unexpected expenses or downturns. 3. Cost Control and Reduction Keeping costs under control without compromising quality is vital for profitability. Analyze all expenses to identify areas where costs can be reduced. Negotiate with suppliers for better rates or payment terms. Automate repetitive tasks to save time and reduce labor costs. 4. Investment in Technology Leveraging financial management software can streamline processes and provide real-time insights. Use tools for automated invoicing, expense tracking, and financial reporting . Access dashboards that highlight key performance indicators (KPIs). Improve accuracy and reduce manual errors. 5. Risk Management Identifying and mitigating financial risks protects your business from potential losses. Diversify income streams to reduce dependency on a single source. Purchase appropriate insurance coverage. Maintain compliance with tax and regulatory requirements. Financial charts and calculator on a business desk What is business financial management? Business financial management refers to the process of planning, organizing, directing, and controlling the financial activities of a company. It involves managing the procurement and utilization of funds to achieve the organization’s objectives efficiently. Key components include: Financial Planning: Setting goals and outlining strategies to meet them. Financial Control: Monitoring financial activities to ensure compliance with plans. Financial Decision-Making: Choosing the best options for investment, financing, and operations. For example, a company deciding whether to expand its product line will analyze projected costs, expected revenues, and potential risks before committing resources. This decision-making process relies heavily on accurate financial management. By mastering business financial management , companies can improve profitability, reduce waste, and enhance their competitive edge. Detailed financial report with graphs and charts Practical Tips to Improve Financial Decision-Making Making sound financial decisions requires more than just numbers. Here are actionable recommendations to enhance your decision-making process: 1. Use Data-Driven Insights Rely on accurate and up-to-date financial data to guide your choices. Avoid making decisions based on assumptions or incomplete information. Implement regular financial reporting cycles. Use analytics tools to identify trends and anomalies. Benchmark performance against industry standards. 2. Prioritize Strategic Goals Align financial decisions with your company’s long-term vision. Avoid short-term fixes that may harm future growth. Evaluate how each decision supports your strategic objectives. Consider the impact on stakeholders, including employees and customers. Balance risk and reward carefully. 3. Engage Cross-Functional Teams Involve different departments in financial planning to gain diverse perspectives. Collaborate with sales, marketing, and operations teams. Understand how financial decisions affect various parts of the business. Foster transparency and accountability. 4. Continuously Educate Yourself Stay informed about financial best practices, regulations, and market changes. Attend workshops and webinars. Subscribe to financial news and industry reports. Consult with financial advisors when necessary. 5. Plan for Contingencies Prepare for unexpected events by developing contingency plans. Maintain emergency funds. Identify alternative financing options. Regularly review and update risk assessments. Business meeting discussing financial documents Leveraging Technology to Enhance Financial Management Technology plays a pivotal role in modern financial management. Here’s how you can leverage it to improve your business’s financial health: Cloud-Based Accounting Software: Enables real-time access to financial data from anywhere. Automated Expense Tracking: Reduces manual errors and saves time. Financial Dashboards: Provide visual summaries of key metrics for quick decision-making. AI and Machine Learning: Help predict trends and identify potential risks. By integrating these tools, businesses can streamline operations, improve accuracy, and make faster, more informed decisions. Building a Culture of Financial Responsibility Financial management is not just the responsibility of the finance team. Cultivating a culture where every employee understands the importance of financial discipline can lead to better overall performance. Educate employees about the impact of their actions on the company’s finances. Encourage cost-saving initiatives and reward innovative ideas. Promote transparency in financial reporting and decision-making. This collective approach ensures that financial management strategies are embedded throughout the organization, leading to sustainable success. Mastering financial management strategies is a continuous journey that requires commitment, knowledge, and the right tools. By applying these principles, businesses can enhance their decision-making capabilities, optimize resources, and achieve their goals with greater confidence.

1099 form Paper filing E-filing To recipient Purpose 1099-MISC 28-Feb 31-Mar 31-Jan Miscellaneous compensation, such as rent, prizes, awards, healthcare payments, and payments to an attorney The minimum reporting threshold for 2026 increases from $600 to $2000 1099-NEC 31-Jan 31-Mar 31-Jan To report nonemployee compensation The minimum reporting threshold for 2026 increases from $600 to $2000 1099-A 28-Feb 31-Mar 31-Jan  For a lender to report the amount of the debt owed (principal only) and the fair market value (FMV) of the secured property as of the date of the acquisition or abandonment of the property 1099-B 28-Feb 31-Mar 15-Feb Used by brokerages and barter exchanges to record customers' gains and losses during a tax year. 1099-C 28-Feb 31-Mar 31-Jan Used only for cancellations of debts for which the debtor actually incurred the underlying debt 1099-CAP 28-Feb 31-Mar 31-Jan Furnished to shareholders who receive cash, stock, or other property from an acquisition of control or a significant change in the corporation's capital structure 1099-DIV 28-Feb 31-Mar 31-Jan Used by banks and other financial institutions to report dividends and other distributions to taxpayers and to the IRS 1099-G 28-Feb 31-Mar 31-Jan Federal, state, or local governments file this form if they made payments of: Unemployment compensation. State or local income tax refunds, credits, or offsets. Reemployment trade adjustment assistance (RTAA) payments. Taxable grants Agricultural payments. Commodity Credit Corporation (CCC) loan. 1099-H 28-Feb 31-Mar 31-Jan This statement is provided to you because you received Health Coverage Tax Credit (HCTC) advance payments of your health coverage insurance premiums 1099-INT 28-Feb 31-Mar 31-Jan A tax form issued by interest-paying entities, such as banks, investment firms, and other financial institutions, to taxpayers who receive interest income of $10 or more 1099-K 28-Feb 31-Mar 31-Jan  A report of payments you got for goods or services during the year from: Credit, debit or stored value cards such as gift cards (payment cards) Payment apps or online marketplaces, also called third party settlement organizations or TPSO 1099-LS 28-Feb 31-Mar 15-Feb Used by the acquirer of any interest in a life insurance contract (also known as a life insurance policy) in a reportable policy sale to report the acquisition 1099-LTC 28-Feb 31-Mar 31-Jan Enables individual taxpayers to report long-term care (LTC) benefits, including accelerated death benefits.  1099-OID 28-Feb 31-Mar 31-Jan Enables individual taxpayers to report long-term care (LTC) benefits, including accelerated death benefits 1099-PATR 28-Feb 31-Mar 31-Jan Reports dividends associated with a farm or cooperative (co-op) 1099-Q 28-Feb 31-Mar 31-Jan A record of funds distributed from a qualified tuition program (QTP or 529 plan) to an account owner, student beneficiary, or designated school 1099-QA 28-Feb 31-Mar 31-Jan Distributions From ABLE Accounts-a tax advantaged savings account that helps people with disabilities save money for qualified disability expenses 1099-R 28-Feb 31-Mar 31-Jan To report distributions from annuities, profit-sharing plans, retirement plans, IRAs, insurance contracts, or pensions 1099-S 28-Feb 31-Mar 15-Feb To report the sale or exchange of real estate 1099-SA 28-Feb 31-Mar 31-Jan A U.S. tax form that reports distributions made from a health savings account (HSA), Archer medical savings account (Archer MSA), or Medicare Advantage medical savings account (MA MSA) 1099-SB 1-Mar 31-Mar 15-Feb File Form 1099-SB if you are the issuer of a life insurance contract and you receive a statement from an acquirer in a reportable policy sale provided under section 6050Y(a) or you receive notice of a transfer of the life insurance contract to a foreign person Other forms 1098-F Section 6050X A government or governmental entity and certain nongovernmental entities must file this form required by section 6050X, to report certain fines, penalties, and other amounts paid. 1097-BTC Issuers of certain tax credit bonds (or their agents) and recipients of Form 1097-BTC from the bond issuer or agent, such as mutual funds or partnerships, who are further distributing the credit must file this form for each tax credit distributed. 1098 Use Form 1098 (Info Copy Only) to report mortgage interest of $600 or more received by you during the year in the course of your trade or business from an individual, including a sole proprietor.  1098-C A donee organization must file a separate Form 1098-C with the IRS for each contribution of a qualified vehicle that has a claimed value of more than $500. A qualified vehicle is: Any motor vehicle manufactured primarily for use on public streets, roads, and highways. A boat. An airplane. Form 1098-E If you receive student loan interest of $600 or more from an individual during the year in the course of your trade or business: file this form, and provide a statement or acceptable substitute, on paper or electronically, to the borrower. 1098-Q Qualifying Longevity Annuity Contract Information Form 1098-T Eligible educational institutions file Form 1098-T for each student they enroll and for whom a reportable transaction is made. Insurers file this form for each individual to whom they made reimbursements or refunds of qualified tuition and related expenses. 3921 Corporations file this form for each transfer of stock to any person pursuant to that person's exercise of an incentive stock option described in section 422(b). 3922 Corporations file this form for each transfer of the legal title of a share of stock acquired by the employee pursuant to the employee's exercise of an option granted under an employee stock purchase plan and described in section 423(c) (where the exercise price is less than 100% of the value of the stock on the date of grant, or is not fixed or determinable on the date of grant). 5498 File this form for each person for whom you maintained any individual retirement arrangement (IRA), including a deemed IRA under section 408(q). 5498-ESA File this form for each person for whom you maintained any Coverdell education savings account (ESA) 5498-SA If you are the trustee or custodian of a Health Savings Account (HSA), Archer Medical Savings Account (Archer MSA), or Medicare Advantage MSA (MA MSA) file Form 5498-SA for each person for whom you maintained an HSA, Archer MSA, or MA MSA. A separate form is required for each type of plan. W-2G File Form W-2G, Certain Gambling Winnings, to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on the type of gambling, the amount of the gambling winnings, and generally the ratio of the winnings to the wager. File Form W-2G with the IRS. You must provide a statement to the winner (Copies B and C of Form W-2G) IRS Filing Information Returns Electronically If 10 or more, you MUST file electronically ( IRIS ) and Year End for 1096 Contact | BookkeepingBusinessOnline.com for assistance All 21 Types of 1099 Forms and IRS FIRE requirements IRS FIRE (Filing Information Returns Electronically)

In today’s fast-paced business environment, managing finances efficiently is crucial. Many businesses are turning to Bookkeeping Business Online solutions to streamline their accounting processes. Virtual bookkeeping services offer flexibility, accuracy, and cost savings, making them an attractive option for small to medium-sized businesses. This article explores the top virtual bookkeeping services, highlighting their features, benefits, and how to choose the right one for your business. Why Choose Bookkeeping Business Online Services? Top Virtual Bookkeeping Service in the USA Bookkeeping Business Online services provide businesses with a convenient way to manage their financial records without the need for in-house staff. These services use cloud-based software, allowing real-time access to financial data from anywhere. Here are some key advantages: Cost Efficiency : Hiring a virtual bookkeeper is often more affordable than maintaining a full-time employee. Expertise : Many services employ certified professionals with extensive experience. Time Savings : Automating bookkeeping tasks frees up time to focus on core business activities. Accuracy and Compliance : Professional bookkeepers ensure your records comply with tax laws and accounting standards. For example, a small retail business can outsource its bookkeeping to our virtual service , reducing overhead costs while gaining access to expert financial advice. Top Virtual Bookkeeping Service in the USA Online bookkeeping setup with laptop and documents Top Features to Look for in Online Bookkeeping Providers When selecting an online bookkeeping service, it’s important to consider features that align with your business needs. Here are some essential features to evaluate: Cloud-Based Software Integration The service should integrate with popular accounting software like QuickBooks, Xero, or FreshBooks. This ensures seamless data synchronization and easy access. Customized Reporting Look for providers that offer tailored financial reports, helping you understand your business performance clearly. Security Measures Since financial data is sensitive, ensure the service uses encryption and secure login protocols. Scalability Choose a service that can grow with your business, offering additional services like payroll or tax preparation as needed. Customer Support Reliable customer service is vital for resolving issues quickly and maintaining smooth operations. For instance, a growing e-commerce company might prioritize scalability and software integration to handle increasing transaction volumes efficiently. Detailed financial report with charts and graphs Benefits of Using Our Virtual Bookkeeping Services Utilizing virtual bookkeeping services can transform how you manage your business finances. These services provide: Real-Time Financial Insights Access your financial data anytime, enabling quicker decision-making. Reduced Errors Professional bookkeepers minimize mistakes that could lead to costly penalties. Improved Cash Flow Management Accurate bookkeeping helps track receivables and payables efficiently. Tax Preparation Support Organized records simplify tax filing and reduce audit risks. For example, a consulting firm using virtual bookkeeping can focus more on client projects while ensuring their financial records are accurate and up-to-date. Person using laptop with financial software for bookkeeping Final Thoughts on Bookkeeping Business Online Bookkeeping Services Choosing the right online bookkeeping service can significantly impact your business’s financial health. By leveraging professional virtual bookkeeping, you gain access to expert knowledge, save time, and reduce costs. Whether you are a startup or an established business, investing in a reliable bookkeeping service is a smart move toward sustainable growth. Explore your options carefully, prioritize your business needs, and take advantage of the many benefits that virtual bookkeeping services offer. Your financial clarity and peace of mind are worth it.

In today’s fast-paced digital world, managing your finances efficiently is more important than ever. Whether you are a small business owner, freelancer, or individual looking to streamline your accounting tasks, connecting with a professional accountant online can be a game-changer. Online accountant support offers convenience, expertise, and cost-effectiveness that traditional accounting services may not always provide. This blog post explores the benefits of online accounting services, how to find the right support, and practical tips to make the most of your collaboration with an online accountant. Why Choose Online Accountant Support? Connect with Professional Bookkeepers and Accountants Online Online accountant support has revolutionized the way people handle their financial matters. Instead of scheduling in-person meetings and dealing with piles of paperwork, you can now access expert advice and services from the comfort of your home or office. Here are some key reasons why online accountant support is becoming the preferred choice: Accessibility : You can connect with your accountant anytime, anywhere, using digital tools and platforms. Efficiency : Online systems allow for faster processing of financial data, tax filings, and reports. Cost Savings : Reduced overhead costs for accountants often translate into more affordable services for clients. Real-Time Updates : Cloud-based accounting software enables real-time tracking of your financial status. Personalized Service : Many online accountants offer tailored packages to suit your specific needs. For example, a freelance graphic designer can upload invoices and receipts directly to an online portal, where the accountant reviews and categorizes expenses promptly. This eliminates the need for physical document transfers and speeds up tax preparation. Connect with Professional Bookkeepers and Accountants Online Online accountant working with financial data on a laptop How to Find Reliable Online Accountant Support Finding the right online accountant support requires careful consideration. Here are some practical steps to help you choose a professional who fits your needs: Check Credentials : Ensure the accountant is certified and has relevant experience in your industry. Read Reviews and Testimonials : Look for feedback from other clients to gauge reliability and quality. Evaluate Communication : Choose someone who is responsive and explains financial concepts clearly. Assess Technology Use : Confirm that the accountant uses secure, up-to-date accounting software. Discuss Pricing and Services : Understand what services are included and how fees are structured. You can start by visiting websites that specialize in connecting clients with accountants. For instance, if you want to speak directly with an accountant online , you can reach out through their contact page to inquire about services and availability. Client interacting with online accountant through digital tools How much does an online accountant cost? Understanding the cost of online accountant support is crucial for budgeting and decision-making. Pricing can vary widely depending on the complexity of your financial situation, the services you require, and the accountant’s experience. Here are some common pricing models: Hourly Rates : Some accountants charge by the hour, typically ranging from $50 to $200 per hour. Fixed Monthly Fees : Many online accountants offer subscription plans that cover bookkeeping, tax filing, and advisory services for a set monthly price. Project-Based Fees : For specific tasks like tax preparation or financial audits, a one-time fee may be charged. Package Deals : Bundled services can provide cost savings if you need multiple accounting functions. When comparing costs, consider the value of time saved and the accuracy of financial management that professional online accountant support provides. Investing in expert help can prevent costly errors and optimize your tax benefits. Calculating costs and budgeting for online accountant services Benefits of Using an Online Accountant for Your Business Online accountant support offers numerous advantages that can help your business grow and stay compliant with financial regulations. Here are some benefits to keep in mind: Time Savings : Automating bookkeeping and tax processes frees up your time to focus on core business activities. Improved Accuracy : Professional accountants reduce the risk of errors in financial records and tax returns. Better Financial Insights : Access to detailed reports and analysis helps you make informed business decisions. Scalability : Online services can easily adapt as your business grows or changes. Secure Data Handling : Reputable online accountants use encrypted platforms to protect your sensitive information. For instance, a startup can benefit from monthly financial reports generated by an online accountant, helping the founders track cash flow and plan budgets effectively. Tips for Maximizing Your Online Accountant Support Experience To get the most out of your relationship with an online accountant, consider these actionable recommendations: Organize Your Documents : Keep digital copies of receipts, invoices, and bank statements ready for upload. Communicate Regularly : Schedule periodic check-ins to review financial status and address questions. Use Recommended Software : Adopt the accounting tools suggested by your accountant for seamless integration. Stay Informed : Learn basic accounting principles to better understand reports and advice. Set Clear Expectations : Define the scope of services and deadlines upfront to avoid misunderstandings. By following these tips, you can build a productive partnership that supports your financial goals and reduces stress. Connecting with a professional accountant online is a smart move for anyone looking to simplify their financial management. With the right online accountant support, you gain access to expert advice, efficient processes, and peace of mind. Whether you need help with bookkeeping, tax preparation, or financial planning, online accounting services offer flexible solutions tailored to your needs. Don’t hesitate to explore options and reach out to an bookkeeping business online today to start improving your finances.

(part 1) of 2 (part 2) Providing a clear picture of the Profitability of Manufacturing Assemblies and Construction Contracting: Project Management Revenue Deferral: A Step-by-Step Guide for Project Managers *The following instructions are proprietary information, created by bookkeepingbusinessonline.com , and are subject to copyright laws. QuickBooks Online provides the software. I provide expert guidance and support. Contact me   or Schedule a 30 minute free consultation Revenue Deferral (Revenue Recognition) is a crucial accounting practice that enables businesses to accurately reflect their financial performance over time, especially in industries where services are rendered, or products are delivered over extended periods. In this blog post, we’ll explore the step-by-step process of deferring revenue, highlighting essential tasks such as creating estimates, issuing sales and change order invoices (earned revenue), and managing deposit-retainers (unearned or deferred revenue). I recommend using QuickBooks Online Advanced with Excel Spreadsheet Sync for large projects. My simple process of automation for numerous months of revenue deferral: Begin with an Estimate of Product or Service(s) + Markup The Basics are: 1) Invoice for the deferred revenue (unearned revenue) from the Estimate of services to be provided, match payment in bank feed. 2) Select "Make Recurring" from the Invoice for each deferred revenue (unearned revenue) invoice date thereafter to project or job end. 3) Invoice for consecutive months (-) deferred revenue (unearned revenue) (+) service provided (earned revenue) 4) Select "Make Recurring" from the Invoice for each month of service and be sure to add an end date of the (earned revenue) just before the next deferred revenue (unearned revenue) invoice date. thereafter to project end. **bills can be attached to invoices for accurate job costing, for the particular customer, and will be GAAP compliant. (If your billable expense (COGS) is greater than any individual month deferral for a particular customer, you can defer the COGS using prepaid expenses current asset, using the same automation technique *see managing billable expense below. This information is an important metric used in Job Costing, planning and analysis. The Process of Revenue Deferral: Step 1: Create an Estimate (Non-Posting) Start with a detailed estimate outlining the project scope, costs, and timeline (e.g., by job phase) Duplicate the estimate. The two estimates are: an Approved copy  is for invoicing (contractual and unchangeable). a Pending copy  is for purchasing. Step 2: Create a Deposit-Deferred Revenue Invoice (Unearned revenue) After approval, create an invoice for the deposit amount, tied to deferred (unearned) revenue. This invoice links the approved estimate to the deposit received. Match payments (to undeposited funds) bank feed and reconcile the bank deposit accurately. Step 3: Create Sales Invoice(s) (Earned Revenue) Generate sales invoices based on the approved estimate job phases : Date them to the project completion, deferral end, or service date. Deduct previously recorded deferred revenue deposits. Run a "Balance Forward" statement to show when deferred revenue became earned. This process moves deferred revenue (unearned revenue) from the Balance Sheet to the Income Statement and adjusts COGS accordingly. Repeat Steps 2 & 3  for each job phase or service period to track future earned revenue (Income Statement) and deferred revenue (unearned revenue) balances (Balance Sheet). This method adheres to GAAP, supports subscription-based services, and aids financial planning and analysis. Key Tip:  Use linked transactions (estimates, POs, bills, and invoices) instead of journal entries to maintain, an audit trail, accuracy and clarity in financial documents. Progress Invoicing vs Revenue Deferral: You can enable project progress invoicing in Accounts and Settings to bill against the approved estimate based on the AIA % of project completion model. In this method: Only retainage (typically 5%-10%, deferred revenue) and paid invoices (earned revenue) are reflected on financial statements. The remaining estimate stays off the balance sheet and is invoiced as the project progresses. Work-in-progress reports help track progress. Caution: Progress invoicing complicates financial reporting, tax compliance, inventory and project management. If your contract follows a % completion model but uses revenue deferral accounting, specialized reports will show job completion percentages. The customization of the revenue recognition process is based on the business's operating standards and procedures. It requires careful planning to accurately identify the products and services items delivered, mapping the items to corresponding income, COGS, and expenses on the chart of accounts, and management of the timing of revenue deferral, as well as the handling of prepaid and billable expenses. Preparation Steps: Sales Channels & Mapping: Map sales channels, job phases, or service segments to their respective class. Align these to product/service income and COGS categories in your chart of accounts. Use report filtering to analyze by class, location, or customer without complicating the Income Statement with excessive line items. Document Organization: Sort sales documents by class in Account Settings, choosing either per document or per line (recommended per document for large projects). Add custom fields (Gear Icon > Custom Fields) for details like Project Manager or Sales Rep. Sales Tax: Location is utilized for NEXUS ship from (origin) information (business or job address, seller office, warehouse, inventory location, employee location, fair or tradeshow, drop shipper, et...) The location field specifies where and how you will submit sales taxes. Set up sales tax based on product or service and location, verifying compliance with state and local laws and the Department of Revenue. Refunds, Discounts, Shipping, Fees and Sales Tax require special consideration depending on how the sales is processed, and if the item is taxable. You will need to set up sales tax for each of your products and services items. Default tax to location (origin-Ship from) or search for the specific item you are selling, and you will get the message, "this item might have special tax considerations. Select Edit sales tax to view our recommendation and we'll make sure it's taxed  correctly. We'll apply sales tax based on the product or service and location. "  ** Because sales tax liabilities are always the seller's legal obligation, I recommend confirming your licensing and other obligations by checking with the Department of Revenue and State and Local Statutes ** Review: Integrating your ecommerce app with QuickBooks Online Chart of Accounts Setup: Ensure accounts match your business type, with income and COGS properly mapped to products and services. Special Sales Considerations: Account for refunds, discounts, shipping, fees, and sales tax depending on item taxability. For taxable items, set default tax to the origin or specific item recommendations in your software. Pricing Rules: Add price rules for specific customers and products and services items Vendors & Customers: Add vendors and customers with email addresses. Mark all vendors as 1099 eligible for profile completion or upload confirmation documents. Upload exemption certificates for tax-exempt customers and vendors. Class Setup Sort the sales documents by class setup from Accounts Settings, per document or each line of a transaction. For large projects it is wise to choose the per document selection. Custom Fields can be added to your forms from Gear Icon > Custom Fields to further specify meaningful information on the document such as Project Manager, Sales Rep, et... GAAP Transaction Matching Income = COGS or Billable Expense Matching-Reimbursements plus Markup (Gross Profit) *A sales price and purchase price are required to be entered for your products and services items to produce COGS calculations on your income statement if a bill is not available when an invoice is issued. Follow Consistent Accounting Procedures: Accounting in QuickBooks follows a specific and structured process. As an accrual-based system that complies with GAAP standards, following consistent accounting procedures is imperative. Proper setup of products and services, including standard sales and purchase prices, is essential for calculating COGS when no bill is linked to an invoice. The primary goal of GAAP accounting is to align expenses and bills with the revenue generated from invoices, creating a clear audit trail to connect all transactions seamlessly and produce accurate financial statements. The accounting process is: Estimate (optional) to PO (optional) to Bill Item or Expense Item ( marked billable , attach receipt) to bank feed (spend transaction) matched to a bill or expense, will populate the Unbilled Charges report, adding Inventory (quantity) and COGS (amount) to your financial statements when invoiced (add billable items to the invoice from the suggested transaction pop out drawer). This process Bill + Invoice is critical for correct accounting of Sales, COGS and Inventory, is GAAP Compliant and produces accurate financial statements. My accounting preference is to GAAP accounting (matching costs with revenue to calculate accurate Gross Profit) following correct workflows Upload all receipts and vendor bills to transactions > receipts and create bill from there. These bills will remain on A/P until paid, from a bank feed spend transaction or otherwise. *Always enter a vendor email to give that vendor access to the 1099 platform. Pre-entered bills will dictate whether the expense/purchase is for: Item dropdown lines  for products and services purchased for resale, typically billable items sold and matched to an invoice. OR Category dropdown lines  for indirect overhead expenses, asset purchases, liability payments, and are typically non-billable . You can enter a bill or expense for COGS directly to the Income Statement, using the category field, for cash accounting transactions only < not recommended where inventory valuations are concerned Always add, customer or job, class and location to each document The rule of COGS calculations: An invoice (income) + bill attachment (Item: COGS) with markup = gross profit An invoice (income) + bill attachment (Item: COGS) and no markup is a reimbursement = zero gross profit   An invoice with no bill or expense attachment will not calculate COGS (if not stated in your products and services), increasing your stated gross profit-income, and your tax liability An Invoice with only a receipt attachment may not calculate the true COGS, or COGS at all, to your income statement (from the receipt) if the price and cost are pulling from the products and services and no billable expense item is attached. Increasing gross profit income and your tax liability. Sales, Inventory and COGS should be reconciled EOM. Create a (BOM) monthly and save to My Accountant > Shared Documents, maintaining a historical record of Inventory, COGS and Sales. QBO engineers have been altering transaction, including estimates, you may need to modify the process of reporting to show invoiced, remaining and closed and watch your Estimates Report for correctness. When the invoices, created from the estimates are paid, the attached bill + invoice will distribute cost of goods + income to the Income Statement, clearing unbilled charges. (12/30/2024 Please send feedback to QBO Gear Icon > Feedback to QBO engineers to correct their work) Item Mapping: Products and Service Item Setup-Mapped to the Chart of Accounts: If the items on the estimate are for: COS Purchases (Non-Inventory) , These items would be mapped to (Income = Sales Income for Invoices and the Expense/Purchases account = COS billable expense/or specific expenses) or ( Category fields on an invoice from Chart of Accounts setup are for general indirect overhead Expenses, non-billable only ) If the items on the estimate are: Inventory Items (Inventory) (Income = sale of product income for Invoices, and the Expense/Purchases = COGS for Bills/Expenses) If the items on the estimate are: COS (Service) Item (Income = Billable Service Income for Invoices, and the Expense/Purchases account = COS Billable Service Expense for Bills/Expenses If the items on the estimate are: Service Vendor Items (Service) (Income = Billable Labor Income, and the Expense/ Purchases = Billable Labor expense COS Labor) (use for 1099 subcontractors ) If the items on the estimate are: Time Item Setup (Service) (Income = Billable Time Income, and the Expense/Purchases = Billable Time COS Labor) *turn on in Accounts and Settings > Time ( use for employees ) employees can easily track time against customers, jobs, service items, and whether a job is billable, for improved accuracy in invoicing and job costing with QuickBooks Time Elite. Read More quickbooks.intuit.com/app/apps/home If the items on the estimate are: Revenue Deferral Item (deposit/retainer) (Income = deferred revenue, and the Expense/Purchases = deferred revenue) For the contractor and final fees *plan according to your preferences If the items on the estimate are: Bundle Item (Multi-Inventory) (Income = Sales for Invoices, and the Expense/Purchases = COGS for Bills/Expenses. (Build of multi-inventory items) *Estimated sales prices should match bundle prices for a client specific estimate to subsequent invoice transactions. If not you may need to issue a change order. Bundles can be used for estimating common projects (e.g. kitchens, bathrooms, et...) when creating inventory bundles always use finished price. (see details: (part 2) ( manufacturing and construction profitability ) and optional production line accounting Managing Prepaid Expenses: Prepaid Expenses (any billable product or service):     If the business is prepaying expenses on behalf of a customer several days or months in advance, set up the Prepaid Other Current Asset account on the Chart of Accounts. This process will follow GAAP matching principles. (1 Create a Bill to the vendor being paid, categorized to the Prepaid Expense Current Asset (increase Prepaid) and pay the Bill when due (match in bank feed). Enter the Customer name in the specified field and make a note of the expense item in the description line, but do NOT mark as billable (2 Immediately after payment is made, create a copy for an opposing Bill dated to the revenue deferral earned income date, with the actual Item, previously prepaid, marked as billable LESS  (-) Prepaid Expense Current Asset (decrease Prepaid NOT marked billable .) 2-line transaction. This net zero transaction does not affect A/P since the Bill has been paid. It reduces the Prepaid Expense Current Asset on the revenue deferral date and marks the expense to be billed to the customer at a deferred date, maintaining GAAP accounting practices, invoice from unbilled expenses on the deferral date. Managing Billable Expenses: Billable Expenses (Any billable product or service): If you are using markup and have turned on markup in Accounts and Settings there are Two ways to proceed: (1 Items can be marked up directly from the Estimate , with markup calculated and included on the subsequent PO + Bill + Invoice. If Invoicing directly from the estimate, with predetermined marked up items, when the actual spend arrives in the banking center, the bill, fielded for the client should NOT be marked up again, only check marked billable (to populate the Unbilled Charges Report). When earned revenue is realized directly from the estimate and invoiced, the markup is already calculated and the difference on the Income Statement is the estimated Income less the billed item (COGS) = Gross Profit with no visible markup calculations. (2 The items are check marked billable and marked up directly on the bill (Cost Plus billing) and matched to a PO and a spend transaction in the bank feed, then invoiced. The markup amount will appear as a separate income line item on the income Statement. Billable Income and Billable Expense line items should match EOM leaving a seperate line for markup. Typical of Cost-Plus Billing, your Income will be clearly visible as the difference between Markup Income + Item Income - billed Item COGS = Gross Profit (example: Bill $100 + 20% MU = $120 Invoiced = $20 Markup Income/Gross Profit) *If no markup was added to the estimate or bill, attached to an invoice, the income and COGS expense will be equal amounts known as reimbursements and should have a separate category on the Chart of Accounts (reimbursement expense and income) to manage EOM balance. How will you know what bank feed spend transaction belongs to which customer? You should have already marked a PO as received, and entered a bill fielded to the customer, check marked billable, for that specific product or service and amount. The bank feed spend transaction will be matched to the unpaid bill on the Unbilled Charge Report. Do not duplicate billable items from the original estimate, that have already been marked up and converted to an invoice. Bills and subsequent Invoicing are reserved for Un-Invoiced Charges or Change Orders and are common practice for Cost Plus Billings. (****Caution should be taken! Failure to mark an expense or bill transaction billable or duplication of transactions can be challenging to reconcile EOM****) In either case, determine whether these bills should be marked as prepaid to a particular Job Phase and that they are attached to the Purchase Order. Receipts for goods purchased can be uploaded to the general company forwarding email (or new AI feature) transaction > receipts and should be attached to at least one of the PO-Bill-Invoice transactions since they are all connected. Conclusion: Effectively deferring revenue is a nuanced process that requires careful planning, attention to detail and adherence to accrual and GAAP accounting principles. By consistently following the outlined steps—creating estimates (with Job Phase bundles), converting to deposit-retainer invoices (unearned revenue), and finalizing with Job Phase sales Invoices (earned revenue) businesses can accurately reflect their financial performance over time. This not only ensures compliance with accounting standards but also provides a clear picture of a company's true economic standing and is beneficial to inventory and project management (and associated accounting collaboration) as well as planning and analysis. Whether you're in a service-oriented industry or managing subscription-based services, mastering the art of revenue deferral is key to financial transparency and sustainable business practices. See below, an outline of the deferrals, related to the milestone billing process. I will be adding more, bookmark this page. (part 2) Providing a clear picture of the Profitability of Manufacturing Assemblies and Construction Contracting: Project Management See also: Cost-Plus Billing vs Time and Materials Billing See also: Navigating Revenue Recognition: A Brief Guide to ASC 606 Compliance See also: Understanding ASC 606 Revenue Recognition: Five Essential Steps Milestone Billing and Deferred Revenue Milestone Billing and Deferrals QBO engineers have been altering transaction, including estimates, you may need to modify the process of reporting to show invoiced, remaining and closed  and watch your Estimates Report for correctness. When the invoices, created from the estimates are paid, the attached bill + invoice will distribute cost of goods + income to the Income Statement, clearing unbilled charges. (12/30/2024 Please send feedback to QBO Gear Icon > Feedback to QBO engineers to correct their work) Products and Services Item Setup: Revenue Deferral Item (deposit-retainer) (income = deferred revenue liability for invoices, and the expense/purchase = COGS or COS for bills and expenses, depending on whether you are using it to defer Contractor and Final Fees or Items) COS Purchases Item (Non-Inventory) (income = sales income for Invoices, and the expense/purchases = COS Purchases for bills & expenses) Inventory Item (income = sales of product for invoices, and the expense/purchases = COGS for bills and expenses) Service Vendor Items (income = billable labor income for invoices, and the expense/purchases = COS Labor for bills and expenses) (use for 1099 subcontractors) Time Item Setup (income = billable time Income for invoices, and the expense/purchases = billable time COS Labor for bills and expenses) *turn on in Accounts and Settings > Time (use for employees) Additional Preparation Steps are noted above. Spreadsheet sync can help with the management of large products and services lists. Caution should be taken not to overwrite inventory quantities if only purchase price and sales price are to be updated (and be sure that the sync does not constitute fraudulent asset manipulation) The most recent inventory purchases relevant to the approved job estimate, and subsequent bill to invoice, is the correct COGs calculation (Specific Identification) regardless of FIFO inventory build and valuation. (hence, GAAP accounting) Use Spreadsheet Sync to review and compare the bill(s) for products and services data in QBO from the bills detail report in Spreadsheet Sync (sorted by customer and class-Job Phase) Verify the data against the approved job estimated costs and invoiced items. Do not sync back to QuickBooks. The bills on the reports are connected to Purchase Orders, A/P and A/R. Deferral Process: Step 1 Job Cost Project Estimate (with Markup)  Enter the full bid details of inventory or materials quantity and amount + any other job-related billable expenses + contractor fees + estimated employee time and payroll tax + 1099 vendor/subcontractor time, et... to an Estimate, *Check with local jurisdictions regarding state and local sales tax laws, add to products and service items accordingly. Tax exemption requires a certificate, posted to vendor or customer list. Spreadsheet sync can be used to build the initial estimate and uploaded back to QBO if desired. Be as specific as you can, breaking down the components of the estimate into job phases (and bundles). When complete send the estimate to the customer for signature approval. Once an estimate is in approved status do not change line items or amounts. Make a duplicate copy of this estimate before proceeding . The accepted estimate will be used to create invoices and monitor job invoicing progress and the pending estimate will be used to create purchase orders and Customer: Bill Bundles. Once an estimate is approved Do Not Sync back to QuickBooks. Step 2 Deferred Retainer-Deposit Invoice (unearned revenue) , on the date the contract is acknowledged create an invoice from the approved estimate for the Deferred Retainer-Deposit Item. Usually 5-10% of the total estimate. Create the invoice from the approved estimate as a whole or % (tip: round to a whole numbers or specific items being deferred), remove all lines you are NOT deferring. Keep the items that you are deferring (+) make an identical subtraction (-) to those items that you are deferring and insert the line-item (+) Deferred Revenue Deposit for the total. Date this Deferred Revenue Deposit unearned revenue invoice to the Current date and email to the client for payment. This is a Good Faith deposit from the client to proceed. Types of deferrals: Products and Services Item Deferrals: Immediately following the Deferred Revenue Deposit (unearned revenue) Invoice sent to the customer (above); create a copy of the invoice, for the same items you just invoiced (+) only, (-) Deferred Revenue Deposit Item (net zero invoice). Date this earned revenue invoice to Job Phase Completion date or Project End to defer the sale and associated sales tax, or punch list items, services, or whatever you are deferring. Subsequent bills for these items can be attached to the invoice at a later date, project end date. Contractor Fee and Final Fees Deferrals: You may want to ask for the deposit from part of your estimated contractor or final fees, excluding products and service item deferrals from the good faith deposit and/or subsequent Job Phase deposits. In that case you would enter: 1.) Deferred revenue deposit unearned revenue invoice (for the contractor service fee or final fee item) to the   Current date from the approved estimate 2.) followed by a copy of that invoice to a (net zero invoice), with a credit (-) for the deferred deposit contractor service fee or final fee item you invoiced dated to the Job Phase Completion date or Project End date. Note: Contractor Fees and Final Fees are profit over and above cost of materials and labor. An example of Products and Services Item Deferrals: Example of Date specific Deferred Invoice transactions (ASC 606 Revenue Recognition) Retainer-Deposit-current date-payment required Deferral-date revenue will be earned on the Income Statement Proceed only after payment has been received (to undeposited funds) and matched to the customer invoice for the deferred retainer-deposit in the banking center. Interim Activities: Collect new vendor contact information, W9, or (TIN) SS#, I9, Tax Exempt Certificates, General Liability Certificate of Insurance and full contact information, including email address , ACH information, direct deposit. **Workforce (self-service) HR communications/Payroll setup **Workforce (self-service) Building Permits Pre-Inspections Insurance Sales Tax Permits Construction Bonds Step 3 Create a PO Sales Invoice(s) from the pending estimate with the item and amount for each line, for each Job Phase (Bundle) expected beginning date (typically each Job Phase (Bundle) will reduce the balance of the construction loan, as an equal portion of the estimate) This will increase accounts receivable and break out the needed inventory items by job phase begin date. Use for Purchase Order Management . The estimate, PO's and PO sales invoices will be connected to A/R bills and to A/R invoices in QBO Do Not Sync back to QuickBooks. ** Note: invoices will not calculate cost of goods sold correctly on the Income Statement without a bill for the product or service item (paid or unpaid) for product and services items. Each product or service item should have at least a standard sales and purchase price. Cost of Goods sold is calculated from the products and services list when no bill has been received against an invoice. Consistent with GAAP accounting, the bill associated with an invoice is the correct COGS calculation (use identical bill and invoice numbering to connect, if possible). Attention to date, customer, and job detail is required for accurate accounting. Step 4 Enter Purchase Orders from the pending estimate . Run an Inventory Valuation Detail Report (showing FIFO inventory build) and/or the Open Purchase Order report to determine the status of inventory requirements, by date, customer and class-Job Phase (Bundles). The Sales Invoices entered in step 3 will show up on the Inventory Valuation report as negative quantities and negative values (if products and service items are not already in stock), until items are on a PO, and attached to a Bill for receipt. The PO to bill process will add to inventory and effectively balance the sale of the negative inventory already invoiced in step 3. Email POs to Material Vendor(s) line by line for each relevant vendor, and relevant Job Phase, with terms of required delivery date, consistent with the relevant Job Phase beginning date (or a few days in advance) for Purchase Order Management and Reporting. Give each vendor permission to the company forwarding email in QBO, where they will send their bills and other documentation, and also collect their ACH payment information for bill payments. Mark all vendors as 1099 eligible and enter their email address Then, email the vendor to complete their profile, view their payments and download their 1099 forms, from the menu: Payroll > Contractor center. Do this even if they are not 1099 eligible (document this fact). A PO sent to a Service Vendor (1099 subcontractor) will notify them of contract acceptance. Insert a description of expected job phase service dates, for scheduling purposes and send a PO to HR to begin an employee hiring/scheduling process. (Give each Service vendor (1099 subcontractor) and Employee permission to the company forwarding email in QBO, where they will send their bills and other documentation, and also collect their ACH payment information for bill payments. Mark the vendors as 1099 eligible and enter their email address . Then email the vendor/ contractor to complete their profile, view their payments and download their 1099 forms from the menu: Payroll > Contractor center. Do this even if they are not 1099 eligible (document this fact). Then wait for Vendor(s)  ...…. Enter a Bill against a PO only after Delivery of Inventory has been confirmed (Bill/Inventory Approval) or for Service Vendors, date their Bill to intended work performed schedule (Bill/Service Approval) (Optional Inventory Tracking) Once the inventory is received (raw materials) to your warehouse for an entire Job Phase, you will be able to follow the job phase progress and inventory movement by using a Customer: Bundle Bill: through each stage of construction/production 1) Raw Materials 2) Job Order, 3.) Installation, 4.) Job Phase Completion (customized to your project specifications) optional Steps are outlined here: (see details:   manufacturing and construction production ) Interim Activities: Pay Vendor(s) if in inventory has been received, or service is performed, follow up on backorders Pay Sales Tax Collected Payroll and Payroll Taxes Inspections PO Reviews, Inventory Status Reviews, WIP Reviews, Payroll and Subcontractor Reviews and Estimate vs Actuals Reviews (Change Orders) As the jobs progresses monitor job progress for change orders. Any cost over and above the original estimate is a Change Order , as determined by the Estimate vs Actuals Reports. Change Orders should have the client's signature and are entered as separate invoices from a Billable Expense + markup. Check in with the status of Estimate vs Actuals Reports often to avoid major overages. Also cap time spending for employees and 1099 subcontract vendors, determined by the original approved estimate. Any overtime would also be considered a Change Order and invoiced accordingly. * Before proceeding to step 5: Consult with a CPA or other Advisor to determine if the PO Sales Invoices for each Job Phase should remain A/R (other asset) and Job phase dated or be Deferred Revenue (liability) and Job Phase Dated. See notes below. Step 5 Alerts: Workflow Automation (Project Management): Deferring the A/R Job Phase PO Sales Invoices you entered, over and above the 1st deferred deposit retainer, requires workflow adaptations. (Repeat Step 2: of the Deferral Invoice Process using the PO Sales Invoices you entered for each Job Phase from start to finish. See the above Example: Date specific Deferred Invoice transactions Use workflow automation alerts to be notified of expected Job Phase start (request for new deposit) and end date (earned revenue) for each Job Phase. To fully Defer a project. (1) Change the existing A/R (purchase order management) PO Sales Invoices you entered to Deferral-Deposit Invoice(s) with ITEMS (+) and (-), for each consecutive Job Phase start date and add the (+) Deferral-Deposit line item send each job phase deposit to the customer for payment (your customer will be informed of the expected timeline for deposits and expected items required for each Job Phase), followed by (2) a copy of that invoice to earned revenue sales invoice (-) Deferral-Deposit line item (+) Items (net zero invoice) recognizing the revenue to the income statement for each consecutive (-) Job Phase completion date . Proceeding to each Job Phase would be stalled if the preceding Job Phase work is incomplete, the next Job Phase deferred deposit invoice is not paid, or the building departments inspection approval is outstanding for the preceding job phase. Include inspection requests in your workflows in advance of each job phase deferral deposit date and preceding job phase end date, if applicable. You may need to change dates of future job phase deferral deposit (start dates) and earned revenue sales invoices (completion date) (along with workflow automations) accordingly. Notes to Project Managers, Accountants, CPA's or other Advisors': Job Phase PO Sale Invoice(s) entered for PO Management from the pending estimate are posted to A/R but are really neither A/R nor Deferred Revenue. From the beginning (contract acknowledgement), goods and services were not yet delivered, and the contract for the revenue, is unearned and not collected. Deferring the successive A/R PO Sales Invoices is beneficial to cash flow projections (future dated P&L and Balance Sheet) along with inventory and project management (and associated accounting collaboration), planning and analysis, and is closely associated with ASC 606 While these instructions are detailed and lengthy, making revenue deferral appear to be complicated, it is not. An entire project can be organized and deferred from beginning to end, by Job Phase, following the process described above. Any accounting or date adjustments can be made, as needed, before and after each Job Phase. Understanding the difference between A/R and Deferred Revenue Accounts receivable (A/R) refers to the money that a company is entitled to receive from its customers for goods or services that have been delivered but not yet paid. Category: It is an asset on the company's balance sheet, representing the amount of money that is expected to be received within a short period (usually 30 to 90 days) from the date of the sale or service. Residential construction typically takes at least 6 months. Deferred revenue , also known as (revenue recognition, unearned revenue or deferred income), represents money (or a contractual obligation) that a company has received in advance for goods or services that it has not yet delivered. Category: It is a liability on the company's balance sheet until the goods or services are provided. Once the products or services are delivered, and each deferred revenue invoice paid, the revenue is recognized to the income statement, and the liability is reduced. See also: Cost-Plus Billing vs Time and Materials Billing See also: Navigating Revenue Recognition: A Brief Guide to ASC 606 Compliance See also: Understanding ASC 606 Revenue Recognition: Five Essential Steps Continue to: (part 2)   Providing a clear picture of the Profitability of Manufacturing Assemblies and Construction Contracting: Project Management Demystifying Revenue Deferral: A Step-by-Step Guide

(part 2) of 2 (part 1) Revenue Deferral: A Step-by-Step Guide for Project Managers *The following instructions are proprietary information, created by bookkeepingbusinessonline.com , and are subject to copyright laws. QuickBooks Online provides the software. I provide expert guidance and support. Contact me  or Schedule a 30-minute fee consultation The recording of raw materials in accounting is crucial for accurate financial reporting, cost analysis, and inventory and project management. Profitability in Manufacturing and Construction Contracting Key Benefits of Proper Raw Material Inventory Recording: Accurate Financial Reporting: Reflects the true cost of production and profitability. Enhanced Planning and Analysis Management: Supports project managers in tracking project-specific costs. Regulatory Compliance: Ensures adherence to GAAP accounting standards using either inventory valuation methods (FIFO, LIFO, or Weighted Average). Improved Decision-Making: Facilitates data-driven decisions through clear visibility into material usage and costs. Follow Consistent Accounting Procedures: Accounting in QuickBooks follows a specific and structured process. As an accrual-based system that complies with GAAP standards, following consistent accounting procedures is imperative. Proper setup of products and services, including standard sales and purchase prices, is essential for calculating COGS when no bill is linked to an invoice. The primary goal of GAAP accounting is to align expenses and bills with the revenue generated from the invoices, creating a clear audit trail to connect all transactions seamlessly and produce accurate financial statements. The accounting process is: Estimate (optional) to PO (optional) to Bill Item or Expense Item (marked billable, attach receipt from your QBO to your custom email) to bank feed (transaction) matched to bill or expense, adding Inventory (quantity) and COGS (amount) to your financial statements. When invoiced (add billable items to the invoice from the suggested transaction pop out drawer). This process Bill + Invoice is critical for correct accounting of Sales, COGS and Inventory, is GAAP Compliant and produces accurate financial statements. My accounting preference is to GAAP accounting (matching purchase with revenue to calculate accurate Gross Profit) following correct workflows . Send bills from vendors or store receipts to custom QBO email, then wait for match in the bank feed (bank transactions). Follow the prompts from the Receipts menu . These bills will remain on A/P until paid, from a bank feed transaction or otherwise. Pre-entered bills will dictate whether the expense/purchase is for: Item dropdown lines  for products and services purchased for resale, typically billable items sold and matched to an invoice. OR Category dropdown lines  for indirect overhead expenses, asset purchases, liability payments, and are typically non-billable. You can enter a bill or expense for COGS directly to the Income Statement, using the category field, for cash accounting transactions only    Shared Documents, maintaining a historical record of Inventory, COGS and Sales. Here are some basic tips: Profitability in Manufacturing and Construction Contracting Enable Markup in Accounts and Settings. Set up products and services Inventory with purchase cost and sales price for raw materials. Inventory and COGS requires cost and purchase price info if no bill is received at invoicing to calculate Gross Profit correctly. ( Average Costing ) Match most recent bill + invoice (specific identification) for current cost and sales price (GAAP accounting) on the Income Statement, regardless of FIFO Inventory Build. Select sales tax for items from products and services. Use Manufacturing or Construction Sales for Chart of Accounts Income and COGS. Be cautious with Excel spreadsheet sync. Avoid overwriting quantities on hand and maintain a BOM production report regularly. Test the project workflow before starting. QuickBooks Online Advanced with Excel Spreadsheet Sync is recommended for large projects. Here is an example of Basic Production Workflow for material inventories recorded in progress: 1. Purchase of Raw Materials Inventory (typically tax exempt requires certificate) Job Purchase Order: When raw materials are purchased, an accounting entry is made using a Purchase Order (from the Pending Estimate). When materials are received, a Bill or Customer: Bill Bundle is created. Bill #1: Date of movement (+) QTY and AMT Raw Materials Received from the Purchase Order to (A/P). Debits:  Raw Materials Inventory. Credits:  Accounts Payable or Cash/Check Bill Payment. 2. Issuance of Raw Materials Inventory for Production (Job Production Order) As raw materials are issued for production, an accounting entry is made. Bill #2: Date of movement (-) QTY and AMT Raw Materials (+) QTY and AMT WIP Issuance Inventory (from copy Bill #1 , change fields (-) and (+) line items, date). Debits:  Work-in-Process Inventory Issuance. Credits:  Raw Materials Inventory. 3. Conversion of Raw Materials Inventory into WIP Conversion (Installation) As work begins, the cost of raw materials is transferred to the Work-in-Process Inventory. Bill #3: Date of movement (-) QTY and AMT WIP Issuance Inventory (+) QTY and AMT WIP Conversion Inventory (from copy Bill #2 , change fields (-) and (+) line items, date). Debits:  Work-in-Process Inventory Conversion. Credits:  WIP Inventory Issuance. 4. Completion of Production and Transfer to Finished Goods (Job Phase Completion) When production is completed, the cost of raw materials and WIP inventories are transferred to finished goods. Bill #4: Date of movement (-) QTY and AMT WIP Conversion Inventory (+) QTY and AMT Finished Goods (from copy Bill #3, change fields (-) and (+) line items, date). Debits:  Finished Goods Inventory. Credits:  WIP Inventory Conversion. 5. Sale of Finished Goods (Ready to Invoice) When finished goods are sold, the cost associated with production is transferred from Inventory to the Cost of Goods Sold (COGM), and revenue is recognized on the Income Statement. Invoice + Bill + sales tax (dated): Debits:  Cost of Goods Sold Manufacturing or COGS Construction. Credits:  Finished Goods Inventory. These accounting entries ensure that the materials are accurately accounted for at various stages of the process. The goal is to match the cost of producing goods with the revenue generated from their sale, providing a clear picture of the profitability of the business operations at each interval or job phase, ensuring GAAP compliant accounting. Effective Inventory and Project Management is the key to accurate reporting. Tracking Inventory Assembly or Job Phase Production: To check the stage of the inventory in production, run a Balance Sheet, double click the inventory asset account (with any subcategories) to view the Bills or customer: Bill Bundles and the date of job progression, along with inventory quantity and/or value. This enables you to determine when the finished goods are ready to be sold on invoice (earned revenue). **One broken in progress (Create an inventory quantity adjustment, from the products and services list for that item) Details of the inventory in stock and movement are also available on other reports such as the Product and Services List Report. The example transaction report below demonstrates the quantity and value movement of inventory as of the report date. (Customize by vendor, customer, product, and more) Note *Customer: Bill Bundles track inventory quantity and date only. Inventory Movement Detail Reporting Manufacturing The Invoice formula for calculating COGS in manufacturing and assemblies: COGM = Direct Materials Used + Direct Labor + Manufacturing Overhead *Don't forget to add sales tax on the Finished Goods Sale (setup by product and service item). The final invoice will contain the costs (bills) linked to the revenue (invoices), aligning with the GAAP matching principle and is consistent with the ASC 606. guidelines Inventory Movement in the Manufacturing Cycle Construction The Invoice, formula for calculating COGS in construction is similar: COGS = Materials Inventory + Billable Labor + Billable Subcontractor Costs + Billable Equipment Costs + Billable Overhead Costs (*Costs that are not directly associated with a specific project should be excluded) The sales invoice(s) will contain the costs (PO + Bill) linked to the revenue, aligning with the GAAP matching principle and is consistent with ASC 606 guidelines . Progress tracking of construction inventory is a necessary activity and can be accomplished using bundles and the zero balance Customer: Bundle Bill process described below. From inventory stock order to job order and job completion, through each job phase of construction ( Preparing the Homesite, Laying the Foundation, Framing the Home, Installing HVAC, Plumbing, and Electrical, adding the Insulation, affixing the drywall, Inserting the Interior and Exterior Finishes to Completing the Final Inspection and Walkthrough) Inventory progress tracking serves as a valuable tool for measuring compliance with AIA, ASC 606, and IFRS 15 Revenue Recognition Standards : For a performance obligation satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognized as the performance obligation is satisfied. Construction inventory tracking also provides a good control measure to identify and reduce inventory shrinkage and assist in identifying overspending, ultimately a measure to job cost containment and is compatible with inventory and project management (and associated accounting collaboration), planning and analysis. Conduct a physical inventory count before construction starts and after final walkthrough, or as necessary. Make any adjustments (inventory quantity adjustments to an item) accounting for inventory shrinkage, if required, or to identify inventory that can be returned for vendor credit/refund. You can also utilized standard project progress invoicing against an estimate based on the AIA model of % of project complete. In this case, only the amounts actually retained (deferred revenue deposit) + invoice paid (earned revenue) along with any cost plus or change order invoices, would be recognized on your financial statements. The balance of the estimate remains (non-posting-off the balance sheet and is invoiced in progression) Due to sales tax obligations, job progress reporting purposes, A/R and A/P planning and analysis, I do not recommend the (off balance sheet) % completion method of progress invoicing. With the revenue recognition method , reports are available to demonstrate % completion and can be invoiced accordingly. Some notes about bundles: Bundle Item (Multi-Inventory Items) (Income = Sales for Invoices, and the Purchase/Expense = COGS for Bills/Expenses) Bundles can have up to 50 items (last I checked with QBO and requested an increase). ( The National Association of Home Builders estimates that over 3,000 components are used in constructing a house, in 6-10 Phases. Therefore, a Job Phase may include as many as 6-10 bundles.) There is no additional markup or change in price for bundles. (Bundles aren’t assemblies) Rather the price of a bundle = The total price of all its finished goods  inventory items. (Inventory Lot for instance, a complete kitchen) Bundles can be used for estimating projects and job phases (e.g.: kitchens, bathrooms, et...) by using Job Phase Bundles when estimating. This process is GAAP compliant and conducive to efficient and accurate Inventory and Project Management (and associated accounting collaboration) as well as planning and analysis. (* Optional  Production Workflow for Bundling Multi-Products  Estimates and Customer: Bill Bundles First complete the steps to Revenue Deferral (Review Details of (Part 1): Revenue Deferral ) Begin Inventories in production: Once all inventory items are verified as received and the deferral revenue deposit invoice paid, a Bill is created for inventory tracking. This is the zero balance Customer: Bundle Bill  includes all  product items that were bundled on the estimate (by Job Phase, consistent with the received items from the unbilled charges report. the Customer: Bill Bundles  are NOT connected to the Job PO's). For the zero balance Customer: Bundle Bill  leave the line item amounts as a zero balance  but leave item quantity and check mark as billable. This net zero bill does not increase A/P but will create an open transaction on the Unbilled Charges Report and is used for job progress workflow tracking of inventory quantities, for the particular Job Phase. You can use Spreadsheet Sync to create the C ustomer: Bundle Bill , in comparison to the bill(s) for the job phase on the Bill(s) detail report. Use this zero balance Customer: Bundle Bill  to begin the workflow production process from Raw Materials through to Job Phase Completion. This will allow you to monitor the bundle inventory movement from start to finish. Track the job progress workflow according to the Project Managers report of progress (along with any inventory debits/credits (Inventory Adjustments) reported during production. When all Customer: Bill bundles  of a job phase have reached completion, and the finished goods items are ready to be invoiced, the original PO sales invoice (earned revenue)  can be voided and replaced with a new sales invoice (earned revenue) , for the same or actual(s) by job phase end date. Select > Create Invoice from the approved estimate , adding the actual inventory items received and open on the unbilled charges report to the new invoice. (if the job is a cost-plus billing, the mark-up line amount(s) will be separate line items on the Income Statement. This is assuming the quantities and amounts of the approved estimated materials are identical to the billed amounts and are consistent with the deferred items revenue deposit invoice. If not, a change order would be necessary or otherwise expect that the profit margin at the end of the project will be reduced by higher actual costs than were estimated and invoiced. The new sales invoice (earned income)  will clear the unbilled charges report, track amounts and quantities invoiced against the approved estimate and any remaining unbilled amounts (evidenced from the Estimates & Progress Invoicing Summary by Customer or Project report or Estimates vs Actuals Report) It will also reduce inventory quantities on hand, while not affecting A/P (plan payments to A/P after the deferral revenue deposit is received, to avoid late fees and take advantage of vendor discounts). Your Income Statement will now reflect the earned revenue and COGS, at the appropriate time. Job Phase-GAAP compliant accounting complete! The zero balance Customer: Bundle Bills  can be DELETED at the end of production for each Job Phase.  Before job sign off of each Job Phase, use the zero balance Customer: Bundle Bill(s) and a transaction detail by account report, filtered to the customer, or sales of inventory report, or in spreadsheet sync the bill details report 1.)  to make comparisons of PO's, bill(s), and invoice(s) comparing Inventory from the approved estimate by Job Phase, and 2.)  to reconcile job inventory received, and invoiced with quantity on hand or, negative quantities on hand from the products and services list (BOM). This process will maintain inventory asset integrity on your balance sheet and substantiate PO + Bill + Invoice amounts (verifying your Income Statement). Any final billings to adjust for inventory discrepancies can be presented as a Change Orders and issued prior to Sign off. The same comparisons apply to Project Substantial Completion, if appropriate. The Sales Price quoted on an Estimate should be consistent with the products and services of the invoiced job phase bundle(s) and include markup. (best to try and maintain bundle pricing for all customers or create customer specific bundles as is described by the above process) Change orders would be used for any deviations as a result of an increase in material costs, or unbilled costs, et... Run a bill of materials (BOM) production report, generated from the products and services list reports. Produce these reports periodically throughout the job and file to My Accountant > Shared Documents. This will maintain a complete historical record of the project through each job phase. Approved Estimates used for invoicing purposes will have a line or field representing the item and amounts invoiced, remaining to be invoiced, or marked fully converted. The Estimates & Progress Invoicing Summary by Customer will track the open balance (filtered by class, location and customer job) Use this information to determine if there are unbilled items. When the project is concluded there should be no balance left on the approved estimate. (part 1) Demystifying Revenue Deferral: A Step-by-Step Guide for Project Managers See Also: Navigating Sales Tax in the Manufacturing Industry: Challenges and Strategies See Also: Pricing Strategies for your Markup and Margins    See Also: APPS Integrate with QuickBooks Online See Also: FIFO vs. LIFO vs. Average Costing Inventory Management See Also: Cost Plus Billing vs Time and Materials Milestone Billing See Also: https://www.irs.gov/pub/irs-utl/constructionindustry_atg.pdf Construction, Manufacturing and Assemblies Raw Materials COGM and COGS