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Here we are in QuickBooks Desktop Sample Rock Castle Construction Practice file provided by QuickBooks going through the setup process we do every time maximizing the home page to the gray area view drop-down open windows list on the left hand side reports drop-down company and financial looking at the P&L profit and loss tab for the range change from 010124 to 123124 and that's January through December going to customize it so we can go the fonts and numbers and change the font on up to 12 okay yes please okay one more time with the reports drop-down company and financial this time the balance sheet standard going to change that date to 123124 to match up with the profit and loss customize the report fonts and numbers and change the font to 12 okay yes please and okay that's what we do every time going to go back to the home page and in prior presentations we've been focusing in on the customer cycle which can also be called the sales cycle the revenue cycle the accounts receivable cycle looking at the flow of the cycle and the forms within it noting that at the end of the cycle we're hoping to have a deposit that's going to be going into our checking account the normal accrual cycle will be with the invoice that's the starting point for the accrual cycle typically the invoice being used when we build the client or give an invoice to the client for work that was done for which we have not yet received money and that would be for an industry such as an accounting firm bookkeeping firm law firm or landscaping typically where we have to do the work first track the accounts receivable now we're going to take a step back and look at the estimate form the estimate form is often used when we're thinking about a job cost system so like we have here with the construction company if you have a job cost system that's usually one in which you've got not standardized units but rather more customized units so whatever you're doing that has more customization to it the more likely then you're going to be using some kind of job cost system and then you might need an estimate because if you have a new customer or client they might be asking you how much something will cost because not everything is exactly the same we're going to have to basically run an estimate for it so the estimate will look a lot like an invoice but the estimate is not an invoice the estimate is going to be an information return and that way it's similar to the purchase order you'll recall that the purchase order didn't have a financial transaction in other words no impact on the financial statements balance sheet income statement or profit and loss the estimate is going to be the same we've recorded for informational purposes it's going to be tracked within the system it can be used to later create an invoice but the estimate itself is not actually going to have any effect on the financial statements because we haven't received any money and we haven't done any work at that point in time it's just an estimate for things that might be happening into the future so if we go into the estimate then we're going to see the the time let's go back to a prior estimate so we can see one that has been populated looks a lot like an invoice we've got the information related to it on the right i'm going to close out the icon for now or the carrot and we would populate it similar to an invoice we can imagine someone calling us in if it was a construction job then obviously we would try to figure out all the components to it that's when the estimate will become quite complex as you can see here you got a fairly complex estimate that's being taken place so if you have a very customizable thing that's going to be completely different such as construction jobs for different individuals then the estimate is becoming more and more important but even more in a simplified term if you have a bookkeeping firm or a law firm or something like that and someone calls you in with an estimate then you might have a fairly more basic kind of estimate but the same kind of process you're going to want to say okay i don't want to create an invoice to try to calculate how much this thing may potentially cost let's open up an estimate and we'll run an estimate and give an idea of how much something might potentially cost you might also use it if you have like a a rental kind of situation if you're going to rent equipment out and so someone calls in and says i would like to request a rental of this kind of thing we might run the estimate but at that point in time we haven't really rented them anything and they haven't they haven't really paid us at that point in time possibly so then when they come in to actually to actually pick up the stuff we might use the estimate then to create the invoice the estimate then allowing us to track that information in the system without actually recording the financial transaction so we got we could create a new customer as we go or we might be using an existing customer just like with an invoice we got the class tracking if it was turned on that's a specialized area the template you could change the estimate template it's an important thing to think about the look and feel of the estimate because like the invoice it's a form that you might be giving externally to the clients and then we've got the date of it the number generated automatically the address and so on is going to be generated from the customer fields when we set up the customer and then much like the invoice we've got the items that are going to be selected on the left hand side which will help us to then populate the amount that might be charged for for these services for what we're going to do those services provided and the goods provided but we have not yet provided them so this is an an estimate of what could happen if we went forward in the future and so it looks a lot like an invoice and then of course we sum it up a lot like an invoice we could have a we've got a markup which that could be something that you can kind of set up in the estimate meaning if you have a job cost type of system you might say how are you going to calculate your your your income on the invoice you might want to populate that on the invoice meaning i'm going to put my line items of how much the things cost and then i'm going to put my markup whatever the markup is that i'm going to charge over and above that's going to be my profit over and above what i think the cost is going to be in terms of the estimate so you could be seen as clear and transparent in the estimate that's one way you could set up an estimate and then you've got the sales tax that would be applied so we want that in the estimate as well and then the total this whole thing looks like the type of form that would be impacting the financial statements but remember it's not going to impact the financial statements because we're just estimating what would happen we're estimating what in essence the invoice might look like uh after the job was done and we actually invoice the client and then we can use this estimate to pull over to an invoice so if i close this out and we see this we could see the next step in the estimate would generally be an invoice so we can imagine an estimate happening and then we actually do the work for a customer and then possibly we use the estimate to help us populate uh the invoice and so in a job cost system there could be changes from the estimate to the invoice and so on we're not going to get into all the detail on that here we i think we have a course on a job cost system specifically if you want to dive into that in more detail it's a specialty area and so you want to keep that in mind that it is a specialty area when you're thinking about where you're going to be like working what's your particular business what kind of bookkeeping services you want to provide for what kind of industries so then you might have questions of course about the estimates and usually those questions would be tracked in the customer center so which we can go to here or we can go to the customers up top and then the customer center so we we then on the left hand side tab we've got the the customers and on the right hand side we we could search by transactions so i believe that customer that we were looking at was that estimate for that customer something with an n it was this one was it i've got all transactions here i don't know this one's got an estimate in it so here's an estimate for example so if someone came in if this customer came in and said hey i started an estimate or whatnot then we might go into this particular estimate and find it that's how it could happen in practice double click on the estimate and then if we're going to follow through with it at that point in time if we had done the work then we can create the invoice using the estimate so we can go up here and create an invoice from the estimate and move forward there depending on whatever our flow system is depending on what kind of industry we're in i'm going to close this back out for now and then we could go to a similar thing up here to the transactions and for example search your estimates uh on the transactions tab and then you might look at all the estimates or you might look at the open estimates and then try to sort your estimates in this way remembering the estimates have no impact on the financial statements they're not flowing through the balance sheet or the income statement they're tracked internally and usually when you're looking at where they're going to be tracked you're looking at the customer center by customer and then possibly using those estimates say say uh active estimate to make an invoice i'm going to click on this one the cook estimate i'm going to double click on it and so then let's first go through the options up top with the tabs we're in the main tab they look similar to an invoice for example we can go back we can go forward we've got the new item we can save the estimate save as a pdf we've got the delete option create a copy of it which could be useful if it's like a complicated estimate that we want to copy over we can memorize it we can mark as inactive which marks the estimate as inactive quickbooks keeps a record of inactive estimates but doesn't use the estimate numbers in reports now remember the estimate itself is not going to be used to create the balance sheet but we might want to be tracking in essence the estimates themselves so it's quite possible that we're making estimates and some of which are going to be converted into invoices and some of which possibly no action is ever taken on them maybe we don't want to delete them to delete the process but make them in essence inactive so we can then print we've got the preview estimate uh envelope and so on we've got the emailing options which could be useful of course with estimates these days email later we can attach to it if we need to we will create shortly an invoice from the estimate and you've got the start of a project so we're going to go to the formatting tab we've got the preview if you go to the preview it looks like this you can go into some customizations for the estimate but this would be the the general look and feel of it you can manage your templates if you have different templates download the templates spelling you can insert the lines which could be useful if you're trying to maneuver around these lines and you want to put something in between here so when you have a complex a set of data down below that can be useful copy a line as well send ship you've got your options for the email prepare a letter and so on and then your reports up top back to the main tab if we were then to use this to create an invoice then we could go to the create invoice up top we have some options create an invoice for the entire estimate that's the general idea we're probably going to be starting with create invoice for a percentage of the entire estimates or create invoice for selected items or for different percentages of each item so i'm going to create one from the entire estimates where it's going to say okay and then it creates an invoice that looks a whole lot like the estimate the invoice now is what's going to record the actual transaction right so we got this customers and it's been generated the date now of the invoice the invoice number the ship to the terms and so on when we expect to receive the money we've got the items down below that are being sold and then the taxes that are being applied when we create the invoice that's when we expect the transaction to do what invoices do it's an invoice it's going to increase accounts receivable for example for the full amount the other side's going to go to some kind of sales account but not including the sales tax and then we're going to have to include the sales tax in sales tax payable also we're going to have a decrease if inventory is involved to inventory not for any amount on the invoice but for the cost the system knowing what the cost is by by having the items in place and then cost of goods sold will be impacted so i'm going to close this back out and say uh recording i'm not going to record it and i'm going to go back to the carrot up top and the home page so if you have a full accrual process on your accounting system then you're in a business where you do the work first you could could start at the invoice if you do the work first you're billing in essence invoicing the clients increasing accounts receivable and then receiving payment and then deposit or you might have an added step where the client is typically going to be requesting some kind of estimate of how much it's going to be costing first in that case whatever system you have you might first be doing an estimate which will not be affecting the financial statements but which you're going to track and possibly use that estimate in the future to generate the invoice then the process continues on as we've seen in the past