 QuickBooks Online 2023 Progress Invoicing Example Number 2 Calculate and Interestimate Get ready to earn the skills needed to boost your bank books on up with QuickBooks Online Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website If you are broken out by category, further broken out by course, each course then organized in a logical, reasonable fashion making it much more easy to find what you need than can be done on a YouTube page We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable Once again click the link below for a free month membership to our website and all the content on it Here we are in our QuickBooks test company file We started up in a prior presentation Remember that we are in the accounting view as opposed to the business view You can toggle between the two views by going to the cog up top switch the view down below We're going to duplicate some tabs to put reports in like we do every time Right click the tab up top to duplicate it as that's thinking right click again Duplicate the tab again back to the tab to the middle reports on the left hand side Opening up the balance sheet which is in the favorites Changing the name or the range 010125 to 123125 I would like to see this one by class even though we only have one class that we worked on in a prior presentation We turned on class tracking in a prior presentation And that gives us this breakout not too much detail from the balance sheet side Although it might give us more detail in this practice problem on the balance sheet side Next tab I'm going to open up the reports this time the profit and loss report And this time I'm just going to open it for the last few months from 070125 to 123125 And run that by month so we can see what the last practice problem did And then I'll run that and there's our our income statement by month of transactions And we have this issue with the timing not exactly lining up on like a percentage of completion type of system And that's what we want to be thinking about this time So what we're going to do this time is we'll create basically a system where we'll try to line that up Let's first enter the estimate again so I'm going to go into Excel and kind of think about how we might put this together from an estimate If we're putting a project together and then we'll go through a similar kind of process to tie all this together So in an Excel worksheet I'm going to format the Excel sheet by clicking here Now by the way if you have this sheet then it'll have an example tab a practice tab and a blank tab to help you work through it And we'll just build it on the blank tab if you don't have it that's okay because we'll just build it from the blank tab anyways So I'm going to right click on this tab and we will format the cells I'm going to make it currency bracketed and then I'm going to say no decimals that's usually my starting point on the formatting And then let's let's say we're going to make our estimate so our job let's say this is job to estimate That we might actually do in Excel we might do this estimate in Excel so that we can then populate it into say QuickBooks right So I'm going to say alright let's then say that we went through our estimate if it was a complex type of estimate But it will simplify it here and just say that our three buckets of expenses are usually going to be materials And then the labor and then the overhead So let's say that of those items we think it's going to be 40,000 for the materials Labor let's say 30,000 that we think it's going to be a labor and then the overhead Let's say we think it's going to be 923 or something like that when we put our estimate together If I sum this up we're going to get to 76 let's say let's say this one this one's actually going to be 6,000 923 which sums up to 76 923 so that'll be our total cost and then we're going to have the markup That I'm going to say is a 30% markup so whatever the cost is we're going to market up 30% this is a general convention Again it would depend on what your billing structure is but this is the concept that I'm going to be using here So we'll mark it up 30% and so we're going to say this will be the markup percent and then this will be the markup amount Which will be equal to the 76 923 times 30% So now I'm going to say the total charge estimate is going to be equal to the cost plus the markup which would be 100,000 Which we're trying to get to that nice even 100,000 So that's going to be our kind of baseline starting numbers We're going to make this bracketed and this is going to be the bottom line Now once we have that estimate we might tell the client hey look we're going to bill you based on this estimate So we might then say okay our billing structure I'm going to make this a skinny column We'll look something like this the billing schedule for this job is going to be I'll make this black and white Is going to be I'll say month one and then month two month three month four and month five And I'm just going to I'm just making up the billing structure and like how would we make up the billing structure We'd probably tie it to the materials we need if it was a construction type of contract But and we might have our first amount that I'm going to charge is just going to say 10,000 Because I'm going to assume we need 10,000 down to buy the stuff we need to start with this more longer term project And month two I'm going to say we're not going to bill in month two because that's when we'll start the project possibly But we actually got the deposit in month one so we got kind of like a prepayment of it And then in month three I'm just going to make up a billing structure of 25,000 30,000 in month four 35,000 in month five for a total of 100,000 So notice that this billing structure doesn't tie out exactly to my process of the job because I haven't started it I don't know how much it's going to take and I know the 10,000 up front I want before I start the job to lock in the client As well as to get the materials that I need to start even though I haven't worked on anything And that's where of course we get in this difference between the the revenue recognition and the billing that's going to be taking place Now when we come up with a billing schedule note that you might have a hard billing schedule in a company You might say hey look I we shook hands and I want to make it I don't want you to think that I'm messing up doing anything funny on the billing schedule So I'm going to I'm going to be tied to the billing schedule even if my costs differ as I go because that's how I do things Or you might say hey look this is just an estimate this is usually in a construction for government projects or something We're like that's an estimate it's probably low no it's not low but then it'll be way low right because then the estimates will go up And it's like oh whoops it cost $500,000 or something and we had to increase the billing rate right You might have a flexible a flexible billing rate but for our purposes I'm going to I'm going to I'm going to make it a fixed billing amount here And say we're locked into the billing for what it is even though our estimates could we don't know what's actually going to happen as the job Goes forward in terms of our actual costs until we actually incur the costs right So at this point in time we can make the estimate and then we'll collect that month one amount So let's go ahead and go over here and I'm going to go to this is our second project so I'm going to make a new project I'll say just call it project number two now so I'm going to say project to generic project number two I'm going to say new project project project number two It's going to be not tied to it could be tied to the same customer but I'm going to say it's tied to customer to right customer to new project And I'm this is going to happen actually at the beginning of 2025 so I'm going to say and 010125 is a start date it's in progress Okay, so now we have a new pro new project number two in place we're going to make an estimate for that project So I'll hit the drop down we'll make an estimate and I'm going to say that's for project number two And we're going to say then this happens start I'm just going to start at the beginning of the year this time 010125 And we'll make our little estimate down below same way that we did before with the generic categories of materials, labor and overhead In practice, obviously you might have a whole different kinds of material and you know labor might go through payroll or contractors however you're going to account for that and overhead and whatnot But they would all be categorized into generally these categories of material labor and overhead usually when you're making something right So materials I'm just going to give the generic category of materials according to our estimate was 40,000 So I'll say 40,000 and I'm going to make a new class which is kind of redundant because we already have the project But we know that the classes will break out at least the income statement by column which is quite useful and in this case it might give us some more detail on the balance sheet side too So I'm going to say class number two or job two so so I can indicate I want to be able to indicate that this is different than the project thing that we're using in terms of tools That's why I'm trying to name it a little bit differently so then we're going to say this is going to be next labor and that we said was for 30,000 Alright 30,000 and I'm going to say this is class number two and then we've got overhead and this is going to be for we're going to say we're going to say the overhead is 6923 Alright 6923 and that's going to be for class number two And then I'm going to put the markup in a separate line item so that the client can see the actual costs and the markup The other way you could do it is to mark up each of the line items by like the 30% markup So I'm going to say I'm going to make up another item here which I'm just going to call the markup So I'm going to say it could be a non inventory or a service item because we're not going to be tracking inventory I'll just say service I'm just going to call it the markup and so we'll copy that and we'll put it down here on the description It's going to be going once again to the sales of products because we are going to be making something here And we'll say save it and close it so there is it and that's going to be our other 2377 So we'll say okay that's going to be 23077 so that should add up to the 100,000 total and this is going to be job number two So there we have it so we'll record the estimate the estimates not going to do anything to the actual financial statements It's just going to give the estimate that we could provide of course to the client and then go from that point If they accept the estimate so we're going to say save and close and then we can track the estimate over in the sales tab By going to the estimates or to the customers customer number two and there's going to be our estimate for the second project What we expect to be happening from this point forward is that we can use that estimate to basically create invoices as we go into the future Now nothing has been recorded to the financial statements yet we have the same familiar problem over here that we saw last time In that we're going to start billing the 10,000 before we did any work on it And that means that the billing could be used with an invoice which would be great That's what we did last time because that facilitates the collection process easier most likely But it causes that revenue recognition issue because we haven't actually done the work to earn the 10,000 So then we'll deal with a couple different options we might deal with that problem with next time