Progress payments to subcontractors

dpic44 · ‎August 23, 2018

I'm working with a company that does progress payments to subcontractors. They do not currently keep any inventory items, and there are no clients, just the development project they are working on. The development project is set up as the customer.

The subcontractors submit an invoice/contract of work to be done. Payments are made at specific intervals. I don't see a way to create terms to match this form of payment. And if part of the bill is paid the rest appears to be past due in the A/P aging report.

We tried creating a purchase order for the total dollar amount of each item invoiced. The quantity is 1. If you pay less than the amount owed it will still close the PO because the quantity is 1. I was thinking the quantity could be the total number of payments however that is not always known. We could also switch the quantity and rate, but they don’t like that solution.

Is there a better way of handling progress payments to subcontractors?

lynda · ‎August 24, 2018

Hi @dpic44:

I believe your resolution is the only one. Other than what you’re doing with the PO’s, you could change the due date so that it doesn’t look so bad that your AP is overdue. I used to work for a general contractor many years ago and we had the same issue. But, honestly I cannot think of any other way around what you’re trying to accomplish. Sorry.

View solution in original post

lynda · ‎August 24, 2018

Hi @dpic44:

I believe your resolution is the only one. Other than what you’re doing with the PO’s, you could change the due date so that it doesn’t look so bad that your AP is overdue. I used to work for a general contractor many years ago and we had the same issue. But, honestly I cannot think of any other way around what you’re trying to accomplish. Sorry.

dpic44 · ‎August 24, 2018

Thank you!

qbteachmt · ‎October 28, 2018

For QB Desktop, for that purchase order for Services, you Reverse the Quantity and the Rate.

$10,000 contract = qty 10,000 Rate $1

Now you can do Partial Payment processing and even manage that the remaining Quantity (scope) is being exceeded by the contractor's payment request.

SS_KTGrading · ‎May 21, 2019

My company has the exact same issue as what you describe, and we found a partial solution, but hit another problem; we used the quantity as percent completion (1=100%, .50=50%, etc.). This solved the issue of closing the PO or having to show it as super old in the aging. However, the issue arose that when the billed amount didn't come out to a nice round percentage, QB's 5 decimal place limit meant that we were having to round the calculations and deal with minor discrepancies between 1 cent and sometimes a few dollars. If your subs use the percentages to calculate the billing amounts, this is not a problem, but if they use the amount to get the percentages, this is what you end up with.

I know it's sort of an answer and sort of another problem created, but I thought I'd pass it along anyways! (Also, if anyone knows how to best deal with those rounding discrepancies, we would LOVE to know an easy solution; journal entries for a few cents here and there are such a pain!)

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Progress payments to subcontractors