Post future direct deposit to current period

Cincyfloors · ‎June 30, 2021

I am trying to find a way to post direct deposit payments to my contractors in the same month period that I am paid by my customers. Right now, using the QB payroll module my contractors payments post to a “Subcontractor Cost” COGS account on whatever date the direct deposit is done. This is fine most of the time but at the end of the month we usually have two or three jobs where I may get paid by my customer on the 30th for example but I won’t pay my contractors until the following Friday which crosses into the next month (we pay on Fridays after the job completes). I’d like my PNL to show the revenue for the job and the cost of my contractors in the same month the job is completed. QB direct deposit does not allow for any backdating.

My thought is to create a payroll/contractor liability account, then I would do a manual journal entry for the amount of each upcoming direct deposit debiting my COGS account and crediting the liability account. Then when I actually enter the direct deposit, I would select the liability account. My hope is that this would allow the “expense” to show in my current month PNL even if the direct deposit doesn’t actually happen until a few days into the future month.

Does this make sense and would it work? Or does anyone have a better way of solving my issue?

john-pero · ‎July 01, 2021

While you could easily write a paper check dated yesterday, 6/30, even though it is not a Friday, the same thing holds true for making a Direct Deposit, you have to have recorded it with a pay date of 6/30, which means you might have had to create it on 6/28 due to the two banking day lag. I assume you created payments already to post on 7/2 (Friday).

What you suggest with journal entries, although technically achievable, I do not think it is proper to pre-date the payment. The easiest solution is to change how you view your books and look at it as Accrual. Under Accrual accounting if you enter a BILL dated 6/30 but do not pay until 7/31 it is June business.

Cincyfloors · ‎July 01, 2021

Thanks for the reply! I am using accrual accounting, and that is essentially what I am trying to do -- accrue the future direct deposit into the current month (eg. a direct deposit transfer on 7/2 to post on 6/30). The challenge is that no matter when I create the direct deposit, it will only post in the month the transfer occurs. In other words, I can't accrue it. Maybe I am doing something incorrectly with the direct deposit entry, but it seems pretty straightforward. In my mind, with a job completed, the payment to my contractor is a known obligation (liability) that should be accrued, but direct deposit doesn't seem to allow for any accrual.

GlinetteC · ‎July 01, 2021

Thanks for getting back to us and providing additional information to your concerns, Cincyfloors.

For QuickBooks Payroll, payroll post based on the paycheck or direct deposit date. As mentioned by our All-Star above, you can create a check dated 6/30 instead. Please follow the steps below:

Go to the Payroll menu and select the Contractors tab.
Select the dropdown next to the contractor's name and then Write check.
Select the expense account you use to track paychecks.
When you're ready to process the check, select Save and Close.

To learn more details, please refer to this article: Pay a contractor with a paper check.

If you have other payroll concerns or inquiries about the direct deposit in QuickBooks, I'm just around to help. Take care always.

Cincyfloors · ‎July 01, 2021

Thank you for the information and the help. Maybe I can't have the best of both worlds -- I would like to use direct deposit for my contractors, but only a paper check would allow me to date the transaction in the current period. Is there now way to accrue a direct deposit entry?

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Post future direct deposit to current period