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Level 7

Re: I am very frustrated by the lack of integrated time track...

@juVielL -

 

I am not confused and I am an accountant (30 years) so I know that OH = operating expense.  I am asking what options are available for allocating those OH costs onto jobs once you have those cost accumulated in a Fake job as the instructions say to do? 

 

 

Level 7

Re: I am very frustrated by the lack of integrated time track...


@mtrainor1969 wrote:

It is too bad there isn't a way to put these per hour costs, by worker, into the system so that when weekly hours are entered, by job, the costs reflected show the true burdened cost without having to do the $0 Bill method to add those additional costs in as an extra line item.  

 

True burdened cost cannot really be computed until year end when you have total annual cost so that you can see that total actual indirect cost has been allocated 100% to all jobs. However, you can estimate full-absorbtion costing pretty easy as a small business owner.


 

Level 15

Re: I am very frustrated by the lack of integrated time track...

"It is too bad there isn't a way to put these per hour costs, by worker, into the system so that when weekly hours are entered, by job, the costs reflected show the true burdened cost without having to do the $0 Bill method to add those additional costs in as an extra line item. "

 

The reason is that First, you incur Actuals. You use specific Actuals to determine an overhead and/or burden that you decide needs to be directly allocated.

 

You cannot do this with Every Friggin' indirect or overhead entry! Every month that you enter Rent, and every time you enter costs for equipment or vehicle, you would need to know what to split that as, in advance for every job. That is impractical.

 

You can set Desktop Payroll to Job Track all gross costs. That is not possible with every other type of expense the business incurs, when you actually incur them, for Job Tracking, other than Direct costs. And yes, you should already be allocating Direct Costs on every purchase you enter.

 

The only thing left to allocate is anything that was not already Directly allocable, as you handled that piece of data the first time you handle it.

 

Please see my attachment.

Level 1

Re: Job costing: allocating labor costs

Hello, this may have already been answered (there were a lot of replies and I did not read them all, but did not see it in the ones I did read), but I think I can help. We are a government contractor and so have to do this ourselves (including allocation of things like fringes, etc.), and we have no issues doing this. That being said, this may require you to make significant changes in how you capture time and costs, but I will explain how it do it with our company (Note: These instructions are focused on your question regarding Allocating Labor Costs. You can also do this with Non-Labor costs, but the things you check in the Item setup box will be slightly different - it's pretty intuitive once you are in there though):

 

1. I set up various wage categories using payroll items such as: Wages - Direct, Wages - Indirect (if you use a "bucket" of wages, labor, or whatever are the defaults, you will not capture the wages correctly)

2. I set up my Customer/Jobs as individual jobs (most people already do this)

3. I set up Items in the Item list per job (I name them by job to make it easy for tying the item to the job) - For Example if I had a Job Named - 123 XYZ Street and assigned it a project number 1900, I would name the item(s) 123XYZ St - Superintendent, 123XYZ - Project Engineer, etc. (QB has character limitations, so you may have to be creative in your abbreviations)

    HINT: I like to set up a top level item that does not ever get charged to, just to make my list nice and neat, but it is not required. If you do this, then you wouldn't need to type the whole project name, you could just use an account code number (e.g. 1900-001, 1900-002, etc) or the project number and a brief description  1900 Superintendent, 1900 Project Engineer, etc. Whatever floats your boat, as long as the users know what Item belongs with what project.

4. In the new Item setup window, first select "Service" for the Type

5. Then add in your Item Name/Number using whatever recipe you chose to use for this job

6. If you are using a "Master" Item just to help things stay organized for the job, and all of your items are under that master item, then Click on "Subitem of" and select your master Item

7. We just skip the U/M box for service types

8. Then check the box "This service is used in assemblies or is performed by a subcontractor or partner" - THIS IS IMPORTANT in order to capture costs and allocate them to the job

9. This now gives you the opportunity to enter "purchase information" and "Sales information." If you need your invoices to print what that Item is for (e.g. on a cost-reimbursable or T&M job) type whatever description you want for that item, otherwise, you could just leave it blank, just know that reports won't give you a lot of data if you don't put something in that box. Use as you see fit.

10. THIS IS THE MOST IMPORTANT PART for cost allocation: On the Purchase Information side, enter in the Expense account you set up for Direct Wages. Any time charged using this item (see discussion on entering time below), will now segregate the worker's time from time of your office people (i.e. indirect wages)

11. If you want to track your income types separately (we have to track federal $$ coming in from non-federal $$) then you would set up the appropriate income accounts just like you did for wages and then select the proper income account so when you invoice using that Item it tracks the income and sweeps it over to that income account

 

Ok so now you are all set up with Items that can now be "attached" to a job. The next step is your timekeeping and your invoicing. This is pretty simple:

If you are using QB Timecards order to do payroll), your employee will:

1. Select the Customer Job (1900 123XYZ Street) from the dropdown list.

2. Select the Service Item you just created 1900 - Superintendent

3.  Select the Payroll Item (Direct Wages)

4. Add any notes, or skip it, it's up to you

5. Enter in the time

6. Make sure that Billable column is checked if you invoice off of timecards (for federal cost reimbursable or T&M work, we have to do that)

 

If you are NOT using QB Timecards and are using something that Integrates into QB (e.g. T-Sheets and SpringAhead do, we use SpringAhead), you would just set up your timekeeping program in accordance with their instructions for syncing to QB and the timecard populates for you.

 

Now you would just do payroll as usual. You will now notice that the printed paystub and the paycheck detail in QB both show the appropriate hours to the appropriate items. This means you are now capturing the wages (i.e. cost) against the project, and the payroll expense items (e.g. medicare, taxes, etc.) will also be allocated as cost to the job.

 

If you now run a job profitability report, your "Actual Cost" will include those wages and payroll costs. You can verify this by clicking on the actual cost number and the detail will show the expense in the "Account" column.

 

The key is making sure that you are setting up individual jobs, setting up different wage payroll items to segregate out direct wages from other wages, then applying that wage expense to the item you set up, then choosing that item when time is entered.

 

FOR ALLOCATING THINGS LIKE VACATION, HOLIDAY PAY, ETC.

The simplest method is to set up two types of each of the expense/payroll types in question (e.g. set up items for Holiday Wages - Direct, Holiday Wages - Indirect) and then when a person is charging their holiday time, they would choose the Project 1900, and the Item (Holiday) - no need to make a separate holiday Item for each project (we only do that with the other items to make it easy for the employee to make sure that they get the right item with the right job). The mechanism to get that holiday/vacation time allocated to the project is by them selecting the project, then the appropriate item.

 

There are a couple of other ways to get things like medical expenses, etc. to allocate to that job as well, but this particular posting is focused on the question at hand, which was allocating "time/wages/payroll" to the individual job. My 10,000-foot hint is that the key for non-wage expenses is related to setting up two types of expenses for fringes (Direct Fringes and Indirect Fringes, and then when setting up those expense accounts, you direct the expense item to code to the direct or indirect expense codes. Allocation to the specific job, once you have swept the costs to either direct or indirect, can be done, but it's a bit more challenging. It's simpler just to get the direct wages and then set up an Excel spreadsheet to do allocations for you - or use an addon that will do it for you (e.g. ICAT).

 

I hope you find this helpful! We've been using this method for more than 12 years and it has worked beautifully! (We do the same with ODC items as well to ensure those automatically get coded to the job to give us a full and complete job cost report).

Level 3

Re: Job costing: allocating labor costs

Thank you for sharing as s/b helpful to some users.  Too many steps for my preference but may I ask what contract types do you have and how many?  Appreciate your 12 years of experience.

 

How do you meet requirement for GAAP accrual-basis accounting, for example, with regard to PTO accrual since that is not a direct cost to jobs but rather indirect cost allocated via cost pool. 

 

I assume ICAT computes your indirect rates, then do you post JE's back into QB manually or track job cost by project in Excel to do customer billing with cumulative contract-to-date totals on bill?

 

Are you able to submit invoices to customer on last day of timesheet period end, like EOM? 

Level 2

Re: I am very frustrated by the lack of integrated time track...

Hello,

I recommend you create a dummy job, for e.g. our company uses 'our company name' as the client, and 10000 as the job #/name, and all our administrative/corporate overhead time is allocated to job 10000 on the timesheets (excel which I import into QB). This is the only way to more evenly distribute the salary paid employee job costs. For e.g. if you have a manager who does administrative and business development work 30% of the time, and job related work 70% of the time, if you don't assign the manager's overhead time to a job, the job costing through QB payroll will apply a disproportionately higher 'hourly' value to each job as it will be the total of the salary divided by only 70% of the job related hours. Where if the administrative/business development/professional development/vacation/etc. time is coded to 10000, then the staff salaries for each pay period are divided by the full amount of hours they worked in the pay period. Make sense?

There is a downside with job costing and salaried employees in that it's not overly accurate. In our engineering and construction firm, some of the salaried staff will work more than 40 hour weeks during busy times, driving the cost per hour for job costing lower, or say if they worked less hours in a pay period due to some personal commitments, the cost per hour for job costing is higher. I don't really see a way around this. It's a non issue for hourly paid staff.

The other benefit of using a dummy job # for overhead time is the ability to run a filtered report in QB for management to review non-production hours to manage this cost. I also set up about 8 Service Items that identify Administration, Professional Development, Illness (Salaried), Vacation, Business Development, Proposals, IT, Equipment Maintenance, etc. so that we can further review how our non production/non job related time is spent.

I hope this helps.

Highlighted
Level 3

Re: I am very frustrated by the lack of integrated time track...


@mswanson wrote:

There is a downside with job costing and salaried employees in that it's not overly accurate. In our engineering and construction firm, some of the salaried staff will work more than 40 hour weeks during busy times, driving the cost per hour for job costing lower, or say if they worked less hours in a pay period due to some personal commitments, the cost per hour for job costing is higher. I don't really see a way around this. It's a non issue for hourly paid staff.

 

If you were working on Govt contracts, this is what is required.

 

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