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Level 1

Payroll expense entry by customer

I am hoping somebody has experience in processing payroll through QBO and allocating salary expense to a customer. I want to process payroll through QBO using time entries by customer. I am wondering how QBO calculates the wage expense to the customer if the employee is paid by salary. Does the system calculate an hourly rate and post that as wage expense to the customer or does the system generate an entry in some other way?

7 Comments 7

Payroll expense entry by customer

Hi @jessicachangecollaborative, I'll help share details about your payroll expenses.


Allocating payroll expenses to a customer for salaried employees is called billable time entries in QuickBooks Online (QBO). Salaried employees are set with hourly wages or rates to allocate and use this feature. I'll show you how to turn this on.


  1. Go to the Gear icon.
  2. Under YOUR COMPANY, select Accounts and settings.
  3. Select Expenses.
  4. On the Bills and expenses section, select the Pencil icon.
  5. Toggle to run on both Track expenses and items by customer and Make expenses and items billable feature.
  6. Put a checkmark on Track billable expenses and items as income selection.
  7. Choose how you want to track each billable time activity and the default terms used.
  8. Select Save.
  9. Click Done.


Here's an article to read and learn more about employees' billable time activity and allocating them to customers via invoices: How to Record Billable Expenses in QuickBooks Online?


I'm also adding this article for an overview about the benefits of time tracking for salaried employees: 4 Reasons Salaried Employees should Track Time.


I've got you covered if you've got questions about time tracking in QBO. You can use the Reply option below and leave a comment for me to get back and assist you. Take care always!

Level 1

Payroll expense entry by customer

Now that I understand how the cost of a salary employee is billed in billable time, can you help me understand how this expense posts to the general ledger? Will the expense post to the general ledger by customer so we can run a PnL by customer, or do we have to use projects to track the billable time as a customer expense? 

QuickBooks Team

Payroll expense entry by customer

Thanks for getting back to us in Community, @jessicachangecollaborative. I'll chime in and help you with your concern about reports in QuickBooks Online Payroll.


Yes, I agree that you’ll have to use projects to track the billable time as a customer expense. That said, you can pull up a Project Profitability report.


Here’s how:


  1. Go to the Projects menu on the left side.
  2. Select the project the list.
  3. Choose Project Reports and click View in the Project Profitability.
  4. Hit Customize button and pick the relevant details in the fields.
  5. Tap Run report and review the data.

You can also print, export, and email the mentioned report for future use. For additional details, check out this article: Run payroll reports in QuickBooks Online


Additionally, visit these articles below to understand more about profitability and how the project works in QBO:


Please feel free to get in touch with me here for any additional questions with reports in QBO. The Community always has your back. Have a great day! 

Level 1

Payroll expense entry by customer

Thank you for the information. I want to clarify that there is no way to get gross profit margin through a Customer PnL Report. You are saying the only way to get actual revenue and expenses, including payroll expenses, is to use Projects. Is that correct?

Candice C
QuickBooks Team

Payroll expense entry by customer

Hey there again, @jessicachangecollaborative


Thanks for reaching back out and asking more clarifying questions about your issue. I'll share some insight with you to help put your mind at ease. 


Gross profit is the profit after eliminating products or services (Cost of Goods Sold) from the total net sales. With that being said, the best way to get this information is by calculating it from the Profit and Loss report. Here's how: 


Gross Profit = Revenue - Cost of Goods Sold


For more details about reports, check out this link. 


Come back if you have any other concerns. We're always here to lend a helping hand. Have a wonderful Friday!

Level 1

Payroll expense entry by customer

That makes sense. What about finding net profit margin for a customer? Can we see that in a Customer P&L Report?

QuickBooks Team

Payroll expense entry by customer

Hi there, Jessica.


Yes, you can use the calculation provided by Candice C to get the net profit margin for your customer. When running the Profit and Loss report, you can filter the name to the customer you need.


Here's how:


  1. Click Reports at the left pane, then open the Profit and Loss report.
  2. Go to the Customize tab.
  3. Set the dates, then go to the Filter section.
  4. Select the customer name from the Customer dropdown.
  5. Tap on the Run report tab to refresh the page.


I'm adding this link for more tips about personalizing your reports: Customize reports in QuickBooks Online.


On the other hand, you can check out this blog to learn more about profit margin analysis: How to run a profit margin analysis for your small business.


If you have any other follow-up questions while running your reports, let me know by adding a comment below. I'll be right here to help you again. Have a good one!

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