I have started an LLC for home building of both custom and spec homes. I want to use the Desktop Pro version and make each home act as inventory to keep track of basically every expense occurred for each house so that when I sell the home that inventory will count as an expense of the profit of sale. What is the best way to do this?
Thanks for visiting us here in the Community, CCCBuilder.
I can share information with you on how to set up spec home building in QuickBooks Desktop.
Based on the data you've provided, you can create an item for each home to track inventory. Then, you can create sub-items for the expenses for each home. To give you more of an idea about this process, you can read this article: Add, edit, and delete items.
Additionally, in QuickBooks Desktop we also have this feature called Job Costing. This helps tracking the expenses for a job and comparing those expenses to your revenue.
However, I'd suggest consulting an accountant to help and guide how to record these work. Your accountant can provide more expert advice in dealing with this concern.
If there's anything else I can do for you, please let me know. I'm always here to help.
Okay so I have bought QuickBooks Pro 2020 Desktop, and I do not see anything called inventory but I do see the Items.
I think quickbooks auto-populated a list of items as I see it has about 40 items. However their 'Type' is all considered Service and their 'Account' is Construction Income. It's hard to tell but it seems like that would be if I did those services, that it would show how much money I made in that category? Or is it saying how much I spent in that category?
I think I'm getting close, but it seems I should have the 'Account' be Spec Home #1 so that when I have a Spec Home #2 it can have those item costs but keep them separate. I want to be able to keep track of Spec Home #1's Materials costs, sub-contractor fees, building lot cost, utility cost, and property tax costs. What is the most efficient way to do this, then? Or am I not right in this assumption and that I need to create something else?
Thanks for getting back to us, CCCBuilder.
To answer your first question, it's possible that you haven't turned on the Inventory feature in the Preferences yet. If that's the case, here's how to do it:
As per the second question, since that Service item has an income account, then yes! That will show how much money you made for that category.
For the last question, you can create a new account and name it Spec Home#1 or #2 separately.
For more information, check out this article: Create, edit, or delete account in QuickBooks.
Once done, you can either use it to an existing item or when creating a new one. Refer to this article and proceed to the Add or Edit Items section for the detailed steps on how: Add, edit, and delete items.
I want to make sure everything is taken care of for you, so please let me know if you have any other issues or concerns. I'll be here to help. Have a good one!
Thanks for the prompt replies and screenshots.
I did indeed have Inventory turned off so I enabled that but that just enabled a feature under Vendors titled Inventory Activities where if I say 'New Item' I am shown a detailed screen for adding individual inventory as if I were a store selling many quantities of stock items where as I want to be much more vague and just be listing 'Framing Materials' for Spec Home 1 instead of '32 two-by-four studs, 15 sheets of 7/16" OSB'. I think we're close....
However it sounds like that is maybe not even relevant if I go to the Accounts and setup a Spec Home 1 Account? My question here is when I pick new account I need to say what type of account it is; technically the Spec Home 1 is what I want each expense to fall under, so do I choose expense account or is this considered a Fixed Asset since the house is technically land and a permanent structure being built? I don't know if it matters. I assume it's considered type is 'Expense'. When I look at the Item FAQ you linked, it seems like I will need to come in and create Items that fall under Spec Home 1 Account. I'd like to just be able to enter receipts, categorize them into their designated category, and apply them to the Spec Home 1 so I can see a running total of how much money has been spent on Spec Home 1. Is the best way to do this to just enter Check and Credit Card purchases, and apply each purchase to the Spec Home 1 sub-account I create? I guess I don't know the difference between Expense and Item in terms of quick books system.
I am not sure where Inventory comes into play here, then, if any?
I appreciate you following the procedure presented above, @CCCBuilder.
You've got me here to help you get pointed in the right direction to get assistance about selecting the right account for the item that you're going to create on your QuickBooks.
When creating an item in QuickBooks Desktop, these will give you an option to select an account that will manage all the transactions that you're going to create using the item.
However, when it comes to deciding on what is the right account to be used on an item, I'd recommend reaching out to your accountant. They'll be able to provide you the best course of action for your business type.
Lastly, I've added a link here that contains details about the different accounts that are available in QuickBooks: The QuickBooks Chart of Accounts.
This should guide you on track.
Please know that you can always leave a reply below should you have further questions. I'll be around to help. More power to your business!
Okay Betty, I am not 100% sure I follow.
I understand it is up to the CPA to tell me what they want done, but in terms of efficiently using QuickBooks PRO, do I need to be making an expense account for Spec 1, with multiple sub-expense accounts below Spec 1 such as;
"Spec 1 - Framing Materials Expense Account",
"Spec 1 - Concrete Work Expense Account",
"Spec 1 - Utilities Expense Account",
"Spec 1 - Plumbing Materials Expense Account"
Or do I need to say "Spec 1 Expense Account" and then create ITEMS that somehow link to "Spec 1 Expense Account"? -- I just want to make this clean and efficient especially after I tried entering some previously purchased items, it seems tedious but it seemed I had the best luck by adding my Vendor, then picking the date, the amount spent, adding a description of what it was, choosing the "Expenses" tab, and picking one of the sub-expense accounts I created in which that expense was relevant to...
I appreciate your idea so you can work with QuickBooks seamlessly, @CCCBuilder.
Allow me to step in and provide some information on creating and linking items to an expense account.
You can consider creating expense transactions and use the expense and sub-expense accounts so you can work less. However, in terms of reporting those transactions will not be included when you run a report for purchased items.
Also, setting up accounts including products and services can have more detailed reports for purchases and sales. It also includes COGS if needed.
Most importantly, I still recommend checking with your accountant for more guidance. He/she may add suggestions based on what's more suitable for your business and to your books.
In case you want to manage special accounts in the Chart of Accounts, you can read this article for your future reference: How to Manage Default and Special Accounts in the Chart of Accounts.
Feel free to leave a reply below if you have further questions. We're always here to help.
Haven't been free to work on this more but today I am back in the office. I spoke with the CPA and they just suggested making sure each home is tracked and used the word inventory but that is not enough for me to go off. They don't seem too interested in giving more information than that since they are busy as well. I don't think it should be this difficult so I know I'm doing something wrong.
It sounds like I need to create Items. In the default Items group after picking what kind of business I have, it made a nice list of items but unfortunately they are setup to work as one big business, where I want to work as a business keeping track of each home/job/expense according to what job it is. So my understanding is that I need to go in the items, and create the 20, or 30 'Items' that are detailed as to what part of the spec home phase they apply to; 'Excavation' and 'Concrete Work' and 'Framing Supplies' and 'Plumbing Materials' things like these all need to be an item then? And then when I create the item I need to make sure the expense account for that item is 'Spec Home 1' expense account, and the income account would not really be relevant but to make things simple I will need to create an income account called 'Spec Home 1' anyway so that each item has the proper accounts linked then? Just wanting to make sure I understand this correctly.
If that is all correct, my next question is after looking at the Items FAQ is what category these items are? I would assume every item in Spec Home 1 is actually an 'Inventory Part' but I do not want to have to track each specific item in the home build specifically as it seems that is what QB is prompting me to do? It's asking for a specific item name, even part number. So if I choose 'Non-Inventory Part' it looks much more broad and what I want so that I can just say 'Framing Materials' and then any receipt that has any kind of wood on it would be counted as that 'Framing Materials' Item, correct? In this case I see I can check the box of 'This item is used in assembled or purchased for a specific customer job' - would it be best to check this box since it's items for a specific job, Spec Home 1?
Thanks for getting back to the Community, @CCCBuilder.
Allow me to join in this thread and provide some additional information about setting up spec home building in QuickBooks Desktop.
First, I'd like to acknowledge your effort in adding detailed information about your concern. After reading the whole thread, it looks like you understand correctly the process of creating and linking the items to an expense account.
In addition, selecting an item type is based on what business you have. You can check this article to learn the difference in item types and to help you decide which type you need to use: Add, edit, and delete items.
You may also consult an accountant for advice when choosing an item type to ensure that it will suit your business.
Don't hesitate to leave a comment below if you have additional questions about managing your item. The Community will always have your back.