Cost of goods sold NO INVENTORY

Hello @Hey May,

I appreciate your detailed response about the task you want to achieve in QuickBooks Online. I'm here to assist you with your concern about the Cost of Goods Sold (COGS).

I can see that you don't use inventory because of the custom purchases for your clients. For the workflow, you create an estimate and convert it to an invoice later.

If you bill your clients for the costs, you'll need to mark the line items as billable to the customer. The only way to do this in QBO is to include products or services.

Since you don't need to track the inventory details, I recommend you use the Non-Inventory or Service type. During the process, you'll have the option to add an income for sales and expenses for the purchases.

Here's how:

1. Click the Gear icon in the upper-right corner.
2. Select Products and Services under Lists.
3. Click New.
4. Select Non-inventory or Service.
5. Enter the necessary information.
6. Hit Save and close.

After a client accepts your estimate, you can convert that estimate directly into an invoice. Check out this link for the detailed steps: Convert an estimate into an invoice in QuickBooks Online.

Also, you can easily record and track billable expenses so your client can reimburse them through the invoice. To learn more about it, please visit this article: Enter billable expenses.

Keep in touch with me if you have additional questions or clarifications about using QBO. I'll be more than happy to help you some more.

Hello!

Thank you for the reply.

Yes, I have already done that.  When I try to record an expense and make it billable this is the message I receive..

an account you chose for a billablle expense doesn't have an income account associated with it...

here is an example from our file.

Can Someone respond to this issue...it's more complex than the message received...

Many thanks!

M

Hello, Hey May and HJI.

I'll share some information to fix the error message when recording billable expenses in QuickBooks Online.

To fix this, let's ensure that Billable expense income account is select in the Account and settings. I'll show you how.

1. Go to the Gear icon.
2. Select Account and settings.
3. Click the Advanced.
4. Go to the Chart of accounts section.
5. Choose an income account under the Billable expense income account dropdown.
6. Once done, hit Save and then Done.

After that, go to the Expenses tab and make sure that the Track billable expenses and items as income is selected.

Here's how:

1. Go to the Gear icon.
2. Select Account and settings.
3. Click the Expenses.
4. Go to the Bills and expenses field.
5. Ensure that the Track billable expenses and items as income box is selected.
6. Once done, hit Save and then Done.

For your reference, you can read this article to guide you in recording the billable transactions: Enter billable expenses.

Additionally, you may use the Unbilled Charges report to see billable expenses that haven't been charged to a client or project. 

I've added the following resource if you wish to customize your report to show the data you need: Customize reports in QuickBooks Online.

You're welcome to post again if you need further assistance in QuickBooks. We're always available to help.

Hi, 

Thank you.

IN your example when we click "track billable expenses as income" wouldn't that "net" the items?  We pay collect and pay sales tax on gross sales less non taxable sales.  Wouldn't clicking the "above" net those items?   I want to track billable expenses as COGS and revenue by item:  Furniture Income, Wallcovering Income and I have corresponding COGS accounts: COGS: Furniture expense or COGS: Wallcovering Expense.

Hello there, @HJI.

In QuickBooks Online (QBO), we can change the Markup income account to reflect the correct posting account when running a report. Let me show you how:

1. Go to the Gear icon on the top menu.
2. Choose Account and settings.
3. Select Advance.
4. Tick the Pencil icon on the Chart of accounts section.
5. Go to the Markup income account field and choose Cost of Good Sold. If you'll want to change the account for the billable expense, just go to the Billable expense income account field.
6. Press Save.
7. Hit Done.

If you track the billable expenses and items as income, then it will use the billable account selected in the Accounts and settings. If you'll want to change it then follow the instructions above and proceed to Step 5. Then, update the account for the billable expense in the Billable expense income account field.

On the other hand, QBO uses the income account of the item based on what you set up in the Product and Service item page. Once done, try running the Profit and Loss report to compare it with the markup line on your invoices. 

I've got articles here for more insights about Chart of Accounts:

• Understand the chart of accounts in QuickBooks
• Add an account to your chart of accounts in QuickBooks Online

Please know that you can always get back to us if you have other questions. I'm always here to help.