Is there a better way to handle a Sub Contractor Advance?

tonymorgan · ‎June 14, 2022

Hello, QBO Family. I think this is my first topic posted here but I read a lot so thanks for answering all of my questions without me posting them all and boring you to death :)

Here is my situation....I have a couple of SubContractors who are simply very good at their job so I go out of my way to help them when I can. Inevitably one (or more) of them will come to me and ask for an Advance on future earnings. I want to help them and keep them happy, so I agree.

In QBO I create a new "Other Current Asset" as "Loans to Others" and I use that to pay them. One account for each SubContractor that I am advancing money. Now I have a nice record of my loan to them and this part works as expected.

The part that I think I handle "the hard way" is when it comes time to repay the loan. The SubContractor sends me an invoice for the work they have done but wants 100% of it to go towards the Advance. I key it in as a BILL. Currently, because I do not know a better way, I simply cut a check and ask the SubContractor to endorse it back over to me where I then deposit back into my same account as a Credit against the "Other Current Asset" that is holding the note in QBO.

Is there not an easier way? Is there a way that one can offset the other without the physical check being cut and endorsed and re-deposited?

This way works, it just seems like it is the hard way.

What say you, QBO Experts??

Thanks!!

Tony

btks · ‎June 16, 2022

You will still create a check in QuickBooks but you do not have to actually print it.

Give your contractor an advance in the usual way and post it to the “loan to others” account just like you have been.

Create a bank type account called barter to use for this type of transaction.

Create a bill from the subcontractor as usual. Then, when you pay them, use the write check form.

BUT, remove the check number (you can leave it blank or put in the word barter), uncheck the “print later” box, and change the source account as paying from your barter account. Save this.

Create a deposit for this however you usually do to show a payment from the contractor. BUT, deposit it into the barter account.

Your barter account should now be back to a zero balance and you have shown the expense and the receipt of a payment.

I do this in QuickBooks for the exact same reason you do and I also struggled with the process at first.

Hope this will help. : )

View solution in original post

JoesemM · ‎June 14, 2022

Thanks for sharing detailed information about your concern, @tonymorgan.

Keeping your loan records accurate is important so you won't miss any payment deadlines. The steps, you've performed is the correct way of handling a sub-contractor advance future earnings.

Recording the payment as a check is easy way to offset the amount. This to ensure all the details are accurate and you can easily track them.

Also, I'd suggest contacting your accountant for further accounting-specific help. If you don’t have an accountant available, you may visit our ProAdvisor's page. You can contact one of our ProAdvisor's and ask them for accounting advice.

I'll add this article to help you manage your deposits and Chart of Accounts:

Let us know if you have other questions or concerns with your QuickBooks account. We’ll be here to help. Stay safe!

btks · ‎June 16, 2022

Yes you can do this without issuing a physical check. It is called a barter transaction.

I use desktop so I dont know the exact steps for online. Just search for "how to record a barter transaction".

Just_me · ‎June 16, 2022

@tonymorgan Here is a link for on how to set up the barter, like @btks had mentioned.

https://quickbooks.intuit.com/learn-support/en-us/help-article/accounting-bookkeeping/record-barter-...

tonymorgan · ‎June 16, 2022

Thanks for the information! I had never heard of this before so I got really excited when I first read it....but, after walking through the steps, I am not exactly sure how I would do this for my unique situation. Maybe I am missing something obvious...if so, please forgive me in advance. But, for the barter transaction to work no cash changes hands on either side of a transaction with a vendor/customer. However, in my situation, I need to send the vendor an advance payment and I make that into a "loan to others". Is there a way that I can "barter" that amount away from the loan and into the operations? Basically, I have to get it off the Balance Sheet and onto the P&L and I can't seem to think of any other way to do it other than writing a physical check.

Again, if I am missing something please let me know. I am slow sometimes, I admit it :)

btks · ‎June 16, 2022