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Experienced Member

3rd party Pays the sub-contractor

I enter the bill.  The bill is entered under an item and placed on an invoice.  The invoice is sent to the customer.  The customer has their bank directly cut the checks to the bills on the invoice including my profit to me.  Now I have a bunch non payed bills and an invoice with only a partial payment.  I do I clean up my books?  I purchased construction and advanced #2 but the owner needs a loan asap. 

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Best answer 11-29-2018

Accepted Solutions
Established Community Backer ***

Re: 3rd party Pays the sub-contractor

You are describing something like "Bank uses construction loan to pay my subs" or "I got third party checks to sign over to the subs."

 

You treat them the Same. First, you use Receive Payment for the total, and Deposit to a Bank type of account you name Clearing or Barter.

 

Now pay the bills from the Barter Bank.

 

The remaining balance here should be your share. You use Banking menu > Transfer, to checking, for the actual Net you have, that you called your "profit." It is the Net Banking, and not really profit, of course.

 

Now Barter Bank or Clearing Bank should be 0 for this date; that's why it is called Clearing or Barter. It is "We avoided trading all of that banking in reality, and just traded all the Values."

 

Have you discussed with your own CPA if these Subcontractor costs are your revenue and expense; they might be your Work In Process Other Current Asset, instead.

7 Comments
Established Community Backer ***

Re: 3rd party Pays the sub-contractor

You are describing something like "Bank uses construction loan to pay my subs" or "I got third party checks to sign over to the subs."

 

You treat them the Same. First, you use Receive Payment for the total, and Deposit to a Bank type of account you name Clearing or Barter.

 

Now pay the bills from the Barter Bank.

 

The remaining balance here should be your share. You use Banking menu > Transfer, to checking, for the actual Net you have, that you called your "profit." It is the Net Banking, and not really profit, of course.

 

Now Barter Bank or Clearing Bank should be 0 for this date; that's why it is called Clearing or Barter. It is "We avoided trading all of that banking in reality, and just traded all the Values."

 

Have you discussed with your own CPA if these Subcontractor costs are your revenue and expense; they might be your Work In Process Other Current Asset, instead.

Established Member

Re: 3rd party Pays the sub-contractor

A different version of this scenario:

I have a client, and one project assigned to that client. I invoice them from my company, and there are other contractors also working on this project who bill the client directly. I need to cost track their bills, but I do not pay their bills or receive payment for their bills. How do I track these 3rd Party bills on my project (for completeness)? The barter method would be quite tedious as we have these type of 'pass-through' bills frequently.

Thank you in advance!

Christine

QuickBooks Team

Re: 3rd party Pays the sub-contractor

Hello there, @ChristineR1.

 

You make a billable expense in QuickBooks. I'll show you how to do it.

 

Here's how:

  1. From the Edit menu, choose Preferences.
  2. Select Time & Expenses.
  3. Go to the Company Preferences tab.
  4. In the Invoicing Options section, check the Mark all expenses as a billable option.
  5. Enter the Default Markup Percentage.
  6. - You can leave this blank if there isn't a default percentage for the markup.
  7. From the Default Markup Account drop-down menu, choose the correct account.
  8. - If you don't have one yet, you can always scroll up and select Add New to quickly create a markup account.
  9. Click OK.

After we've set it up, allow me to guide you on how to enter the power and porta potty bills as billable expenses:

  1. From the Vendors menu, select Enter bills.
  2. Choose the Vendor.
  3. Enter the Date.
  4. Fill in the appropriate details in the following fields:
  5. Account: Make sure to choose the correct account.
  6. Amount: Enter the total amount of the bill.
  7. Memo: You can leave this field blank if necessary.
  8. Customer:Job: Choose the customer billable for this expense. Choosing the customer will automatically mark this expense as Billable.
  9. Click Save & Close.

If there's anything else I can help you with, feel free to comment or post again here in the Community!

Established Member

Re: 3rd party Pays the sub-contractor

Basic question - What is the 'Edit Menu' you are referring to?

QuickBooks Team

Re: 3rd party Pays the sub-contractor

Nice to see you again, @ChristineR1!

 

You can consider creating a new barter bank account so you can record your transactions. I'll be happy to help you accomplish this.

  1. Go to Accounting.
  2. Select Chart of Accounts.
  3. Click New.
  4. Under Account Type, select Bank.
  5. On the Detail Type menu, select Cash on Hand.
  6. Enter Barter Bank Account as the name of your new account.
  7. Click Save and close.

Once completed, you can record all your transactions and use your barter account so it won't affect your business accounts. Also, here's an article you can read to learn more about recording a barter transaction: Record a Barter Transaction.

 

As always, you can visit our Help Articles page for QuickBooks Online in case you need some easy steps and related articles for your future tasks.

 

If there's anything else that I can help you with, please let me know in the comment section down below. I'll be always around ready to help.

Established Member

Re: 3rd party Pays the sub-contractor

Sorry I don't think you understand my question.

I am on Quickbooks Online. 

For a project, I am 1 of the vendors submitting invoices to the client, but I need to track the invoices of other 3rd party vendors working on this project, for my client. I need to track these 3rd party invoices without them becoming billable to myself, or billable on my invoice to my client, because again the 3rd party is directly invoicing the client.

 

Think of me as a prime contractor at a construction site. I invoice the client for my time to manage the site, but I also cost track the project for them and I need to track 3rd party invoices for things like tile, lumber, labour, etc. These 3rd party invoices are not billed to me, nor are they paid by me. The 3rd party vendors invoice the Client who pays them directly. I also invoice the client who pays me directly. Is there a way to track these as a pass-through expense that does not cost my company money, but is tracked on my project budget.

 

Thanks again

Moderator

Re: 3rd party Pays the sub-contractor

I've read your original post, ChristineR1.

 

The steps above provided by one of our Established Community Backers, qbteachmt, will work on the scenario you've provided. 

 

When paying a contractor bill with a customer invoice or a customer invoice with a vendor bill, you'll need to create a barter bank account in QuickBooks Online (QBO).

 

This is to make sure you've tracked the value of the barter transaction and will not affect your business bank account.

 

Here's how:

  1. From the Gear icon, choose Chart of Accounts and click on New.
  2. Select Bank as the Account Type and Cash on Hand as the Detail Type.
  3. Type in the name of the account.
  4. Click on Save and Close once you're done.

Now, let's create an invoice for the barter transaction:

  1. From the Plus (+) icon, select Invoice and Fill out the invoice as you normally would. Then, click on Save and close.
  2. Then, go to the Plus (+) icon and Receive Payment.
  3. Choose the barter customer in the Customer drop down, then fill in the date and amount.
  4. From the Payment method drop-down menu, select Add New and enter "Barter" in the name field.
  5. Click on Save.
  6. In the Deposit to drop down, select the barter bank account.
  7. Click on Save and close.

Then, enter a bill for the barter transaction. Once the invoice is created and the bill is paid, you will have a record of the exchange, but the barter bank account will be zeroed out.

 

I've got an article in case you need additional reference: Record a barter transaction.

 

I suggest conferring with your accountant for further guidance with recording this transaction.

 

Let me know if you have any follow-ups or other questions. I'm here to help. Wishing you a good one.