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

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!

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

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.

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

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.

I have a similar scenario.

I did exactly as suggested, but now my P&L shows a giant loss because the costs are in there but not the income.

Please advise.

I’ve got you covered, @SedonaGC.

When recording your barter transaction, make sure you've added your barter partner as a vendor for the bill and customer for the invoice. And if your business operates on a cash basis, the invoice payment and bill payment should both be dated with the same date as the invoice or bill.

Also, ensure that the date period you selected when running the Profit & Loss report is correct. You can utilize the Verify and Rebuild Data tool if you’ve done all of this and the issue remains.

Here’s how:

1. First, choose Window and then select Close All.
2. Go to the File menu, and then click Utilities.
3. Select Rebuild Data.
4. Follow the onscreen instruction to back up your data.
5. When the tool finishes, select OK.
6. Navigate to the File menu, then hover over Utilities.
7. Click Verify Data and select Rebuild Now once QuickBooks finds an issue with your company file.

Please know that you'll need to log in to your QuickBooks Desktop account using the single-user mode when performing this process.

You can read this reference about customizing reports in QuickBooks to learn more. This provides information about our report features to help your experience better.

I appreciate you for joining this thread. If you need further assistance with your report, just leave us a message below. We're always here. Take care!

So I've always done it like the instructions said above.  Where I treat it as if they were paying us then we paid vendors so used a clearning bank account to show the in and out for the 3rd party payment.  No issues.  Revenue remains the same and the receivable is lowered and the vendor invoices are reflected as paid.  In my scenario now the Customer is now showing as a deductive change order so the revenue (contract value) needs to be reduced.  Some of which goes against the Retainage Receivable.  I've got my revenue #'s correct and my retainage withheld correct but I cant seem to get my Retainage Receivable correct.  First being the debit to retainage receivable as a credit memo to show the offset of the Deductive Change oRder that lowers the Contract Value (Revenue).  But I also have for the same amount the 3rd party pymt to the clearing account which is offset by using that clearning account to reflect the vendor payment.   My issue now is if they are assuming its a deductive change order on our end then why do I need to show it like they "paid us" for that invoice (via a clearning account) as its a credit memo vs a payment.  However if I dont show that 3rd party pymt via a clearning it will mess up the payment to the vendor that hits that same clearing account. and zeroes it out.   

Thanks for checking in with us, @twinkler06.

In this case, it would be best to consult your accountant to balance all the accounts in QuickBooks since it will mess up the payment to the vendor that hits that same clearing account. and zeroes it out. Also, a Clearing Account is an account you use to move money from one account to another. This is when the option to move the money directly is unavailable. This account normally has a balance of $0.00 because you always take out the same amount that you put in.

To use a clearing account, just follow the steps below: 

1. Create a journal entry.
2. Add the AR or AP from which you are moving money.
3. Add the Clearing account. Then, save the Journal Entry.
4. Create a second Journal Entry. Once done, add the Clearing Account.
5. Add the AR or AP account to which you move money.
6. In either Pay Bills or Receive Payments, link the Journal Entries together.

I've got you an article to learn more about the barter accounts: Set Up a Clearing Account. You'll also be able to find many detailed resources about using QuickBooks in our help article archives.

Should you need any additional assistance with reconciling your accounts, just leave a comment below. I'll be sure to get back to you. Have a great day ahead.