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lyt
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Billable Expenses in P&L

Our company has a lot of pass through cost where we would help a client pay things and then bill them back for the same amount. I have set up Billable Expenses in my Online QB. Depending on the Reimbursable Expense account, I have marked it Billable and linked it to the Income account I have created "Billable Expense Income". When I run the P&L, I see a total for Billable Expense Income and the same amount in my Expense section. Since these are pass through costs, is there a way to have it not show up in the P&L since these aren't our direct expenses?

18 Comments
ProAdvisor

Re: Billable Expenses in P&L

Hello @lyt:

 

Billable Expenses have to show on your P&L.  They are marked as expenses and income.  But one washes the other out.  The expenses will offset the income for you.

 

lynda

Established Community Backer ***

Re: Billable Expenses in P&L

Along with  what Lynda said

 

If you live in a state that taxes gross sales receipts, instead of an expense account use an income account named for billable expense income, it will act as a contra account lowering gross sales

Established Community Backer ***

Re: Billable Expenses in P&L

Let's examine this Statement: "Since these are pass through costs, is there a way to have it not show up in the P&L since these aren't our direct expenses?"

 

"Pass through" costs that are not yours, does not Bypass that you have Sales and when you incurred it, this was your Expense.

 

What you should do is ask your own CPA; example: A Law Firm has Advanced Costs as Other Current Asset for costs incurred for clients, to be repaid. They don't have Expense and cannot have expense, by law, for these types of costs that they are not allowed to report as business Expense in their own tax reporting. A Property Manager also has Incurred Costs for property that do not owe, but manage, to be repaid to them from the Rent they collect as Liability on behalf of the owner's whose property they manage.

 

So, you ask your CPA:

 

Do I have a Gross Income and Gross Expense activity for my operation?

 

Or, do I have a Trust Requirement and this is all Balance Sheet activity?

Senior Explorer *

Re: Billable Expenses in P&L

So just to clarify, the expense and income should both be posted to the billable expense income account so it zeros itself out (and also a good way to check you missed one or the other if there is a value)?

 

The gross sales receipts have been confusing me because of this, as this is what I have to report and have match up (the numbers are out by the billable expense income amount).  It is still showing on my gross income, but as a separate line.  I have the expense in a separate line under expenses at the moment.  I'm trying to get this correct so I can file amended taxes, so I want to make sure I have it right this time.

Established Community Backer ***

Re: Billable Expenses in P&L


@GreeneWrench wrote:

So just to clarify, the expense and income should both be posted to the billable expense income account so it zeros itself out (and also a good way to check you missed one or the other if there is a value)?

 

No, posting income and expense to the same account is bad form, use an expense account for expenses, and an income account for what the customer pays you

 

The gross sales receipts have been confusing me because of this, as this is what I have to report and have match up (the numbers are out by the billable expense income amount).  It is still showing on my gross income, but as a separate line.  I have the expense in a separate line under expenses at the moment.  I'm trying to get this correct so I can file amended taxes, so I want to make sure I have it right this time.

 

Gross revenue is the total sales less discounts and refunds.

 

billable expense does not mean it does not count as income when you charge the customer.  On the P&L income is reduced by expense to get net taxable profit.


 

Senior Explorer *

Re: Billable Expenses in P&L

Thank you @Rustler!

 

I think the problem I'm currently having with the billable expenses is my understanding of how to input the expense and invoice it with regard to the sales tax.  It is the sales tax I am needing to file, so my gross receipts and sales tax charged is what I'm focusing on.

 

This is where I'm at:

We are an LLC filing as S-Corp in North Carolina. The business is mobile automotive repair (services subject to sales tax), and we have Quickbooks Simple Start (I know Essentials has the Billable Expenses feature, but we don't have enough need to use/track to warrant the upgrade).

 

Most of our invoices and sales receipts are simple: Labor services and tax (either diagnostic or customer already has parts).  Probably a couple of times a month we will have a job that needs the mechanic to purchase parts, so they go to whatever parts store and get the parts and pay sales tax on it.  We charge the customer the exact amount we paid (parts plus tax as one lump).

 

Do I need to add the parts line by line on the invoice and mark them as taxable to bill to customer?  This doesn't make sense as the tax would be paid twice (once to the parts store and then us filing sales tax also).  This would seem to make the gross receipts and tax collected right though (we do not have any tax exempt sales to account for a difference).  If this is the case, do I need a separate line for each item (or subtotal for parts) and also the tax paid when I add the expense to billable expenses?  What account would I use for the tax for that?

 

I hope that makes some sense?

Established Community Backer ***

Re: Billable Expenses in P&L

@GreeneWrench 

 

Check the state sales tax site, they usually have a resellers permit form you download, fill out and hand to the vendor. That allows him to sell items for resale (or used in a service) sales tax free.

Other wise, the sales tax you pay for the part is included in the parts cost,. book that to an expense account you create named something like parts exp. And yes you charge sales tax on the price you enter on the customers invoice, either you mark it up to cover time and gas, or you do not, but it is taxable.

 

Then use a generic service type item and use it on the customer invoice. You can click and type in the description block to be specific, most customers do want to see what was replaced, and if it is there and the customer comes back complaining, you know if the complaint is new or might be what you replaced.
Generic, like brakes, A/C, hoses/belts, etc etc

 

Senior Explorer *

Re: Billable Expenses in P&L

I have QB 2019 for Mac Desktop. When I run my P&L, billable expenses and their related invoices are listed under expenses, to get a net. If the payments exceed the expenses I essentially get a negative expense, or a profit. Is there a way to make my P&L report not do this? I want my invoices to be under income and my expense charges under expenses; I don’t want them together in expenses. This commingling seems to happen if I make expense purchases billable and pull them into invoices. For reasons having to do with the unsatisfactory markup function, I’ve taken to just entering charges, not associating them with a customer, and them manually entering the marked-up charges to an invoice. This keeps income and expenses separate on the P&L, but I’ve got all these previous transactions already mingling - is there a way to make them show up separately at this point?
QuickBooks Team

Re: Billable Expenses in P&L

Hi Joy gardener,


Placing the invoice in the Expense section is a way of QuickBooks to offset the billable expense. However, if there are markups, they will separately be placed in the Income section of your P&L, provided that an income account is assigned for markups.

 

Let’s check the assigned account:

  1. From the Edit menu, select Preferences.
  2. Choose Time & Expenses at the bottom.
  3. Click the Company Preferences tab.
  4. Check the Default Markup Account.
  5. Change it if an expense is assigned to it.
  6. Click OK.

If an income account is assigned in the first place, you can check to see if this is a data issue. You can run the Verify utility to diagnose your file and run the Rebuild utility if an issue is detected.

 

Please let me know if you need more help.

Senior Explorer *

Re: Billable Expenses in P&L

Thanks, I have desktop for Mac. At the advice of a bookkeeping friend, I deactivated the Markup Income account (she felt it was an inappropriate account for a report), and when I used the Markup on a subsequent invoice, I selected an Income account.   (I'm experimenting with avoiding the markup feature because I don't like the way QB handles it. ) The real issue is that invoices show in my Expenses under the P&L unless I do not associate an expense charge with a customer but instead just invoice them manually.  I understand this is a way for QB to net invoices and expenses, but when the expenses are less than the invoice amount it shows as a negative expense, which affects income correctly, but is not how I want my P&L to show. If invoices just showed in Income and expenses in Expenses, the whole purpose of a P&L is to net them for income, and it reads much more clearly. 

QuickBooks Team

Re: Billable Expenses in P&L

Thank you for getting back to us, @Joy gardener.

 

You’ll need to enter a product/service item when creating billable expenses. Let me add more details about this.

 

Before anything else, I appreciate you for the testing you’ve done to achieve the correct report data.

 

To achieve the correct posting of your income and expenses, you need to enter a product/service item. This way, QuickBooks can determine which transactions go to those accounts.

 

You can follow the steps below in entering a product/service to your billable expenses:

  1. Click on Vendors from the menu bar.
  2. Choose Enter Bills.
  3. Enter the vendor name.
  4. In the Items tab, enter the product/service in the Item column.
  5. Select the customer in the Customer: Job column.
  6. Enter the necessary details.
  7. Click on Save.

Once done, you can then pull up your Profit & Loss report again to review if it’s showing the correct data.

 

Don’t hesitate to let me know if you have any other questions or concerns. I’ll always be around to help.

Senior Explorer *

Re: Billable Expenses in P&L

Hi There,

 

When I enter an Expense charge, it's usually a credit-card charge incurred for a vendor. There is no Item tab or option on that, or for entering a bill; I use an expense account I created from the chart of accounts. When I go to invoice for that expense, I use an Item list associated with an Income account. Is this not correct?

 

Senior Explorer *

Re: Billable Expenses in P&L

I should also mention that the options QB gives for invoicing using the Markup function (either adding a line that effectively advertises how much I've added to my cost, or hiding all detail, necessitating manual entry of invoiced items so that my client sees what they're paying for) means I'll be manually entering expenses to invoices anyway going forward. This will solve the P&L issue, but I find it extremely odd that QB creates the P&L as it does. 

QuickBooks Team

Re: Billable Expenses in P&L

Hello there, @Joy gardener.

 

You’ll need to edit the credit card charge to add it as an item. Let me add some details about this.

 

You may have entered the credit charge through your bank register. To edit this, you can follow the steps below:

  1. Click on Banking from the menu bar.
  2. Choose Use Register.
  3. Select the bank where the credit card charge was posted.
  4. Right-click on the charge, then select Edit Credit Card Charge.
  5. Remove the charge from the Expenses tab.
  6. Click on the Items tab.
  7. Enter the charge and the amount.
  8. Select the customer from the Customer: Job column.
  9. Click on Save and Close.

Once done, you can then invoice the billable expense and review your Profit & Loss report to check if they’re posting to the correct accounts.

 

Feel free to let me know if you have any other questions. I’d be happy to help you.

Senior Explorer *

Re: Billable Expenses in P&L

I'm sorry to be dense, but I'm confused. I enter purchases as either Enter Credit Card Charges, or as Write Checks (using Debit as the check number for my business debit card). No tabs are offered; the only option is to select an Account from the Chart of Accounts. 

 

I am using Desktop for Mac; many of the instructions in the Community seem to be for the online version, which I don't have. 

 

 

 

Senior Explorer *

Re: Billable Expenses in P&L

Ah, so you are saying I should always enter a bill when I make a purchase? Most of my vendor expenses are incurred via credit-card purchases; I am never billed. Are you recommending I enter a bill and mark it as paid with a credit card rather then enter it as a direct credit-card charge?

 

 

QuickBooks Team

Re: Billable Expenses in P&L

Hello, @Joy gardener.

 

You can directly enter/record a credit card charge following the steps provided by Alessandra_B above. Just ensure to go to the Items column/tab and not in the Expense tab, to be able to select an item. 

 

  1. Go to the Credit Card Charge page.
  2. Click on the Items tab beside Expenses.
  3. Fill in the necessary information.

b10 1.PNG

You can also visit our QuickBooks Desktop for Mac guide for your future reference: QBDT for Mac Guide.

 

Let me know if you have any other questions about credit card charges, I'm always here to help. Wishing you the best!

Senior Explorer *

Re: Billable Expenses in P&L

Thank you very much -- I will try it!!

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