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Matt_G
Level 1

House flipping/spec business: Expenses to Inventory / Using "Projects"

Is "Projects" really intended to be used by a builder that flips or specs homes, whose accounting aproach is to post the various costs for acquisition, improvements, holding costs, etc. as INVENTORY rather than COGS/expenses (and then xfers the inventory costs to COGS when completed home sells)? 

 

It looks like the "Projects" interface only tracks and shows reports for income/expenses, so if you are using the "inventory method" for costs, the Projects screen will perpetually show "zero" since income/expenses/profit would be zero (expensed to inventory and not COGS), which would then make the reports available to "Projects" not very useful either. The only other option for using Projects seems would be to track the improvement costs as expenses during the year so Projects shows meaningful expense data, and then if the house does not sell by year end then have to do a journal entry to xfer the expenses to inventory...but I see at least 2 issues with that: (a) during the year the books are technically incorrect since things are being expenses that are really WIP/inventory, which makes the B/S also inaccurate in addition to the I/S, and, (b) even if you do go with the "expense" approach just to make Projects more meaningful, then after you xfer the expenses into inventory and year end those expenses would appear as a single journal entry amount in inventory without all of the products/services type detail that expense amount would've previously had in it before it was transferred to inventory.

 

***So based on all this, how would you recommend setting up QBO for a flip/spec builder business?

***Is there any reason to even use Projects if costs are being tracked to WIP/inventory instead of expenses? 

 

Thanks so much for any advice and feedback!

 

 

 

2 Comments 2
Jovychris_A
QuickBooks Team

House flipping/spec business: Expenses to Inventory / Using "Projects"

Thanks for posting to the Community, Matt_G.

 

Your insights are astonishing, and I appreciate the details that you have shared. 

 

Currently, we're unable to recommend setting up QBO for a Flip/Spec builder business, especially for WIP/inventory. Yes, you're correct that using this will only track expenses and income or the profitability of the project, and this is the significant reason to use Projects.

 

As a workaround for your goal, I found a thread that may help you discover the Flip/Spec WIP situation in QuickBooks Online. You can reference this link to view the setup and details shared by one of our Community backers: If my business flips houses, do I put our company as a customer when using "Projects"?.

 

Additionally, to know more about how the Projects feature works in QBO, you can check these articles:

 

Keep me posted if you have any additional questions, as I'm always here to assist. More power to your business!

Fiat Lux - ASIA
Level 15

House flipping/spec business: Expenses to Inventory / Using "Projects"

@Matt_G 

As another option, explore the construction management app with more features to integrate with your QBO.

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