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3rd party Pays the sub-contractor

Forum|Forum|7 years ago
November 29, 2018
11 replies
57 views

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.

QuickBooks Desktop

Best answer by qbteachmt

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.

qbteachmtAnswer

Level 11

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.

C

ChristineR1

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

S

SedonaGC

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:

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

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

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

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