Construction Bonds

It's great to have you here in the Community space, @Kimberly74.

You may have posted the same question, and one of our colleagues was able to respond and provide a recommendation to it. We'll route you to her response to help you get through this and record it with your book inside QuickBooks Desktop (QBDT). Feel free to visit this page: https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/re-construction-draws/01/14...

Furthermore, here's an article to help you keep track of transactions you entered inside the program: Understand reports.

We look forward to having you here again if you need help managing contractors or transactions inside QuickBooks. As always, we'll respond and provide you with the details to address your questions. Keep safe and have a good one.

@Kimberly74 

Not sure if you determined the best way to record vendor bills when paid by the bonding company.  If you still need some guidance, you can create an Other Current Liability (OCL) account called 'Due to Bonding Co.' and a service product called 'Paid by Bonding Co.'.  When setting up the service product, select the newly-created Due to Bonding Co. (OCL) under 'Income Account'. 

When you enter the vendor's bill, add a line item with the Paid by Bonding Co. service product and an amount equal to the total of the bill as a negative amount.  That will create a $0 bill (it will show as paid), the expenses will be booked and the amount paid by the bonding company will be booked to the Due to Bonding Co. OCL account.    

Thank you Rainflurry!

However, I must be doing something incorrectly. I've set up the OCL account and the service item linked to the OCL account.  However, when I enter the vendor bill, and try to choose an account under the expense tab, I receive a message that I have to use an expense or liability account.  If I put the charge under the Item tab as a negative, it creates a charge under the expense tab as a positive and I receive a pop-up that I'm not in balance.

RainFlurry,

You are wonderful!  Thank you so much!

This solution doesn't work because you wouldn't be able to track the expenses in the project with reports if the amounts on all of the invoices are $0.

Also (in Hawaii, at least) the construction company doing the work is responsible for issuing 1099's to any subs that the bonding company has paid on their behalf. 

So you need to have the expenses in the books to issue the 1099s.

It actually does work.  If you run the profit and loss by job all of your expenses are there.

@Christyn Sanchez 

Another option to record this is to create a bank ‘Clearing Account’ and use that to pay the bills.  Then, move the negative balance in the Clearing Account to the ‘Due to Bonding Co.’ OCL account using a journal entry- debit Clearing Account, credit Due to Bonding Co.  Or, move the amount in the Clearing Account to A/P by entering a bill for the bonding co. and selecting the Clearing Account on the bill.  After reviewing the original solution, using a Clearing Account is probably a better way to record it

Thank you, that is how we have them booked. We have a project account that acts as a passthrough so that all of the bills/expenses and payments from the bond are correctly entered in the books.

It is a tedious process to manage though. We also have to keep track of where we are against the original estimate so that we can reconcile what we have with the bonding company. I guess I just wish there was an easier way to run these projects. Our clients (we have a lot of construction clients) continually have multiple bonded projects running at a time and we haven't been able to figure out a better solution. We have 2 extra steps for every action (if that makes sense).

Aloha, my apologies. I assumed you were discussing the issue within QB Online I just realized the solution is for QB desktop. I work in QB Online and within QBO, that option doesn't work as there is no 'Amount Due' box to zero out within the expenses.

The only way we have found to manage the bonded jobs (and we manage A LOT of them) is with a 'Clearing account'. I just wish there was an easier, less tedious method. Every transaction that goes through the bonding company has double the steps.

We've been looking to streamline the process which is what brought me to this discussion. There isn't a lot of readily available information on this topic. I'm gathering that everyone is running them basically the same way that we are.