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What’s the best way to track and bill my time as a small business owner, including tracking the cost of my time on each project, each proposal, and on overhead and volunteer activities?
I am a sole proprietor, but I expect to add employees in the future. I work as a transportation planner, providing consulting services to public and private sector clients. Usually, I charge by the hour. I sometimes have to charge different billing rates for my time on different consulting projects (e.g., most current projects are at $250/hour, one old contract must remain at $225/hour). I have a QuickBooks Plus subscription. I use the Time Tracking feature in QBO to track my hours, not a separate program. Instead of taking a regular salary, I take occasional draws from the business.
To track my time (both billable and nonbillable hours) I set myself up as a Vendor.
I set up the following Accounts related to the business owner (me) in the Chart of Accounts:
I set up the following Customers:
I set up the following Projects:
I set up four services under Products and Services:
Under Purchasing Information, I haven’t checked the “I purchase this product/service from a vendor.” box for any of these services, so these services aren’t automatically linked to my time entries as a Vendor. I thought this would avoid creating accounting problems, since I don’t actually pay myself a fixed rate for every hour worked. However, this also means that when I look at the Overview and Time Activity for each of my Projects, my hourly time cost is listed as $0.
So far, my approach seems to be working pretty well. Assigning expenses to customers and projects has worked fine. Invoicing has been okay. My tax preparation firm has no problems with the QBO reports I send them each year. However, I do have these questions:
Any help appreciated!
It's good to see you in the Community, Patrick.
Thanks for the detailed information about your questions and I'm here to walk you from it. The setup of your customers, projects, and service items are correct.
You can use the Time Tracking feature to track and bill customers for the number of hours consumed in a project or activity. When you create a time activity, you have the option to select the service they worked on. Once you marked them as Billable and selected the customer or project's name, you'll see all billable time ready to be included when you create their invoices.
We can check your Time Tracking settings to include the service item:
After that, you can enter billable time through the Single Activity Time Sheet and the Weekly Time Sheet. Once you select the item, the Billable rate posted is the sales price of the service item.
Pay rates, cost rates, and billable rates impact profitability. To know more about these types of rates and when to use them, you can refer to this article: What are pay rates, cost rates, and billable rates?.
The option to edit the cost rate at once is unavailable. You'll have to open each time activity, from there you can update each rate.
I'm attaching these articles that will help you through the process of tracking billable time:
You can also consult an accountant that will guide you with the best option on where to enter the rates for us not to mess up your books.
Please don't hesitate to leave a reply below if you need more help. You take care always!
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