QuickBooks Tips for Tracking and Billing Reimbursable Expenses
As a construction business owner or contractor, managing reimbursable expenses is crucial for maintaining accurate financial records and ensuring proper billing. QuickBooks offers powerful tools to help you track and bill these expenses efficiently. In this article, we’ll explore some valuable tips and best practices for using QuickBooks to handle reimbursable expenses in your construction business.
Understanding Reimbursable Expenses
Before diving into QuickBooks tips, let’s quickly review what reimbursable expenses are. In the construction industry, reimbursable expenses are costs incurred on behalf of a client that you expect to be paid back for. These can include materials, equipment rentals, permits, or subcontractor fees that are not part of your standard pricing but are necessary for completing a project.
Setting Up QuickBooks for Reimbursable Expenses
1. Create Expense Categories
Start by setting up specific expense categories for reimbursable items. This will help you easily identify and track these expenses separately from your regular business costs. Some common categories might include:
- Project Materials
- Equipment Rentals
- Permits and Fees
- Subcontractor Expenses
- Travel and Mileage
2. Enable “Billable” Feature
Make sure the “Billable” feature is turned on in QuickBooks. This allows you to mark expenses as billable to specific customers or projects. To enable this:
- Go to Edit > Preferences
- Select “Time & Expenses” from the left menu
- Click the “Company Preferences” tab
- Check the box for “Use time data to create invoices”
3. Set Up Customers and Projects
Ensure that all your customers and their associated projects are properly set up in QuickBooks. This will allow you to easily assign reimbursable expenses to the correct client and job.
Recording Reimbursable Expenses
1. Enter Expenses Correctly
When entering a reimbursable expense:
- Go to the “Expenses” or “Enter Bills” section
- Select the appropriate expense category
- Choose the customer and project
- Mark the expense as “Billable”
- Enter the amount and any relevant details
2. Use the “Billable Time and Costs” Feature
QuickBooks has a “Billable Time and Costs” feature that helps you track and bill reimbursable expenses. To access this:
- Go to Customers > Invoice for Time & Expenses
- Select the customer and date range
- Choose the expenses you want to bill
- Create an invoice with these items
3. Attach Receipts
Always attach digital copies of receipts to your expense entries in QuickBooks. This provides documentation for your records and makes it easier to justify charges to clients if questions arise.
Billing Reimbursable Expenses
1. Create Detailed Invoices
When billing clients for reimbursable expenses, create detailed invoices that clearly itemize each expense. This transparency helps avoid disputes and makes it easier for clients to understand and approve the charges.
2. Use Markup Options
QuickBooks allows you to add a markup to reimbursable expenses. This can be useful if you want to charge a handling fee or account for administrative costs. To set up markups:
- Go to Edit > Preferences
- Select “Time & Expenses”
- Click the “Company Preferences” tab
- Check “Markup expense when billing” and set your preferred markup percentage
3. Customize Invoice Templates
Create a custom invoice template specifically for billing reimbursable expenses. This can include sections for materials, labor, and other project-specific costs, making it easier for clients to review and approve.
Reporting and Analysis
1. Run Regular Reports
QuickBooks offers several reports that can help you track and analyze reimbursable expenses:
- Unbilled Costs by Job: Shows billable expenses that haven’t been invoiced yet
- Job Profitability Detail: Includes a breakdown of reimbursable expenses per project
- Customer Open Balance: Helps identify outstanding reimbursable expenses
2. Monitor Cash Flow
Keep a close eye on your cash flow, especially when dealing with large reimbursable expenses. Ensure you have sufficient funds to cover these costs before being reimbursed by the client.
3. Analyze Expense Trends
Regularly review your reimbursable expenses to identify trends or areas where you might be able to negotiate better rates with suppliers or subcontractors.
Best Practices for Managing Reimbursable Expenses
1. Establish Clear Policies
Create and communicate clear policies regarding reimbursable expenses to both your team and clients. This should include what types of expenses are considered reimbursable and any approval processes required.
2. Get Client Approval in Advance
Whenever possible, get client approval for reimbursable expenses before incurring them. This helps prevent disputes and ensures you’ll be paid for these costs.
3. Keep Detailed Records
Maintain thorough documentation for all reimbursable expenses, including receipts, invoices, and any client communications regarding approvals.
4. Review Regularly
Set aside time each week or month to review your reimbursable expenses in QuickBooks. This helps ensure nothing falls through the cracks and all billable items are invoiced promptly.
5. Train Your Team
Make sure all team members who handle expenses are trained on your QuickBooks processes for tracking and billing reimbursable items.
Common Pitfalls to Avoid
1. Mixing Personal and Business Expenses
Always keep personal expenses separate from business expenses, even if you plan to reimburse the company later. This maintains clean financial records and simplifies tax preparation.
2. Delayed Expense Entry
Enter reimbursable expenses into QuickBooks as soon as possible. Delaying this task can lead to forgotten expenses and lost revenue.
3. Overlooking Small Expenses
Don’t neglect small reimbursable expenses. They can add up over time and impact your project profitability.
4. Inconsistent Categorization
Be consistent in how you categorize expenses. This ensures accurate reporting and makes it easier to analyze costs over time.
Conclusion
Effectively managing reimbursable expenses is essential for maintaining healthy finances in your construction business. By leveraging QuickBooks’ features and following these tips, you can streamline your expense tracking and billing processes, improve cash flow, and ensure you’re properly compensated for all project-related costs.
Remember, the key
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