Contractors Guide To QuickBooks Pro 2004
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Introduction

Why You Need This Book

Contractor’s Guide to QuickBooks Pro is a simple, hands-on guide for contractors, remodelers, subcontractors, and real estate developers who plan to use, or are now using, QuickBooks Pro accounting software. Think of this manual, like QuickBooks Pro, as a powerful new tool. Used correctly, it will get results you never thought possible — in ways you never imagined.

This book was written for contractors by contractors. That’s why it’s low on “accounting speak” and high on practical examples. We’re not going to talk about debits and credits. QuickBooks Pro doesn’t use those terms, so we won’t either. Instead, we’ll use words we all understand, like checks, estimates, bills, timecards, purchase orders, and deposit slips.

We’ll help you set up a good, effective, highly-professional bookkeeping system as quickly and painlessly as possible. You’ll know, at the click of a mouse button, who owes you money and who you owe. You’ll know if there’s enough cash on hand to pay bills. When you need a current profit and loss statement, you’ll have one in a minute or two — either for the month, the year, or for just one job. When a lender or a bonding company needs a balance sheet, you’ll get one in minutes.

Contractors have special payroll requirements. This book will show you how to get the most out of QuickBooks Pro’s payroll system. No matter where you do business in the 50 states, QuickBooks Pro has a current tax table exactly right for your company. If QuickBooks Pro isn’t doing your payroll now, we predict it will be before too long.

Since estimating is important to most construction contractors, we’re going to cover estimating from three perspectives. In Chapter 12, you’ll see how to enter the summary data from estimates you’ve already written into QuickBooks Pro. From here, you can do progress billing and job cost tracking. In Appendix A you’ll learn how to use the estimating system built into QuickBooks Pro to create estimates. And for those who want still more estimating power, Appendix B has complete instructions for using Craftsman’s estimating software, National Estimator, and Job Cost Wizard, a program that lets you turn estimates into invoices that will export to QuickBooks Pro. Both are included on the CD in the back of this book.

What You Can Expect from This Book

According to a recent national survey, more construction contractors use QuickBooks Pro and QuickBooks than all other accounting programs combined. When set up properly, QuickBooks Pro can handle the accounting for most small- to medium-sized (to $10 million a year) construction companies. But despite the sales hype, QuickBooks Pro isn’t easy to set up and learn. Dozens of options and preference settings may lead you down the wrong road and may end in hours of frustration. We’ve spent hundreds of hours testing the options and preferences in QuickBooks Pro to help you get it right the first time. Follow our examples and you’ll have an effective accounting system that provides all the information any successful business needs — and in the shortest time possible.

QuickBooks Pro doesn’t replace accountants. But it does help organize and standardize your bookkeeping system. Every report your accountant needs is readily available. This makes it easier for your accountant to prepare tax returns and annual reports. The time saved should translate into lower costs for your company.

In this book, we’ll explain how to:

• set preference options correctly for your company
• set up a Chart of Accounts that matches the work you do
• set up, edit, and use classes
• set up customers and jobs
• set up vendors and subcontractors
• set up employee payroll
• get your current account balances into QuickBooks Pro
• track transactions through QuickBooks Pro
• create and use estimates
• set up a simple and effective job cost system
• create and send invoices
• enter vendor bills
• write checks
• process payroll
• get payroll tax and workers’ comp expenses into job cost reports
• get an owner’s time into job cost reports (for a sole proprietorship)
• run workers’ comp reports
• create and interpret job cost reports to keep track of your business
• prepare financial statements
• set up end-of-the-month and end-of-the-year procedures

In short, we’ll show you how to get everything a construction company needs out of QuickBooks Pro. If you understand and apply the methods in this book, you should see real improvement in the effectiveness of your accounting system. And you’ll gain the personal and financial rewards that come from working not just harder, but smarter.

QuickBooks, QuickBooks Pro or QuickBooks Premier: Contractor Edition?

You’ll notice that the title of this manual refers to the “Pro” version of QuickBooks. We recommend that you use at least QuickBooks Pro because basic QuickBooks can’t create estimates and can’t track time spent on specific jobs. If time tracking and estimating are important to your construction company, invest the extra money to get QuickBooks Pro. If you have QuickBooks Premier or QuickBooks Premier: Contractor Edition, this book will work for you as well. All the features in this book are based on QuickBooks Pro, which is included in Premier and Contractor editions. When we refer to QuickBooks Pro, we are also referring to QuickBooks Premier and QuickBooks Premier: Contractor Edition.

You’ll find another major advantage to QuickBooks Pro once we get into estimating. QuickBooks Pro can do progress billing — creating an invoice for each part of a job as you complete that part. That’s important if you handle larger jobs that take weeks or even months. For example, you can send out a bill that covers 100 percent of the foundation work, 40 percent of the framing, and 20 percent of the plumbing on a job. That’s an important advantage. No calculation is required. QuickBooks Pro does the math and keeps all the records: what you told the customer it would cost, what you’ve billed so far, and what is left to be billed. These progress billing statements may also become important business records to reduce arguments over what’s still owed.

We believe QuickBooks Pro has the best combination of power and simplicity for small-volume builders and general contractors. It makes accounting simple for non-accountants because it works the way you do. You’ve been writing checks for years. With QuickBooks Pro, you fill in blanks on a check the same as always. But you do it on a computer screen. And you add notes to check stubs about accounts and jobs to be charged — just the way you’ve always added notes to the stubs of paper checks. Timecards, purchase orders, and invoices work the same way.

Can QuickBooks Pro do the job for you? The thousands of construction companies now using QuickBooks Pro are good evidence that it can. If you’re serious about making your construction business grow and prosper, you’ll want the accounting and reporting power built into QuickBooks Pro.

There’s an old saying among builders about construction accounting: “A builder who knows where he stands won’t stand there very long.” You need to know where you stand so you can make informed decisions quickly. If you agree, QuickBooks Pro may be perfect for your company.

For more than ten years, the three authors of this book have used construction accounting packages, some costing thousands of dollars. None are as slick, professional, and as easy to use as QuickBooks Pro. In our opinion, QuickBooks Pro offers the builder, remodeler, general contractor, and specialty subcontractor the best off-the-shelf accounting program on the market. It’s affordable, reliable, and probably has all the features you’ll need.

Even though QuickBooks Pro never mentions debits and credits, it handles accounting and reporting functions the same way an accountant would. It follows what professional bookkeepers and accountants refer to as Generally Accepted Accounting Principles (GAAP). You may never notice, but QuickBooks Pro uses conventional double-entry accounting. That means each time you enter a transaction, the numbers go two directions — one way as a debit and another way as a credit. Suppose you enter a bill from a supplier. Behind the scenes, QuickBooks Pro records the transaction two ways, first as an account payable and then as a charge to an expense category.

Strictly speaking, the way it comes out of the box, QuickBooks Pro isn’t a true construction accounting program. But it’s adaptable enough to fit the needs of most construction companies like a glove. For example, you can customize reports to get great job cost reports, just like a so-called “construction accounting package.” That’s why we feel so strongly that QuickBooks Pro is right for most construction companies.

Why Should You Believe Us?

All three authors have been in construction, using computers, and using QuickBooks and QuickBooks Pro for many years. We’ve helped hundreds of contractors set up and use QuickBooks and QuickBooks Pro. We’re confident that what we’ve done for others we can do for you, too.

Karen Mitchell was a general building contractor and is currently co-owner of Online Accounting  which uses the Internet to help train contractors on QuickBooks Pro and Master Builder. Karen conducts seminars nationwide for contractors who use QuickBooks Pro. She is a frequent speaker at many construction trade shows such as: A/E/C SYSTEMS, JLC Live!, and NAHB’s PCBC (Pacific Coast Builders Conference). Karen has written several books including: Construction Forms & Contracts, Quicken for Contractors, Contractor’s Guide to QuickBooks Pro, Architect’s Guide to QuickBooks Pro, Interior Designer’s Guide to QuickBooks Pro, and The Property Manager’s Guide to QuickBooks Pro.

Craig Savage has been a general building contractor, remodeler and custom homebuilder for over 25 years. He was an editor at The Journal of Light Construction magazine for many years, then director of the JLC LIVE! Training Shows, and most recently, Vice President of Marketing & Sales at BobVila.com.

In his own time Craig is a construction management computer consultant. He started Construction Business Computing and Macintosh Construction Forum newsletters, and his articles have appeared in Architectural & Engineering Systems, Architectural Record, Fine Homebuilding Magazine, Computer Applications Newsletter, Remodeling News, NAHB Commercial Builder, NAHB Single Family Forum, Remodeler Magazine, Mac Week, Document Imaging, Imaging World, and A/E/C Computer Solutions.

Craig is a regular speaker at the A/E/C Systems, NAHB, NARI, CSI, and PCBC annual conventions. He also instructs at seminars sponsored by the University of Wisconsin College of Engineering, and the University of California Santa Barbara Extension.

Jim Erwin is a partner in several second-generation family-owned construction companies in upstate New York, that are involved in land development as well as residential and light commercial construction. He’s an active member of the National Association of Home Builders and has written articles on using computers in construction for a variety of construction magazines. He’s also the creator of GC/Works (published by sYnapse Software, Inc.), a full-featured software solution for the construction industry that uses Quicken or QuickBooks Pro as its basis.

What Comes Next?

But don’t just take our word for it. Here’s a brief summary of some of the features we’ll show you to make QuickBooks Pro specific for your construction business needs.

Payables/Receivables

One of QuickBooks Pro’s greatest strengths is in tracking money owed to you (Accounts Receivable) and money you owe others (Accounts Payable). For example, when you buy materials from a vendor and receive an invoice or delivery slip, you enter the information in a screen form called a Bill. You’ve seen lots of these, even if you’ve never used a computer and don’t know anything about accounting.

QuickBooks Pro tracks payables and receivables so you can see at a glance what’s owed and what’s due. You can even see what’s due on several different reports: Accounts Receivable Aging, Open Invoices, and Customer Balance Summary. Having all this information available almost instantly should help you sleep better at night. And it helps you make better decisions. For example, it’s nice to know how long it’s been since you received the last check when a customer asks for “just a little more work” on a project.

The Estimating Programs and Cost Data

QuickBooks Pro doesn’t come with cost estimating data. And the estimating function built into QuickBooks Pro is limited, as you’ll discover in Chapter 12. That’s why we include the National Estimator and Job Cost Wizard programs. You can create an estimate with National Estimator and then import into QuickBooks Pro. Everything you need for estimating is on the CD inside the back cover of this book and gets installed when you select the “Complete” installation.

Intro-1 A National Estimator estimate imported into QuickBooks Pro using Job Cost Wizard

Purchase Orders

There are three good uses for the purchase orders in QuickBooks Pro. The first is to track orders placed for special order items, such as windows, doors, and skylights. Another is to track what you’ve committed to pay subcontractors. For example, suppose a subcontractor bids a project at a certain price. You can use a purchase order to track the bid price to compare it with the bill he submits. The third use is to establish a schedule for multiple payment draws for a subcontractor. If you agreed to pay a framing contractor, say, 30 percent on completion of the floor framing, 30 percent on completion of the walls, and 40 percent after the roof framing, you can use purchase orders to keep track of those payment schedules and payments you make against them.

Time Recording and Payroll

Payroll and time billing are flexible and sophisticated functions in QuickBooks Pro. The timecard window looks like a paper timecard, so data entry will be a familiar task. You’ll find QuickBooks Pro’s payroll function to be very accommodating.

QuickBooks Pro payroll handles tax withholding, additions, deductions, and company contributions. Deductions such as health insurance, payments to a retirement plan, or union dues are simple to set up and report. So are company contributions such as health, life, and workers’ comp insurance paid by the company. You can record irregular payroll events such as bonuses, reimbursed travel expenses, and advances against salary. QuickBooks Pro even keeps track of sick and vacation time due employees.

QuickBooks Pro payroll reports provide all the information you need to file state and federal employer tax forms in any of the 50 states. That’s part of the QuickBooks Pro payroll system. Intuit, the developers of QuickBooks Pro, have a small additional charge for the current tax table. Payroll tax tables are updated automatically as tax rates change.

If you want, you can use the QuickBooks Pro Online Payroll Service to pay all of your state and federal taxes and file all the necessary forms (including W2s) for a modest cost. You can have QuickBooks Pro print payroll checks, or use the QuickBooks Pro Online Direct Deposit Service to deposit employee paychecks automatically at nearly any bank.

What’s on the CD?

We hope you bought this book because there’s a CD in the back. We’ve loaded the CD with everything you need to get the most out of QuickBooks Pro:

However, the CD in the back of this book doesn’t include QuickBooks Pro. You won’t get much out of this book without a working copy of QuickBooks Pro. So the first step will be buying and installing QuickBooks Pro if you don’t have it already.

How Do I Use This CD?

To use the CD in the back of this book, you’ll need a computer running Windows 95, 98, or higher, a CD-ROM drive, and about 21 to 40 Mb free on a hard drive (depending on your computer's configuration).

If you’re using a version of QuickBooks Pro older than the 2004 version, many of the illustrations in this book may not look exactly like what’s on your screen. That’s because this manual is based on QuickBooks Pro version 2004. If you’re using version 2000, 2001, 2002 or 2003, the changes will be mostly cosmetic. Version 99 and older versions are different.

Installing the CD

To install everything on the CD, put the Contractor’s Guide to QuickBooks Pro CD in your CD drive (such as D:). If installation doesn’t start automatically after a few seconds:

• Click Start
• Click Run
• Enter D:\SETUP

Then follow the instructions on the screen. We recommend you select the “Complete” installation when you’re asked which type of installation you want to use.

When installation is complete, you’ll see a new program group when you click Start and then click Programs. The new program group name is Construction Estimating. In that group, click on National Estimator 32 to start the program.

If you’ve installed an earlier version of National Estimator in the National folder, SETUP will automatically update obsolete files without affecting any of your estimates.

Get Help by Phone

Everything you need to know about National Estimator and Job Cost Wizard is available on the Help files that come with each program. Just click Help on the menu bar or click the question mark at the right end of the toolbar, or press the F1 key.

If you have trouble installing or using National Estimator or Job Cost Wizard, call Craftsman Book Company (Monday through Friday from 8 a.m. to 5 p.m. Pacific time) at 760-438-7828.

If you need help with QuickBooks Pro, call Intuit technical support (Monday through Friday from 6 a.m. to 4 p.m. Pacific time) at 888-320-7276.

Removing the Installed Files

To remove any of the programs installed from the Contractor’s Guide to QuickBooks Pro CD from your hard drive:

• Choose Start, Settings, Control Panel, Add/Remove Programs.
• Click the name of the program you want to remove, Contractor’s Guide to QuickBooks Pro.
• Click Add/Remove.
• Click Yes.

Conclusion

Most contractors would agree that accounting is what they like least about running a construction business. When we started out, we felt the same way. We had a well-founded fear of accounting and an irrational loathing of computers. But using a computer for the first time isn’t much different from using a Skilsaw for the first time. Treat it with respect. You’ll gain confidence with every use.

We wrote this book because so many of our friends and colleagues asked us for a simple guide to setting up a construction accounting system. We’ve worked hard to keep it simple and still provide all the information you need. We feel the mission has been accomplished and hope you agree.

Now it’s time to take the plunge. In Chapter 1, we’ll wade right in by giving you some choices on how best to start using QuickBooks Pro for your company accounting.