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  #1  
Old 09-01-2004, 02:56 PM
emilioda emilioda is offline
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Question direct labor vs indirect labor

I use QuickBooks Pro to manage my books for a Landsacaping Company.

I am in the middle of reorganizing my Chart of Accounts and I want to break out direct labor and burden (labor that is billed to the job) and indirect labor and burden (salaries for management, sales, supervisors). I have successfully broken out the direct labor and indirect labor. The problem lies with the direct and indirect labor burden (payroll taxes). When I go into the payroll items and try to add another item, say Federal Taxes (this would be assigned to an indirect labor burden account), QuickBooks promptly stops me and tells me that "You don't need to set up any additional Federal Tax payroll items because QuickBooks has already done that for you."

How do I get around this?
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  #2  
Old 09-01-2004, 05:13 PM
suzannemead suzannemead is offline
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You don't need to get around it. Any wages, direct or indirect, should be taxed using the existing withholding items.
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  #3  
Old 09-01-2004, 05:14 PM
Joey Joey is offline
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Normally the salaries and wages are split but the payroll taxes are considered Administrative expenses and not split up.
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  #4  
Old 09-01-2004, 07:38 PM
emilioda emilioda is offline
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I can live with that but then I will need to attack it a different way. The report, "Profit and Loss by Job" will not be accurate because my Indirect labor burden will be posted. This is inaccurate because that labor burden was not an expense for the job. This is why I need to split up the direct and indirect labor burden.

Typically when I price out jobs, I calculate the direct labor and burden as cost and materials and then add a mark up for all my indirect costs (such as indirect labor and burden) and then add profit. I feel that I need to break it out this way in order to be able to look at my income statement and quickly see what my gross profit (income minus direct costs) is.

I use a pretty simple formula for pricing: Direct Costs + Overhead + Profit = Selling Price. I need to be able to see how much money I need to spend on direct cost to bring in X amount of revenue. This helps me calculate out a budget for future planning.

Please elaborate if you think there is another way around this.
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  #5  
Old 09-01-2004, 08:38 PM
qbsrox qbsrox is offline
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John,

The only way to get the detailed job-costing that you need is by doing another step in QB's. I use a 'clearing bank account' to reallocate/breakdown these types of things and it should always reconcile to -0-

Rox :-)
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  #6  
Old 09-01-2004, 09:21 PM
suzannemead suzannemead is offline
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If you are using the timesheets for your labor and posting the time to customer's jobs, don't post the indirect labor. Your admistrative, management & clerical (and possibly other ) waages need not be assigned to any job, therefore they won't show up on a job profitability report. In other words, if you don't want the labor cost to go to a job, don't assign a job. I too am dealing with a landscape and tree service company.
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  #7  
Old 09-01-2004, 10:55 PM
emilioda emilioda is offline
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Where would it get posted? I still need to account for it to keep track of the hours worked whether they are posted to a job or not.

I understand what you are saying but still need clarification on where to post the time of my crews when they are not working on a job. This could be loading/unloading trailers, office/paper work, etc. What about the labor burden?
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Old 09-01-2004, 10:57 PM
emilioda emilioda is offline
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I forget to answer one of your questions before I posted the last message. I do use the time sheets for my crews and I also use the option where you can select non billable hours.
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  #9  
Old 09-02-2004, 07:29 AM
suzannemead suzannemead is offline
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If you must account for the time you can make it as simple or as complex as you want. One of our companies wants every minute accounted for, which I find excessive. The have a "fake" customer for truck loading, unloading, traveling, lunch, etc. I think 1 "fake" customer called 'unapplied time is enough. Our tree compaany just leaves the customer:job blank on the timesheet for the unapplied time & this works as well. You don't have to use a customer on the time sheet if you don't want.
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  #10  
Old 09-02-2004, 09:24 AM
emilioda emilioda is offline
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You are making it sound like there is an option to tracking indirect labor or not to track it at all. What do you do when it is time for payroll? If you do not track it, how does your payroll balance out?
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  #11  
Old 09-02-2004, 12:58 PM
suzannemead suzannemead is offline
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If the employee is hourly and you use the timesheets the hours will post to the payroll whether you enter a customer:job or not. If the employee is salaried and has been set up properly they will show up on the payroll. When you go to Pay Employees everyone should be there and they will call compute - with or with a customer:job.
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  #12  
Old 09-02-2004, 06:22 PM
qbsrox qbsrox is offline
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'Where would it get posted? I still need to account for it to keep track of the hours worked whether they are posted to a job or not.

I understand what you are saying but still need clarification on where to post the time of my crews when they are not working on a job. This could be loading/unloading trailers, office/paper work, etc.'

***********************************************

For the above, one of the easiest ways is to have a customer set up called 'Overhead' or something like that; any non-billable time can be tracked there. You can even have 'sub jobs' if you would like....i.e. Overhead:Shop, Overhead:Maintenance, Overhead:Admin, etc.

Are you using the Class feature? If not, this is another great way to get job-costing reports.

As far as your labor burden, the only way to get all the details is to use a clearning account; there is no way for QB's to handle that any other way....some use JE's, personally I use a -0- dollar check because it is easier for the clients to understand.

Rox :-)
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  #13  
Old 09-02-2004, 08:33 PM
suzannemead suzannemead is offline
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If you create a "Time by Job Report" it will show the hours "not" applied to any job with a heading of "No Job Assigned" if you don't enter a customer:job. If you do what I suggested & Rox suggested, creating a fake customer called "unapplied time" or "Overhead", or anything you like, the hours will show up under that name on the report.
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  #14  
Old 09-03-2004, 10:42 AM
emilioda emilioda is offline
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Thanks for all the replies and suggestions. I will try to implement some of these and see if they work out.

My next dilemma is fixed assets and depreciation. I basically lack the knowledge on how this all flows (with or without QBs). Here is how I think it works... (please correct anything that is questionable or wrong).

Let's work with a vehicle. I purchase a truck and set up a fixed asset account for the value of the truck (purchase price or actual value?). I then use the loan manager and set up the loan. I now make payments against the loan and the principal gets posted to what account? The interest gets posted to an ineterest expense account.

Where does depreciation fit in and when does it get applied?
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