Assigning Payroll to Project Costs

QuickBooks allows you to use timekeeping to record both salary and hourly payoll cost to customer jobs. Hourly pay is straightforward but salaried employees will need to account for a 40 hour work week on each weekly timesheet for a proper allocation of payroll cost to each customer:job. Here's how you do this...

If a full 8 hour day can’t be assigned to customers:jobs, the difference can be assigned to a customer with a name such as “Unallocated Payroll Cost” and a service item such as “Administrative time” pointed to an expense account for nonbillable time and a service item pointed to an income account for billable time.

This is necessary because QuickBooks will prorate payroll costs based on the relative time recorded for each timekeeping line entry. For example, if you had only recorded your time for 36 hours, QuickBooks would prorate salary and payroll burden based on each recorded job to 36 hours, therefore over allocating cost to projects. If we recorded an additional 4 hours to “Unallocated Payroll Cost”, QuickBooks would properly allocate costs. Below is an example of how each weekly timesheet would look.



The example below shows how all salary is then automatically allocated to customers:jobs on a pay check.



The report below shows how all payroll costs are allocated to customers:jobs.



The example below shows the time for this employee on each “customer:job”.



Steps to set up job costing from payroll

Step 1: For each employee check the “Use time data to create paychecks” option in the payroll and compensation tab.



Step 2: Create a customer with a name such as “Unallocated Payroll Cost”
Step 3: Create an item with a name such as “Administrative time” for non-billable hours and point it to an expense account. If time is to be billed, create a service item pointed to an appropriate income account.

You are now ready to enter to time sheets and include payroll costs in job profitability reports.

Robert Guild is certified QuickBooks ProAdvisor in Austin, TX who conducts CPE courses for CPAs and individual training and group classes to QuickBooks users. His company at www.QBCoach.biz, maintains a sixteen-station QuickBooks lab, providing hands-on training. You can contact him directly at rguild@QBCoach.biz or follow him on twitter at QBPro