What is Construction Job Costing?
According to Wikipedia, job costing is a type of accounting which tracks the costs and revenues by “job” and enables standardized reporting of profitability by job. This means that in additionally to to the G/L ledger account information for each line of an bill, you would also attach a job code or description. In addition to just the job code, a project code is also added. This allows the companies to also track their profitability on the project level as well.
Go check out our article on Xero job costing where we also describe construction job costing in more detail.
What can QuickBooks Online do well?
QuickBooks Online is a great piece of G/L accounting software. Since it is so popular, it is very easy to find educational materials online on how to resolve some specific issue. Especially when it comes to questions about general accounting. QuickBooks has also added different features regarding project, customer and job tracking.
Unfortunately, there are some reasons why QBO is possibly not the most ideal solution for construction job costing. You can check out our comparison of different QuickBooks versions blog post to learn more.
Enabling the project tracking feature
Turning on the project tracking feature is quite simple. You just need to click on the settings cogweel in the top right corner. From there, just click on the “Advanced” section on the left and then find the “Projects” section. Once you enable this setting, you will have access to project tracking for expenses and incomes. You will also gain access to various reports that aggregate all of the relevant info on the project and customer level.
Project tracking when approving costs
If you enable the project tracking feature under account settings then you are able to attach a customer or a project to each line of a bill. This means that you can very easily attach and track which costs correspond to which projects. Having this information filled in allows us to view costs on a customer or a project level. This means that it is very easy to quickly see who the cost is connected to and to directly understand what you are looking at. It also gives you the possibility to quickly have an overview on the payment status of all incomes and expenses connected to a client.
Project profit/loss reporting and project dashboards
Once you enable the project tracking report in QBO, then you are given access to various dashboards and reports that allow you to look at your incomes and costs in various different ways. You can see the total project profitability and profit margins in a glance without having to do any extra work.
You can easily also look at all of the transactions of a project in a convenient list with some filtering and sorting capabilities. In addition to that, you can easily track your employee hours and attach them to the projects as well. All of this becomes easily digestible in one simple dashboard.
What can’t QuickBooks Online do?
Altough there are some powerful project management features built into QBO, there’s still quite some features missing that are important. Since QBO is a financial tool, we have listed various financial features that are missing from it. This list is in no way exhaustive and will definitely be missing many construction-specific features.
Project profitability projections
For many construction companies, it critical that the project profitability is known throughout the whole lifecycle of the project. This is not the case when a contract structure like cost-plus is used. This means that knowing the profitability of the project or a job is a matter of surviving. For example, let’s say you find out at the end of project that your quoted cost of $100k is instead $120k. You might run into cashflow issues assuming you don’t have enough money in the bank.
Unfortunately, QuickBooks is not really providing a good way of projecting the future profitability. It rather provides you different tools to look at your past costs and incomes. This means that there is no way to continuously see the profitability of the project when the project is still running. You might need to do this analysis in a different tool or try to solve this with a custom Excel spreadsheet.
Project progress and WIP reporting
Slightly connected to the project profitability is also the tracking current progress and remainder of the project. This task contains seeing how much of the project is finished when comparing to the initial estimate and budget. An up to date project cost value is critical to keep track of so that you can compare it to the currently paid out expense amounts.
Since QuickBooks is not a construction-specific tool, it doesn’t really know too much about your estimations and budget. It also does not know anything about your initial estimate vs the current up to date prognosis of the project. It also means that compiling an accurate enough project progress report is not really possible.
Find a cost of a job over all projects
Having an easy way to access this information when putting together quotes for new projects, you can learn from the mistakes from previous projects. Even if the estimation of the other project was accurate, you can still use the info for the new project as a rough estimate.
When you are estimating a new project in QBO, there is no very simple way to look at the cost of a job over all of your projects. At least not in the default reports. This means that all of the job cost information that you provided during the execution of the project is not so easily accessible when the project is finished. And due to this, it’s possible that your estimations are not as accurate as they could be when you did have access to this info.
Easily share the information with your project management team
One fundamental issue in using an accounting software for job costing is user access control. You probably want your quantity surveyors, project managers, and possibly also your site team to be able to attach project and job information to costs that they have incurred.
One challenge with this is that you possibly do not want to give non-accountant users too much access. You want the users to just access their projects and the jobs where they are doing something. With QBO, there isn’t a way to just give access to some parts of the financials. There are some options to allow time tracking or looking at reports, but that isn’t enough.
An additional problem with having a lot of users on QBO is the pricing. As you can not have more than 25 users even when you are on the highest package.
So, does QuickBooks Online do construction job costing well?
QuickBooks Online does do some parts of the construction job costing process in an okay-ish way. It can do very basic parts of it for a small company. One that does not have multiple projects, a lot of users, and many complicated jobs in each project.
It doesn’t work for a medium or large-size construction company that has multiple quantity surveyors, project managers, and works with tens or hundreds of subcontractors. Construction processes are too specific for a general construction accounting software to be able to do all of it.
How to get access advanced construction job costing features using QuickBooks Online?
Since construction processes are too specific for a G/L accounting software, why not use it together with a special tool for it. QBO has an app store with many different construction software options that will fill in the gaps. Integrating QBO and construction-specific software can be done in a few clicks and doesn’t need an IT degree.
One of the options we (understandably) recommend is to use Planyard with QBO. You can use Planyard for all of the construction job costing and QuickBooks Online just gets the expense documents and reports. This means that all of the relevant info that the project management teams need is available to them. And all of the accounting information is available for the accountants. Furthermore, the accountants already get all of the cost sent to them with the chart of accounts and client information prefilled.
You can check out how Planyard works with QuickBooks Online before trying it out.
Still using QuickBooks Online for budget management and job costing?
There’s a better way.
QBO is not the best way for managing job costs
- It’s difficult to see what the costs consist of;
- You can’t easily separate costs on the project and job level;
- There’s no real-time overview of profitability forecasts;
- It means duplicate work for PMs and accountants.
Planyard saves time and nerves
Follow your budget in real time and take immediate action when errors occur. Job costs are organized, and fully searchable and accessible for forecasting, project management and more.
Free 14-day full-featured trial. Full access. No credit card required.
All approved costs get sent to QuickBooks Online automatically after you approve them in Planyard.