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How to handle subcontractors in QuickBooks

There are lots of companies out there that hire subcontractors to service their client’s needs.  Since you need to charge your client and pay your subcontractor all for the same service, there is a specific way to handle this in QuickBooks.

First you want to setup your service items in your item list to handle work being done by a subcontractor:

-Set up a service item for each type of work the person performs.
-Select the “this service is performed by a subcontractor” checkbox.
-Enter a description for sales transactions as you want the work described on sales forms.

 Note: If you modify the item description on a purchase transaction (such as a check or a bill) and want the item description to carry over from the purchase transaction to an invoice, you should leave the sales description for this item blank. If there is a sales description in this item, it will always appear on the invoice when using time/costs to bring over reimbursable expenses.

 -If this work is hourly, enter the vendor’s rate in the Cost field and the rate you charge in the Sales Price field. (If the vendor charges a flat fee that varies, leave both fields at 0.00.)


Now that you have setup your items, it’s all about recording the data.  If you will be tracking your subcontractors time, enter their time into a QB timesheet just like you would for an employee.  At this point, enter in the Customer:Job but uncheck the “Billable” checkbox.


Once it’s time to pay the subcontractor, enter in a bill and you will see that QB will tell you that there is outstanding billable time.  Select Yes.


Enter in the date range for the time you want to pull into the bill and click ok.


QB will now pull those service items, hours, cost (if entered in the item list) & Customer:Job onto the items tab of the bill. Now, you want to check off the billable column on any line items that you will bill back to the customer.


If the vendor or subcontractor works at an hourly rate, QuickBooks calculates the amount for each type of work on the bill, check, or credit card charge. On a purchases by item report, the quantity for each service item tells you the number of hours worked. (To create this report, from the QuickBooks Reports menu, choose Purchases, and then choose Purchases by Item Summary or Purchases by Item Detail. You can give this report columns for each separate job, or filter for one job.)


Now, when creating the customer invoice, you start the invoice as normal by choosing the customer job.  You will get a popup letting you know there is outstanding billable time/costs and it will ask you if you want to apply it to this invoice.

 Once you choose ok, you can select on the next screen whatever time/items you want to pull through to this invoice and click ok.

  Your invoice is now created for the subcontractors services.



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