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Just like a good chocolate chip cookie recipe, sometimes we need a step-by-step approach on how to do something — and just like there are many recipes for cookies, there are equally different recipes for job costing.
Unlike our regular articles, this publication is written as a standard operating procedure on how to job cost using apps like QuickBooks Online, QuickBooks Time (previously TSheets) and Wagepoint. We hope you enjoy our approach, but do feel welcome to make adjustments to the recipe to suit your own taste.
What is job costing and why is it important?
In its simplest form, job costing is the accumulation of costs tracked to a particular job to assist business owners in determining the profitability of a project. For example, costs can include labour, materials or other direct costs and overhead.
Often, job costing is used to benchmark and improve future quotations based on the historical performance of past work. It can also be a great tool to keep track of scope creep or poor performance.
Who uses job costing?
Job costing is common in the construction industry to determine the profitability of large projects. But it can be used in other industries as well. For example, a Public Relations firm may want to track the labour and ad costs related to a client campaign to ensure they are billing at the correct intervals of the engagement and remain profitable.
Who is this article for?
This article is for QuickBooks Online users that wish to gain a greater understanding of how labour costs impact the profitability of their ongoing projects using a job costing method.
It’s important to note that Wagepoint does not have a labour costing feature. This process was developed to track labour costs by Classes utilizing the procedure below with accounting tools such as Wagepoint, TSheets & QuickBooks Online.
Here’s the app stack.
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For employee timekeeping, we’ll be using TSheets.
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For payroll processing, we recommend Wagepoint (naturally).
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To track job costing, we’ll wrap things up into an accounting software package like
QuickBooks Online.
Things to do before setting up a job costing system.
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Activate a QuickBooks Online subscription.
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Set each job up as a Class in QuickBooks Online.
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Activate a TSheets subscription.
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Review how to set up employees in TSheets.
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Activate a Wagepoint subscription.
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Review how to set up employees in Wagepoint.
Now that you have set up your tech stack, it’s time to dive into each app and set it up for success.
How to set up your job costing system.
1. Add each job code as a Class in QuickBooks Online.
For example, a job code could be 2020-03 231 Dundas St. where:
- 2020 — represents the year.
- 03 — represents the project number.
- 231 Dundas St. — represents the location of the job.
You could also use a different naming convention if you like. The key is to be consistent in your naming your jobs to make it simple for employees and business owners.
2. Sync Wagepoint to QuickBooks Online.
2A. Log into the Wagepoint app and click on “Add-ons” found in the upper right corner.
2B. Select “Connect” under QuickBooks by Intuit.
2C. Sign in by entering your QuickBooks Online user ID and password.
2D. Select the company you are connecting to Wagepoint and click “Next”.
2E. Click “Connect” to allow the connection between Wagepoint and QuickBooks Online. Once the connection has been established, you should be brought back to the Wagepoint portal.
2F. Input your Chart of Accounts.
3. Sync TSheets to Wagepoint.
Syncing your TSheets account with Wagepoint will save you data entry time as well as minimize potential data entry errors.
Pro tip: I recommend logging out of all TSheets and Wagepoint accounts before starting this process. It is best to open a new browser in incognito mode and follow the below process:
3A. Within Wagepoint, go to “Add-ons” located in the upper right corner.
3B. Scroll down to Quick and click “Get The App”.
3C. Click “Log In”.
3D. Enter your TSheets login credentials and click “Sign In”.
3E. Select “Allow” to confirm Wagepoint’s access to your TSheets data.
3F. If you manage multiple TSheets accounts, select the client you wish to integrate into the Wagepoint portal.
4. Sync TSheets to QuickBooks Online.
4A. First, sync your QuickBooks Online file to TSheets:
1. In TSheets, go to Feature Add-ons, then select Manage Add-ons.
2. Find QuickBooks Online Integration and select Install.
3. Select Connect to QuickBooks. The Intuit sign-in page should be displayed.
4. Sign in — If you have multiple companies, select the one to which you want to link.
5. When prompted, select Authorize. A “You are now connected” message should pop up, and the Preferences window should open.
4B. Next, choose what you want to import from QuickBooks Online.
There are so many options with TSheets and different methodologies around labour costing. Let’s keep it simple and track labour costs only by Class.
- Once Classes are selected, TSheets will import your QuickBooks Online Class items over as a list that employees can pick from while tracking time.
- If you choose the “Billable” feature, you can also make your time billable back to QuickBooks Online.
4C. Before approving timecards, set up the payroll cycle from the “Company Settings” in TSheets which includes the first day of work in your pay cycle and how often you run payroll.
Accidentally missed this step? Don’t worry, TSheets will populate this process for you when you go to approve time.
4D. Set up employees exactly as they are named in Wagepoint and invite them to TSheets.
Take special care to input employee wage rates into TSheets and set up a process to update TSheets each time a wage rate changes in Wagepoint.
For this process, TSheets only imports time into Wagepoint and does not import the wages. However, note that wage value is required for Step 4E.1 (directly below).
4E. Instruct employees to track time with either the TSheets mobile app or web browser.
For our example, we will be using the web browser for illustration purposes.
1. Have employees track their time by Class using the “Time Sheet” method.
2. Select the “+ Add Time” button.
3. Have employees clock time in and out with the respective date — encourage them to indicate the Class and provide notes that may be useful for the timekeeping approver.
4. Press Save.
4F. Employees can see their time entries and — if provided permission — can make changes to entries that are not yet approved for payroll.
5. Approve time in TSheets.
5A. In the left sidebar, select “Approvals” > Choose the date range > Click “Run Report” to approve the time in TSheets — subsequently, this will lock in the period and avoid further changes. This privilege is available to timesheet administrators.
- To look into how the employee was spending their allotted time, select “View Details” under the employee’s time.
- In the “View Details” report, you can review the time logs and notes in addition to job codes.
- Once the employee’s timecard is approved, the timecard turns green in the Approvals section and employee portal.
- Note that timecards are locked as soon as they are approved. If an employee wants to make changes, they will need to contact the administrator to “Unapprove” the timecard.
5B. Once you have approved the time cards, you will want to export the “Worker Job Costing” report to use in Step 7.
1. In the left sidebar, select Reports > Tracking > Worker Job Costing.
2. Confirm the date range of the payroll cycle. Be sure to select “Class” in the Include Custom Field drop-down menu.
3. When ready, click “Download CSV” — if you want to look at the report before downloading, click “Run Report”.
4. The report will look like the example below:
Note that the wage rate used in Step 4D populates the “Total Estimated Cost”. This is for the wage only and does not include additional labour burden.
6. Process payroll by importing the hours into Wagepoint.
6A. Once the time is approved in TSheets, log into Wagepoint and select “Import Hours”.
6B. TSheets will now import the hours for your employees and Wagepoint will change the button from “Import Hours” to “Import TSheets Hours”.
6C. Continue to process payroll by pressing “Save/Next”.
7. Export the payroll to QuickBooks Online.
For simplicity, we will use the “Bill” method to export payroll information from Wagepoint into QuickBooks Online.
7A. Start by selecting “Add-ons” in Wagepoint located in the upper right corner, and select the “QuickBooks Tab” as shown below.
- Confirm your pay group, pay cycle and the reports you wish to be exported to QuickBooks Online as an attachment on the “Bill”.
- You will need to link Wagepoint as a vendor in QuickBooks Online — if you haven’t yet done so, click “Link Vendor”.
- You will also need to update the chart of accounts — click “Chart of Accounts” to determine which accounts you want payroll transactions posted to in QuickBooks Online.
- When you are ready, select “Export Payroll”.
7B. In QuickBooks Online, click “Expenses” in the left menu bar and open the Wagepoint bill posted for the pay cycle you are reviewing.
7C. Using the TSheets Worker Job Costing report exported in Step 5B, you can reallocate the labour found in the “Regular Pay” line on your “Bill” (posted by Wagepoint into QuickBooks Online) to various Classes per the image below.
For larger data files, it is recommended to summarize the labour cost by Class using a pivot table. For our purposes, we will use the job costing method of actual time booked in TSheets and forgo additional labour burden.
Select “Save and close” to post your revised payroll bill from Wagepoint.
You are welcome to use either a burden rate or percentage of labour by Class found in the Worker Job Costing report to allocate overhead costs like the Canadian Pension Plan (CPP) contributions and employment insurance (EI) premiums.
Just be sure any reallocates you make equals to the value of the bill — this way, it can be reconciled when payment is processed through the bank.
7D. To view a job costing report in QuickBooks Online, select “Reports” from the left menu > Standard tab > Profit and Loss.
7E. Verify the “Report Period” > select “Classes” in the “Display Columns by” drop-down menu > click “Run Report” — this report will quickly tell you the profitability of each job.
Note that items Not Specified on the below report relate to additional labour burden not allocated to a Class.
Fine-tune your job costing reporting.
Let’s recap. Job costing can take various approaches. The above article is just one way you can report labour costs using the technology made available to you. Dare I say job costing can be fun? Experiment with your process to fine-tune your job costing reporting. Soon you’ll be finding valuable ways to give your clients the feedback they need to determine if their jobs are profitable.
Feel like you need a little more support? For TSheets, using their in-app support system a wonderful way to get straight answers. Our friends at Wagepoint can be reached at support@wagepoint.com. Lastly, you can get ahold of Intuit to get product support on QuickBooks Online by calling 1-888-843-5449.
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