Billing Time & Material Contracts in QuickBooks

By Taylor Bailey

If your company has just been awarded its first T&M contract, it is important to consider how you track your time and expenses for billing purposes. There are best practices in QuickBooks that will help you bill efficiently and accurately. Two areas of QuickBooks that you want to familiarize yourself with are the Customer Center and the Item List.

The Customer Center holds all of your company’s information about your customers and jobs. Here, you should create a tiered structure of customers (ABC Corp) and jobs (PO 123456). Note that one customer can have multiple jobs. The lowest level in your Customer Center hierarchy should be the invoice level. For example, if you submit one invoice for your purchase order each month, the purchase order is the lowest level you will need in the Customer Center.

The Item List will be where you set up your charge codes (Engineer II) and line items (Direct Travel) that you will bill on your invoice. This list can be set up in a hierarchical structure as well. One method would be to have the following hierarchy: Purchase Order > Labor > Charge code or labor category. However if you use one labor category for multiple jobs, a different structure might work better. The Item List also allows you to store the billing rate for your labor categories and which expense/revenue accounts are affected when transactions are posted.

When entering time for employees in the QuickBooks timesheet function, it is important to select the correct Customer/Job and item. The job will identify which job the time is billable to and the item will identify the bill rate and which expense/revenue account for labor posting. Make sure that the time is marked billable on the line items that have direct hours. Without these three fields marked correctly on the timesheet, QuickBooks will not be able to trace the hours from the timesheet directly to the invoice.

When you are ready to invoice, select the “Add Time/Costs” button at the top of the invoice screen. From this function, you can select the applicable hours that you wish to bill. These hours will be imported directly into the invoice with the corresponding billing rate and item description that is set up in the Item List. If you have costs other than labor on this particular job, it can be imported into the invoice using this function, but only if the customer, item, and billing status were input correctly when the expense was entered in QuickBooks. Once you save your invoice, the time and expenses that were imported will be marked “Billed” in the system. This prohibits the costs from being billing again in the future.

Billing using the import time/expense function is a best practice because it reduces the chance for error that comes with manual entry. It also reduces the change that items will be billed twice due to miscommunication or confusion. QuickBooks has a lot of flexibility with expenses, labor, and billing. If you have questions about the best way to hand your QuickBooks setup or procedures, we have experts with years of experience in these areas. Please let us know how we can help.