would you like to master the most important section of quickbooks
that a contractor would need well then you need to learn
about the work to be done section of the contract and how it relates to your contractor items list
if you have any questions about this topic you can leave them in the comments section below and i'll
do my best to help you and of course if you feel the video helped you i hope you will click like
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now this is the items list that we have been using for the course
and if you remember we set these items up at the beginning of the course when we set up everything
for your contractor file if you remember these items are connected to
income accounts that you had put in the chart of accounts when you originally set up the file
and you need several income accounts in your chart of accounts if you want to see
a detail of the income section of your profit and loss if you look at a typical quickbooks
profit and loss report the income section is on top and the expense section is below and if you
want to see each area that money is coming in from you would have to create separate income accounts
so that those accounts would show up at the top of the profited loss and show you how much money came
into each of those income accounts to get the total income and then eventually subtract out
the expenses for the net income now how does the flow of information work well you start
by putting these items on an estimate because the estimate reflects the entire contract and
when you put the items on the estimate it's at the beginning of the contract
so 100 percent of the amount you expect to bill for the entire contract is what gets listed
on the original estimate then when you build the clients for each piece of the work that's done
you will only put on the items section of the invoice the amount of each item
that was done during that specific phase of the job and that's what you bill your client for
now in quickbooks the most important thing to remember is that it's the moment that you put
the items on the invoice that the income accounts will increase the income accounts do not increase
when you create the estimate and the income accounts do not increase when you finally get
paid for the invoice the income accounts that are connected to the items increase when you put the
items on the invoice and save the invoice so where do they first come from in other words
how do you decide what items to put on the estimate or invoice well usually they come from a
contract and a contract a written contract with a contractor for work to be done over several months
usually has several articles in the contract and there are many pages of each contract
the most important section for purposes of this video is the section called work of this contract
that's really where you decide which items from your items list to put on the estimate
and to put on the invoice and to bill in partial phases for progress invoicing
so these items one by one are actually explicitly stated on the contract for example under article
number two the first description of work might be carpentry and that would be the name of the item
and then in the contract you would have something called a sub description and it's
the sub description that's written directly under the description of the item of work
that really explains exactly what will be done regarding that item for each phase of the contract
for example mason work that might be the name of your item but that might be the description of the
title of that piece of work in the contract and then of course in the contract mason work would
have a sub description that clearly explains physically what the person is going to receive
from the contractor for that specific item that will be billed as one of the line items in the
invoices the main description is the name of the build item in the item column of the invoice
but it's the sub description that's what you use to decide how much of the work is done and the sub
description goes in the description field on the same line of the invoice as the name of the item
for example if the work on this contract called for two items mason work and carpentry
and this was the description of the exact mason work you're going to do and this was a description
of the exact carpentry that you're going to do how would it look on the invoice well the title
mason work which is the description of that piece would go in the item code or item name column and
then the sub description in the contract is what would go on the same line in the description field
of the invoice so you can see which or how many items of work in each section of the work uh done
in the description of the contract and for each item you can clearly see in the description field
exactly what the contractor is supposed to do in order to bill the client for that item of work
but then the question is how do you know how much to bill for any particular phase of the job
well it's common sense you would physically look at all of the work that had been done for that
particular item since the last invoice and you would count and you would use math and then you
would compare it to the sub description exactly as it's written in the contract
and then you would decide for that particular invoice for that part of the job exactly how
much to bill on that invoice comparing the work to what it says on the job
always consider what was billed in prior phases we know that the estimate has a hundred percent
of each item listed for each item on the estimate but if you only finished twenty five percent of
the work in phase one you could only bill for 25 but be careful when you finish the next phase of
the contract you have to consider how much work is done in the prior phase and most often you're
required to show on that invoice how much work was done in all the work that was done actually in the
prior invoices and the specific amount of work that was done in this phase and then after this
invoice the percent of the job that was billed and assumed to be physically finished and it's
only when you get up to the last invoice of the job that you can clearly see that you finished
a hundred percent so in this example phase three forty percent of the work was done in phase three
but this phase three invoice should have a column that shows the prior sixty percent finished
and also show a hundred percent finished uh at the moment you bill the final invoice
billing for physical contracts can be detailed and complex people outside the contract may need to
evaluate the contract but may not understand some of the details it's safer to make a contract and
the billing agreement in a standardized way that's why our good friends at the american institute
of architects have come up with a standardized way of classifying the different trade services
and classifying the different items of service that they give so contracts
can be understood by objective parties and uh be a little bit more clear about
each phase of the work done multi-million dollar contracts often require billing in aia format
it's easier to settle disputes objectively and it's easier to determine the billable amounts
contracts that are in the format from the american institute of architects have standard sections
called articles and it's the work of this contract article that you have to sit down with your client
and decide how to list it in the contract the estimate and the job invoices that you bill for
and one suggested way to match the items in the contract with the items list in quickbooks
is to use the categories of trade services from the american institute of architects
as your main items on your items list for your estimates and invoices so this is an example this
is actually an excerpt of a pdf that was published by the american institute of architects this one
only lists five trade items but in the entire pdf from the aia there are about 30 or 40 different
trade items and trade items basically means what type of company and what type of certification
the company has to perform the services that they perform when they make a contract with a client
it's possible that one company might provide more than one of these trade items but usually it's one
trade item per company because usually that's how they get certified and the aia lists a description
of each of the typical services that would be listed in a contract under that
licensure and under that certification and for each description set for each trade item you could
use those standard descriptions as the categories of your items and you could use the names
actually as your items list this will keep things standardized and it will help objective parties
understand the nature of the item so they can better understand what type of work should be done
and we will use as our example masonry now i know nothing about masonry but i know that you
have to have a license for it and i know that the american institute of architects lists these items
of service that you would put on a contract if you had a contract with a mason worker company
and as you can see this example shows you can take the defined items of services that the aia
has listed for masonry and actually make them the items on your items list and if you do that
that means your estimates and your invoices will be just as clear as the contract itself
and you may be wondering how does it look on an invoice well this is what you could do
you would take you would make first of all the name of the item that came a moment ago as the
item code and the specific thing that you will do for that job will go in the description field
notice you could have the same item listed several times but with a different description so that you
know for these two brick and block work these are the two things that are going to be done for these
three lintels metal and precasts these are the three specific things that are going to be done
and that's how someone who is billing the client would know to look at the work done look at the
description field and then determine how much to bill the client you can learn everything you
need in quickbooks regarding contractor features by watching the full playlist that this video
is a part of you can just click the link in the comment field or under the first paragraph in
the description field and there's also links in the top right of the video as it plays
you