Chapter 19
Tracking Employee Hours with QuickBooks
In this chapter:
• Track time in QuickBooks
• Work with QuickBooks timesheets
• Track mileage
You can track time and mileage and use this information to recover reimbursable costs from customers, develop an accurate job costing system, analyze expenses, and pay employees. All the tools you need to perform these functions are available in QuickBooks, and they are covered in this chapter.
Your QuickBooks software includes built-in time-tracking that lets you record the amount of time you and your staff spend completing a project or doing work for a customer or for your company, such as administrative tasks. This chapter covers how to configure and use this feature.
Setting Up Time Tracking
If you used the Advanced Setup option to create your company file and responded “Yes” when asked if you want to track time, QuickBooks has already turned on the built-in time-tracking features for you.
If you’re not sure whether you turned on time tracking when you created your company, choose Edit | Preferences from the QuickBooks menu bar. Select Time & Expenses by scrolling to the last category in the left pane, and click the Company Preferences tab. Make sure the Yes option is selected.
By default, QuickBooks assumes your work week starts on Monday. However, some businesses use a different work week, such as a Sunday-to-Saturday pattern for tracking time. If you’re tracking time for employees and you plan to use the timesheets for payroll, it’s a good idea to match the work week to the week your pay period covers.
Adding Timekeepers
You can track time for your employees, outside contractors (vendors), or yourself. Everyone who must keep track of his or her time must first exist in the system and, of course, must fill out a timesheet.
Setting Up Employees
If you’re running the QuickBooks payroll feature, you already have employees in your QuickBooks system, and you can use timesheets to track their time. Optionally, you can also use their timesheet data to create a paycheck, using the number of hours reported on the timesheet. For this to work, however, you must modify the employee record as follows:
1. Choose Employees | Employee Center to open the Employee Center.
2. Click the Employees tab to display the list of employees.
3. Double-click the listing of the employee you want to link to time tracking.
4. Click the Payroll Info tab.
5. Select the Use Time Data To Create Paychecks check box on the bottom left (see Figure 19-1).
FIGURE 19-1 |
Link employees to time tracking if you want to use timesheets to prepare paychecks automatically. |
6. Click OK.
You don’t have to link employees to time tracking for them to use timesheets to record their time—your employees can track time unconnected to the preparation of paychecks to make it possible to create job-costing reports or to invoice customers for their time.
Even if you’re not doing your own payroll in QuickBooks, you can create employees (in the Employee Center) for the purpose of tracking time, and you can use the timesheet data for an outside payroll service.
Tracking Vendor Time
Any vendor in your system who is paid for his or her time can have that time tracked for the purpose of billing customers. Most of the time, these vendors are outside contractors or subcontractors. You don’t have to do anything special to the vendor record to enable time tracking; you just need to record their time in a timesheet. If you want to bill the customer for those hours for which the service was performed, mark their time as “billable” on their timesheets (covered in the “Working with Timesheets” section later in this chapter).
Tracking Other Worker’s Time
You may need to track the time of people who are neither employees nor vendors. QuickBooks provides a system list called Other Names that you can use to collect names that don’t fit in the other QuickBooks lists. Following are some situations in which you’ll need to use the Other Names list:
• You have employees and use QuickBooks payroll, but you are not an employee because you take a draw instead of a paycheck. In this case, you should add your name to the Other Names list if you want to track your own time.
• You have no employees and your business is a proprietorship or a partnership. Owner or partner names should be entered into the Other Names list in order to track time.
Adding the Tasks
Most of the tasks you track in timesheets already exist in your Item List as service items. These are the items you use when you invoice customers for services. However, because you can use time tracking to analyze the way people in your organization spend their time, you may want to add service items that aren’t connected to tasks performed for customers.
For example, if you want to track the time people spend performing administrative tasks for the business, you can add a service item called Administrative to your Item List. If you want to be more specific, you can name the particular administrative tasks you want to track; for example, bookkeeping, equipment repair, new sales calls, public relations, and so on.
To enter new items, choose Lists | Item List from the menu bar. When the Item List window opens, press CTRL-N to open the New Item dialog. Select Service as the item type (only service items are tracked in timesheets) and name the new item. Here are some guidelines for administrative items:
• If you’re specifying administrative tasks, create a service named Administration and then make each specific administrative task a subitem of Administration.
• Don’t put an amount in the Rate box unless every employee and outside contractor performing this service has the same hourly pay rate (highly unlikely). You can enter the amount when you make the payment (via payroll or vendor checks).
• Because QuickBooks requires that you assign an account to a service, choose or create a “dummy” (or placeholder) revenue account (such as Other Revenue or Time Tracking Revenue). Don’t worry—no money is ever posted to the account, because you don’t ever sell these services directly to customers.
Working with Timesheets
The built-in QuickBooks timesheet feature offers two methods for recording the time your timekeepers spend on tasks: Single Activity and Weekly Timesheet.
Single Activity is a form you use to enter what you did when you performed a single task at a specific time on a specific date. For example, a Single Activity form may record the fact that you made a telephone call on behalf of a customer, you repaired some piece of equipment for a customer, or you performed some administrative task for the company.
The Weekly Timesheet is a form in which you indicate how much time and on which date you performed work in a given week. Each Weekly Timesheet entry can also include the name of the customer for whom the work was performed. You can also print a blank timesheet that can be filled out manually and entered into QuickBooks all at once at the end of a week.
ProAdvisor Tip: After you fill out and save a Single Activity form, you can open a Weekly Timesheet to view all the single activities that have been entered within that week—they are automatically inserted there for you.
Setting the Format for Displaying Time
When you enter time in the various timesheet forms, you can use either the minutes (hh:mm) format or a decimal format (6.5). To establish a default, choose Edit | Preferences and click the General category. Then select the Company Preferences tab and use the options in the Time Format section of the dialog to select the format you prefer.
If you set the preference to decimal, and then enter time as 1:30, when you press TAB to move to the next field, QuickBooks changes the entry to 1.50 (or the other way around if you choose Minutes).
Tracking a Single Activity
To track one event or task with a Single Activity form (Figure 19-2), choose Employees | Enter Time | Time/Enter Single Activity.
FIGURE 19-2 |
Fill out the details to indicate how you spent your time. |
Follow these guidelines to use this form:
• The Date field is automatically filled in with the current date. If this activity took place previously, you can change the date (but you cannot change the date if you’re using the stopwatch).
• Click the arrow to the right of the Name field and select the name of the person who performed the work from the drop-down list. This list contains vendors, employees, and names from the Other Names list. Most of the time, the person who performed the work is filling out the form.
• Select the customer or job in the Customer:Job field. Do this whether or not the customer is going to be billed for the time.
• In the Service Item field, select the task, and in the Duration box, enter the amount of time you’re reporting.
• If this time is billable to the customer, the Billable check box should be marked (it is by default). If the time is not going to be billed to the customer, click the box to remove the check mark.
• If the Payroll Item field is available, select the payroll item that applies to this time (for example, salary or hourly wages). This field appears only if the selected name is an employee and the employee record has been linked to the time-tracking system (explained earlier in this chapter).
• If the Class field is available, you can optionally assign the time to a class.
• Use the Notes box to enter any comments or additional information you want to record about this activity. You can then transfer those notes onto the invoice that you generate using this timesheet data, and they can be included in job reports as well.
ProAdvisor Tip: If you’ve linked the employee to the time-tracking system and you’ve also enabled class tracking, you won’t see the Class field unless you turn on the Earnings Item option in Payroll & Employees Preferences (see Figure 19-3).
FIGURE 19-3 |
Enable the Earnings Item option in Payroll & Employees preferences if you want to assign an employee’s payroll expense to a class. |
When you’ve finished creating the activity, click Save & New to fill out another Single Activity form (many workers perform multiple single activities each day), or click Save & Close to finish.
Using the Stopwatch When Tracking a Single Activity
You can let QuickBooks track the time you’re spending on a single task. Click the Start button in the Duration box of the Time/Enter Single Activity window when you begin the task. QuickBooks tracks hours and minutes as they elapse.
• To pause the counting when you’re interrupted, click Pause. Then click Start to pick up where you left off.
• To stop timing, click Stop. The elapsed time is displayed.
The stopwatch always displays time in the hh:mm:ss format. If you set your format preference to decimal, QuickBooks converts the time when the stopwatch is stopped.
Using Weekly Timesheets
A Weekly Timesheet records the same information as the Single Activity form, except that the information is recorded in week-at-a-time blocks, and you have the option to “batch” enter the same timesheet information for multiple timekeepers (both employees and nonemployees).
To use the Weekly Timesheet form (shown in Figure 19-4), choose Employees | Enter Time | Use Weekly Timesheet. Use the instructions that follow to fill out the timesheet.
FIGURE 19-4 |
Some people find it easier to enter information on a weekly basis. |
1. Select either an individual employee or a vendor name from the drop-down list in the Name field. Optionally, choose either Multiple Names (Payroll) or Multiple Names (Non-Payroll) (these options are located at the top of the Name drop-down list) to create multiple timesheets with the same information for the names you’ve selected in your list. This latter option is useful if you’ve got a team of employees or contractors working on the same project and performing the same work for the week.
2. The current week appears by default; click the calendar icon if you need to select a different week.
3. In the Customer:Job column, select the customer or job connected to the activity (or select the in-house listing to enter administrative work unconnected to a customer).
4. In the Service Item column, select the appropriate service item.
5. For an employee whose paycheck is linked to timesheets, use the Payroll Item column to select the payroll item that fits the activity. (If the name selected in the Name field is not an employee whose paycheck is linked to timesheets, the Payroll Item column disappears.)
6. In the Notes column, enter any necessary notes or comments.
7. Click the column that represents the day in which an activity occurred and enter the number of hours worked on this task. Repeat across the week for each day that the same activity was performed for the same customer or job.
8. Move to the beginning of the next row to enter a different activity, or the same activity for a different customer, repeating this action until the timesheet is filled in for the week.
9. For each row, indicate whether the time is billable in the Billable column. Click the check box to remove the check mark in the Billable column if the time on this row is not billable.
10. Click Save & New to create a timesheet for a different week. Click Save & Close when you are finished entering time.
ProAdvisor Tip: By default, QuickBooks marks all time entries that are linked to a customer as billable. To change the default to Not Billable, choose Edit | Preferences, click the Time & Expenses category, and uncheck the option Mark All Time Entries As Billable.
Copying Previous Timesheets
You can copy the previous week’s timesheet by clicking the Copy Last Sheet button after you enter the current date in the Timesheet window and select a name. This is useful for workers who have similar timesheet data every week. This description frequently applies to your office staff or to outside contractors who are performing large jobs that take multiple weeks.
For some employees whose work is usually for the office and not charged to a customer, the timesheet may be identical from week to week.
Reporting Timesheet Information
Before you use the information on the timesheets to invoice customers (covered later in this chapter in the section “Invoicing Customers for Time”) or pay workers, you should go over the data on the timesheet reports. You can view and customize reports, edit information, and print the original timesheets.
Running Timesheet Reports
To run reports on timesheets, choose Reports | Jobs, Time & Mileage. You’ll see a long list of available reports, but the following reports provide information on time tracking:
• Time By Job Summary Reports the amount of time spent for each service on your customers and jobs.
• Time By Job Detail Reports the details of the time spent for each customer and job, including dates and whether or not the time was marked as billable. A billing status of Unbilled indicates the time is billable but hasn’t yet been used on a customer invoice.
• Time By Name Reports the amount of time each user tracked.
• Time By Item Shows an analysis of the amount of time spent on each service your company provides, including the customers for whom the services were performed.
Editing Entries in a Report
While you’re browsing the report, you can double-click an activity listing to navigate to the original entry. You can make changes in the original entry, such as selecting or deselecting the billable option or change the Notes field by adding a note or editing the content of the existing note.
Editing the Original Timesheets
Before you use the timesheets for customer billing or payroll, make sure you examine them and make any needed corrections. In fact, you may want to take this step before you view any of the Jobs, Time & Mileage reports.
The most common revision is the billable status. If outside contractors or employees are filling out timesheets, it’s not unusual to have some confusion about which customers receive direct time billings. In fact, you may have customers to whom you send direct time bills only for certain activities and provide the remaining activities as part of your basic services.
To check timesheets, open a new weekly timesheet and enter the name of the person connected to the timesheet you want to view. Use the Previous or Next arrows at the top of the Timesheet window or use the calendar icon to move to the timesheet you want to inspect. Then edit the information as necessary:
• If needed, change the number of hours for any activity item.
• Change the billable status.
• View (and edit if necessary) any notes.
Caution: If you’ve already used the timesheet data to create an invoice for the customer or to pay the employee, the changes you make to the timesheet do not automatically update these documents.
Printing Weekly Timesheets
It’s a common practice to have employees print their weekly timesheets and deliver them to the person responsible for monitoring and managing employee hours. And it’s not uncommon for this person to handle your payroll-related activities as well.
To print timesheets, choose File | Print Forms | Timesheets from the QuickBooks menu bar to open the Select Timesheets To Print window shown in Figure 19-5.
FIGURE 19-5 |
Print the timesheets for every person who tracks time. |
In this window, you can do the following:
• Change the date range to match the timesheets you want to print.
• By default, all timesheets are selected. To remove a timesheet, select its listing and click the column with the check mark to deselect that listing. You can click Select None to deselect all listings, and then select and add check marks to one or more specific users.
• To print any notes in their entirety, select the Print Full Activity Notes option. Otherwise, the default selection to print only the first line of any note is enabled.
The Select Timesheets To Print dialog has a Preview button, and clicking it displays a print preview of the selected timesheets. If you click the Print button in the Preview window, the timesheets are sent to the printer immediately, giving you no opportunity to change the printer or any printing options. Clicking the Close button in the Preview window returns you to the Select Timesheets To Print dialog.
Click OK to open the Print Timesheets window, where you can change the printer or printing options. You should change the number of copies to print to match the number of people to whom you’re distributing the timesheets.
One thing you should notice about printed (or previewed) timesheets is the last column, which indicates the billing status. The entries are codes, as follows:
• B Billable but not yet invoiced to the customer
• N Not billable
• D Billable and already invoiced to the customer
Invoicing Customers for Time
Now that you’ve entered time, marked it as billable, and reviewed it for accuracy, it’s easy to invoice your customer for the hours spent on their project or job—and you can do this right from the Create Invoice window.
From the Customers menu, select Create Invoices, and then select a customer name from the Customer:Job drop-down list. The first time you select a customer for which there is a timesheet entry, QuickBooks shows a message informing you that the customer or job you’ve selected has outstanding billable time. You’ll be prompted to either select the outstanding billable time (as well as any costs) to add to the invoice or exclude time and costs now and leave them available for invoicing at a later date. You can also have QuickBooks save your choice by checking the box Save This As A Preference.
If you choose the option to add the outstanding billable time to your invoice, QuickBooks displays the Choose Billable Time And Costs window (Figure 19-6).
FIGURE 19-6 |
The Choose Billable Time And Costs window makes invoicing a customer for time an easy task. |
Select the Time tab to view all the unbilled time assigned to that customer or job. Click the Select All button to invoice your customer for all the time that appears in this window, or place a check mark next to only those hours that you’re ready to invoice the customer for.
By default, each time entry that has a different service item will appear as a separate line item on the invoice. To combine the hours for all items in this window as one line item on the printed copy of the invoice (the detailed view will still appear on your screen), place a check mark in the box next to Print Selected Time And Costs As One Invoice Item at the bottom of the window. Clicking the Options button gives you additional ways to customize how information from timesheets is included in invoices.
Tracking Mileage
QuickBooks provides a way to track the mileage of your vehicles. You can use the mileage information to track the expenses connected to vehicle use, to use mileage as part of your job-costing efforts, to bill customers for mileage expenses, or to maintain records for your vehicle-use tax deduction.
ProAdvisor Tip: Your accountant may be able to use the vehicle mileage data on your income tax return. You can deduct either the actual mileage expense or your other vehicle expenses; you can’t deduct both. Your accountant, working with the figures you provide as a result of mileage tracking, will make the decision.
To track a vehicle, you first need to add that vehicle to your Vehicle list (covered in Chapter 6). Once the vehicle is in your QuickBooks system, you can begin tracking its mileage. Of course, you also need to make sure that everyone who uses the vehicle is tracking mileage properly, so you should create, print, and distribute a form for this purpose, with the following categories to fill in:
• Trip Start Date
• Trip End Date
• Starting Odometer
• Ending Odometer
• Customer:Job
Entering Mileage Rates
To track the cost of mileage, you must make sure you have accurate mileage rates in your system. These change frequently, so you’ll have to keep up with the latest IRS figures. QuickBooks calculates the cost of mileage based on the information you enter. To get the current rate, check with the IRS (www.irs.gov) or ask your accountant. To enter mileage rates for your own use, use the following steps:
1. Choose Company | Enter Vehicle Mileage to open the Enter Vehicle Mileage dialog.
2. Click the Mileage Rates button on the toolbar to open the Mileage Rates dialog.
3. Select a date from the calendar as the Effective Date.
4. Enter the IRS rate for that date.
5. Click Close.
6. Close the Enter Vehicle Mileage dialog (unless you’re using it to enter mileage).
7. The Mileage Rates dialog accepts multiple dates and rates. When you track mileage, QuickBooks uses the appropriate rate, based on the date of your mileage entry, to calculate costs.
Creating a Mileage Item
If you plan to invoice customers for mileage expenses, you must create an item (call it Mileage, Travel, or something similar). The item you create can be either a Service or Other Charge type.
• If you want to charge your customers for mileage as a reimbursable expense and post your reimbursements as income (as explained in Chapter 11), use an Other Charge item type and select the option This Item Is Used In Assemblies Or Is A Reimbursable Charge. Then enter the appropriate expense and income accounts.
• If you want to charge your customers for mileage and reduce your mileage expenses with reimbursed amounts, select the expense account to which you post your mileage expenses.
It’s important to understand that the mileage rate you entered in the Mileage Rates dialog (described in the previous section) is not automatically transferred to the item you create for mileage. Therefore, you must manually fill in the rate for the item and update it when the IRS rate changes. You can use the same rate you used in the Mileage Rates dialog or enter a different rate to create a markup—or even a markdown, if you wish.
Entering Mileage
After you’ve configured your company file for mileage charges, you can track the mileage in the Enter Vehicle Mileage dialog as follows:
1. Choose Company | Enter Vehicle Mileage.
2. Select the appropriate vehicle from the drop-down list in the Vehicle field and enter the following data:
• The dates of the trip.
• The odometer readings (QuickBooks calculates the total miles for you). You can skip the odometer readings and enter the total mileage manually, but entering the odometer numbers creates a report entry that’s closer to what an IRS auditor wants to see (the IRS likes “logs” that include odometer readings).
• If you want to bill the customer for mileage, place a check mark in the Billable check box and select the Customer:Job, the item you created for mileage, and the Class (if you’re tracking classes).
• If you don’t want to bill a customer but you want to track job costs, select the Customer:Job, but don’t place a check mark in the Billable check box.
Mileage charges can be added to customer invoices in the same fashion as time (see the previous section, “Invoicing Customers for Time”). Reimbursable expenses are covered in Chapter 11.
Creating Mileage Reports
QuickBooks includes four vehicle mileage reports, which you can access by choosing Reports | Jobs, Time & Mileage and selecting the appropriate mileage report from the submenu. If you’re working in the Enter Vehicle Mileage dialog, the reports are available in the drop-down list you see if you click the arrow next to the Mileage Reports button at the top of the dialog.
Mileage By Vehicle Summary
Use the Mileage By Vehicle Summary report to see the total miles and the mileage expense for each vehicle you’re tracking. You can run this report for any date range that you want to check, which is a way to determine whether vehicles need servicing. For example, you may need to change the oil and filter every 6,000 miles or schedule a 50,000-mile checkup. If you deduct mileage expenses on your income tax form, use the entire year as the date range.
Mileage By Vehicle Detail
Use the Mileage By Vehicle Detail report to view details about each mileage entry you created. For each vehicle, the report displays the following information:
• Trip End Date
• Total Miles
• Mileage Rate
• Mileage Expense
No customer information appears in the report, but you can double-click any listing to open the original mileage entry, which shows you whether the trip is linked to a job and whether it’s marked billable.
Mileage By Job Summary
Use the Mileage By Job Summary report to view the total number of miles linked to customers or jobs. The report displays total miles for all customers or jobs for which you entered an item and displays billable amounts for any mileage entries you marked billable.
Mileage By Job Detail
Use the Mileage By Job Detail report to see the following information about each trip for each customer or job:
• Trip End Date
• Billing Status
• Item
• Total Miles
• Sales Price
• Amount
To gain more insight, you can modify the report by clicking the Customize Report button on the report window to open the Modify Report dialog. In the Display tab, select additional columns to reflect what you want to see in this report. For example, you may want to add the Mileage Rate or Mileage Expense (or both). Memorize the report so you don’t have to repeat the modifications next time. Memorizing reports in QuickBooks is covered in Chapter 26.
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