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Flooring invoice template for Legal

hello this video is intended to help companies that are in the Floor Covering industry and who are using QuickBooks to run their companies uh you'll notice right here that it says non-commercial companies uh we're generally talking about retail businesses uh multif family uh housing apartment complexes uh new construction things of that nature commercial companies tend to use uh different models where uh they're doing larger projects over big longer periods of time and they usually use a progressive billing model that's beyond the scope of this video so uh if you're a commercial dealer this probably won't help you uh you can see um we're we're assuming also that you uh if you're watching this video that you are already have kind of a working understanding of QuickBooks that you've been using it and you understand something about how the screens work we're not going to get into a lot of the details of QuickBooks and we're going to assume kind of a working knowledge there uh this is part one of a three-part uh series uh this will be about customer invoicing we'll also have two other videos one will be on inventory in the Floor Covering industry and uh job costing so we'll fly over to our next uh slide here first of all we need to kind of Define the scope of invoicing um in the Floor Covering industry before we can match that up to uh how that would actually work in QuickBooks you'll notice here that we have three separate kinds of invoices um uh that that can be used in the Floor Covering industry these are um basically you know the basics um you'll see that there's an estimate and usually that's given to a customer before an agreement has been made and an estimate or a bid could be several you could give two or three different bids to the same person uh you know with uh different kinds of Floor Covering and different rooms so there's usually an estimate or a proposal phase that goes on with a customer before there's an agreement agement then you have the written sales agreement um we also sometimes call that impr process sales and uh this is the point where somebody has committed to buy uh from you has chosen one of the bids or proposals and now they've committed and usually they will give you a deposit or some kind of assigned contract at that point the Third Kind of invoice uh would be a completed invoice or a completed sell and the definition of that is that all of the products on the invoice or on the agreement have been delivered or installed um with that customer okay and uh and and that doesn't matter if they've paid for it or not but if all the products have been delivered that's the definition of a completed cell at this point um on your books the cells get recorded on your books and you become liable for the income tax and the sales tax um for that sell okay so three different kinds estimates written and completed now if we look at how this matches up in QuickBooks um a completed cell would be equivalent to a QuickBooks invoice a written cell would be equivalent to a QuickBooks estimate and an estimate is not there is no match in QuickBooks um meaning that you want to keep your uh written sales and your estimates separate uh very often in a company you want to know how many sales you wrote up in a month well if you combined your estimates and your written sales together in the same uh section of QuickBooks you won't be able to tell that number so estimates usually are tracked outside of QuickBooks for for this reason okay QuickBooks doesn't have a good match there so just really quickly want to take you through the sales process and show you how this would uh kind of work in QuickBooks uh in the most accurate way okay now if you'll just stay with me here A second we know that maybe this isn't the way that you're using it but it is the most accurate way to record things in QuickBook so that your accounting happens properly and then uh we'll address some of the issues after this um so first of all a customer comes in you give them some estimates as we've already talked about probably track it outside of QuickBooks then you get an agreement from them a written sell okay and it's a three-part process here you're going to add a customer to QuickBooks okay a customer account so if they're not already in there you have to create an account for that customer secondly uh you have to add an estimate uh for that written sell and thirdly you would add any payments that the customer gives to you um if there are any and let me just show you how that kind of happens in QuickBooks uh just real briefly so if I come over here to my uh uh contractor version uh 13.0 this is one of the more recent versions of QuickBooks uh so first of all I'm going to come over and put an estimate in I've already done my bid so now I'm going to put my estimate in over here and let me just show you I've already kind of written one up for this mic Shumway uh customer I I already had the customer account set up so I already had that set up and then I added an estimate for Mike shamway for this plush carpet Okay $1,200 is how much it's going to be so I would go ahead and save this estimate into uh QuickBooks and then the next thing I want to do is take payments uh for that now as I've noted over here on the presentation um let's see I think I've noted it over here adding um adding a payment to the AR account is incorrect here because you don't have an actual sale on the books that doesn't come until the next step here where you're going to add an invoice when you just have an estimate that is not hitting your books and so uh the most correct way to do this would be to add a payment to your customer deposits account okay which is a li ility on your books okay instead of an asset so if I come back over here to QuickBooks um I've added my estimate in now I would skip the receive payments because that puts it to the AR account if you go there and go to your record deposits account okay and over here you're going to record a deposit you're going to say who it's from I would go Mike shamway okay from account I'm going to choose my customer deposits account now which is a liability um let's see here right here this account right here customer accounts or customer deposits current liability okay and then I would put uh the amount in here let's just say we're going to put uh $200 down okay and then I'm going to save and close this okay so effectively I've put $200 uh towards my customer deposits it's going to hang out there until I actually write up an invoice and then I can apply that to my AR account let's say that the customer comes back and gives you another um let's see $400 so that would give us half down right if we did 400 same thing you would come over here to the make payments um uh or make deposits again type in the person's name okay from account this is still going to be customer deposits right here let's do 400 now so that will give us half down okay save and close all right so that's how uh you would start off the the uh the transaction here let's come back over to our uh PowerPoint now the uh second part of this we've got the rent and cell in there we have customer deposits in fact they gave us two deposits one of 200 one of 400 and they're in our customer deposits liability account now um now you go out and you you know schedule the job and the carpet comes in and you go out and actually the job right and it comes back and and you've completed all the installation for all the the products that are on that uh on that uh invoice or that written cell now at this point is when you're going to add the invoice to QuickBooks which um is is where it's going to be recorded on your books okay and so we're going to add the QuickBooks invoice and then we're going to add any additional payments whoops sorry we're going to add any additional payments to the invoice um so usually let's just say this is a cood it will be paid in full and uh and then we'll change all of our previous payments from the customer deposits account to the AR account okay from a liability there are our AR so let me show you how you would do this whole process here okay first of all we're going to add the invoice so you come back you find the estimate so here we go we found the Mike shamway estimate here we're going to go ahead and create an invoice for this notice they already kind of have this feature in here and we're going to do it for the whole entire amount okay okay so now there's an invoice on my books um for that $1,200 it's actually showing on my on my GL okay and now um I can go in and receive any other payments that I have for that uh um for that invoice so let me uh whoops let me find my invoice here first um I like to do that usually so if you go to create invoice you can um find the Mike shamway here's the 1,200 that's now on an invoice and we can receive a payment here now and I can put $600 on here right cuz that was the balance that we created on the cood so I'm going to save and close um putting that uh on there and then the other thing I have to do at this point is I have to go back and I have to find um those other my other payments that have been made so I do a contrl f because I need to find how many payments that they've already made so I'm going to say which account am I looking for I'm looking for my um customer deposits account right here and I'm looking for this customer Mike shimo okay let's find these and you can see here now I can see that he's made two payments one for $200 and one for $400 okay so a total of two payments for $600 so once I know how much he made to his customer deposits account now I can come over and make a journal entry that will change it from customer deposits over into AR so I come into company go down toour Jal entries and I'm going to make a a new journal entry here and uh the account is going to be well you can see right here instead of doing it let me just show you here so this was one that I already did customer deposits for $100 so in the customer deposits account you would debit uh the customer account uh deposits account for $600 and credit the accounts receivable account for $600 okay and what that does is it moves it out of your customer deposits liability into your uh accounts receivable you need to make sure that the date that you do the journal entry for is on the date that you do the invo invoice it's not the written cell date not the estimate date but it's the date of the r of the completed written invoice this needs to be on the same day what that does is it keeps the money that was given to you in a customer liability account during the per period until the the job's installed and then after that it moves it over into customer deposit that's the most accurate way uh to keep track of what's going on in your business in the Floor Covering business okay so um let's get back to our PowerPoint here now that would complete the whole transaction that we just went through okay that pretty much sums up this whole sales process right here okay now realistically all of those steps that we just went through even though it's the most accurate way to account for things and it's how that should be accounted for the truth of the matter is is not very many Floor Covering dealers go through all of those processes and steps they they take shortcuts okay and it's just because for the most part to track all those steps is way too hard especially for really small dealers and so you know here's the kinds there's there's a lot of different shortcuts people take um but here's just a couple of the real popular ones um they'll they'll skip the QuickBooks estimate and just make out QuickBooks invoices so they totally ignore the written sales part and just go right to the invoice well what does that do that that records your Sals prematurely if you do it that way on your books and that means that your sales tax your income tax all that is being recorded uh at the wrong dates at the wrong times and uh can affect uh when you're paying things uh you're Mis paying things and and misrepresenting what's going on in your business there's a a matching principle that we will go over in the job costing um module when we do that video that will explain why that really kind of even screws things up uh with your job costing and matching your expenses to your income so uh it screws up more than just just uh the dates and stuff it really gives you a skewed view of what's going on accounting wise and then you know another popular shortcut to take is that you're not going to go uh record things in your customer deposits account you just put everything in your AR account right and skip the whole customer deposits thing most people do that kind of and the problem is is that your AR becomes understated at that point it's not correct so and again maybe some people don't really care about that but again it it doesn't give you the most accurate view of what's going on in your business so and and there are many other shortcuts that people take but these are just a couple of the popular ones um because they don't want to go through all those steps that I just showed you okay there is another issue uh in QuickBooks and floor covering that you really need to be aware of and and this is a real uh gotcha and I'll show you why here in just a second um in these states the states that are listed right here it is actually illegal to charge sales tax on an installed Floor Covering cell okay so if you have Labor on your customer invoice it's actually illegal to charge sales tax now not very many people know that or what they will do is uh down here on this third Point um they will charge sales tax on the material but not the labor and that's that's even a problem okay um there are other states that have similar laws that are even more complex to to that where in some states it's uh things like um you can charge sales tax on soft surface but on hard surface products you can't charge sales tax and so it goes down to the product level of what kind of product and you know a lot of times they say it's because you can rip up the floor covering the carpet and take it with you when you sell the house and so therefore they uh deem it as as being sales taxable there there's a lot of complexity to this that uh I'm not going to really get into right now so some very complex laws right here okay and and as I mentioned right here down on the third when charging sales tax on material not labor a lot of people in these states do that because they kind of have an idea of this law but not really sure about it you know there's a real problem with this and and uh if you look at the the part down here that says Warren Buffett in the state of Utah um in Utah in uh 2004 uh one of the Warren Buffett owned companies and the state of Utah were uh sued actually because they were charging um sales tax on installed sales and the state of Utah was allowing it they had actually audited people that were just charging sales tax on the material and not the labor and were allowing that to happen they got nailed also let me just show you real quick here's a a newspaper article from back in 2004 uh the state of Utah had to had to pay back millions of dollars to uh tax or to the people that were over taxed because they were doing it this way and and so you just need to be aware of that that uh this is a real issue the reason why I bring that up here is because QuickBooks um we've been looking uh and doing research uh and we just cannot find a very good solution uh to this um this issue of uh not charging sales tax um on an installed cell even though you don't charge sales tax the dealer still has to pay tax on the cost of goods sold on what they paid for the product right and uh and QuickBooks just does not have a good way to track the this type of attacks we call it use tax instead of sales tax and uh even in their help manuals it states that uh um you know there there really isn't a good way to do that so so what do we do well there's a couple of things that we that we can do to try to get around this first of all uh we pay at the source that means uh your vendors whoever is selling you your product a lot of times they will charge you the sales tax on the invoice and then they will remit the taxes to the state and the reason they do this is because there's uh in in uh some software like QuickBooks there's not a good way to track this there's a couple of problems with this number one um even if you have it done this way that still means that you have to manually calculate the difference in uh on your cash and carry sales because on cash and carry now you do have to charge sales tax and you've already paid for part of the tax when it was paid at the vendor so you have have to figure out what the difference is between those two amounts and remit the extra uh back to the state uh the second item is is um if you're doing it this way um you're paying uh sales tax on your inventory you're paying it too early uh as we mentioned before sales tax is not due until it's actually the products are actually installed and you're paying the sales tax when you order the product okay so um that's the other kind of issue there um uh that you're paying your tax a little bit too early and there's a lot of mistakes that happen when you try to do this manual uh type calculation the website that's mentioned here uh on the fourth point is something that we did find in the QuickBooks um uh help section where a company had uh been pretty clever and figured out a way to track um you know track on the cost well not on the cost of good sold but on the the purchases track uh the taxes that would be owed on that which is very much equivalent to paying at the source so instead of paying at the source they just tracked what they purchased and then uh they could run some reports and QuickBooks and kind of do the same thing the problem is with doing this you still have the three other problems up there at the top manually calculating Cash and Carry paying too early and mistakes so the other option is you can just track everything manually which a lot of people do um and uh as long as you're not doing a lot of volume in your business uh sometimes that's a that's a pretty good option okay so this has just been a a real quick video on some of the things to look for uh with Q uh QuickBooks in the Floor Covering industry um we're always looking to improve and to help uh dealers do a better job so if you have any comments or or questions uh or things where uh additional information you think we ought to include with this video just email me at chat cfl.com thank you very much