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Progress invoice example for Financial Services

QuickBooks Online 2023 progress invoicing example number one enter project expenses and progress invoices get ready to earn the skills needed to boost your bank books on up with QuickBooks Online here we are in our QuickBooks online test company file we started up in a prior presentation we also have open in and incognito window the free sample company file if you want the two open at the same time we suggest using incognito window which you can open if using Google Chrome by selecting three dots in the browser new incognito window typing into the search engine QuickBooks online test drive looking for the result that has intuit.com in the URL into it being the owner of QuickBooks the sample company being useful allowing you to enter data into the sample company to test without having to put that into our test company file on the left hand side and it allows us to look at the differences between the accounting view the one that our test company file is in and the accounting view the one that the sample company is in if you want to be toggling back and forth forth between those two views you could go to the Cog up top and then switch the view down below now I'm also going to be opening up a few tabs to put our financial statement reports in now that we have data in them I generally do this every time I right click up top duplicate the tab so that we can open one of the support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website Broken Out by category further Broken Out by cores each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page we also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content tip on it favorites and then I'm going to right click on it again duplicate it again I would like to open up the balance sheet and the income statement back to the tab to the left reports on the left hand side and then I'm going to go to the balance sheet and then I'm gonna put this from let's say 070125 to 12 3125 running it and then on the right hand side I'm gonna go to the reports again this time the income statement or profit and loss report close the hand Boogie change the range 0.70125 to 123125 I would like to see this by month so I'm going to break it out by month and then run it by the way if you're in the business view the reports are located in the business overview on the left hand side and then uh the reports on the left hand side balance sheet and the profit and loss reports located there so last time we we said that we have our project that we set up we made an estimate for the one hundred thousand dollar project and then we basically sent out the prepayment that we we used the process says billing for at the 10 percent or ten thousand dollars even though we hadn't done any work at that point in time so now we're going to continue with this process and we're just going to be billing as we schedule as we told the client that we're going to be building and we're going to be recognizing the costs on the job as the cost to the job come up and we're not going to worry about the revenue recognition kind of a disconnect type of thing between the two although we'll point it out and then we'll in a second presentation we'll get into some more detail on what we might do to remedy that situation all right so let's go back on over we're going to say okay I'm going to go back to the first Tab and we've been working within our projects over here so we set up our project number one let's go into project number one and then let's pretend that our first our our second month uh has happened so we're gonna say in month two that's when the job actually uh starts and we're gonna say that let's not highlight this side we're gonna say that we have 13 uh 18 in actual costs so let's put those into the system so we're going to say all right normally that would be like an expense type of form that we would be paying for stuff usually we would have multiple expense forms that we would be paying to multiple vendors that would basically be grouped or categorized under our main buckets when we have a project or job of overhead materials and labor but I'm just going to kind of group it into one I'm going to make a generic vendor that's who we're paying and I'm gonna say that uh the payment account I don't have my cash account set up so I'm going to set up a cash account so if you don't have a cash account here I'm going to say add account and this is going to be a bank account and I'm going to make it my checking account so I'm just going to call it checking and then I might just put like the last four digits of a of the checking account number or something like that if I had multiple accounts for internal accounting purposes but I'll keep it at that so I'm going to then save it so there's our payment account I'm going to put say that this happened on the second month so I'm going to say 0815 uh two five because we're working in 2025 I'm not going to put a tag I'll put project one on all of them to track the tags and then I'm going to say that we could do it by category now and this would assign the expense to a category which if it was for a project you would expect it to be going to like a cost of goods sold category or a work in process kind of category but oftentimes we assign them by items because the items can can help us to assign things out help us to purchase things like the material and possibly allow us to pull the items over to an invoice if we're using that billable component so we've already set up the items I'm going to put in the generic items of materials now remember you normally you would have multiple kinds of materials you might be purchasing mean that would then be going to the account of you know materials as a general bucket of expenses which would be a cost of goods sold type of account or something like that but I'm going to group it into the generic bucket of materials I'm just going to make three items that add up to that 13 amount so let's say that this was uh six thousand I'm not gonna make it billable so I'm not going to make it billable this customer job would be there if we made it billable but I'm not going to this time we'll see that later I will assign a class to it allowing me to break out the income statement by class which is nice and then I'm going to say that we want labor this is another item that we set up which will be basically going to the cost of goods sold account for the labor I'll make this at four thousand I'm not going to make it billable therefore we don't need a customer or project we'll talk about that later this also going to job number one and then I'm gonna say overhead which is the item we set up before the three main buckets and I'm gonna say that this is going to be for the difference which is 3018 so 3018 not gonna make it billable also going to job or class number one so the total adds up to the Thirteen eighteen this is an expense form decreasing the checking account the other side being assigned by these items which are going to basically going to go to cost of goods sold so I'm going to say all right uh let's save it and close it and check it out so now we have the costs assigned to our project in our in our project summary over here net profit so basically a little income statement within our project which is great for that individual project but I would also often like to see the projects kind of together or an income statement broken out kind of by project so I could then go up here and say let's look at my balance sheet I'm going to run it again notice if I I could hit the total here and run this by classes and it gives me a breakout of of the class over here but not all the balance sheet accounts will be broken out by class uh right now we just have basically the net income that's being broke out by class so then if I go over here and then I say run this again so now we didn't recognize uh Revenue but we have the expense which is now being uh happened the expense happened in August and we just assigned it to cost of goods sold because uh these are going to be expenses for the job now notice if you're doing a percentage of completion type of thing or you might put the traditionally you would put the costs into like work in process on the balance sheet and then you know expense them but if we're doing a percentage of completion we might basically expense them as they happen and then recognize kind of a percentage of the revenue also you might break out the calls to goods sold through multiple categories of Costco cost of goods sold for labor costs goods sold for overhead costs good sold for materials but we're just going to group everything into cost of goods sold uh here so there's going to be our our Revenue that has been uh recognized now note that I'm going to right click and do another I'm going to duplicate this again right click and duplicate I'm going to close up uh the ham Boogie over here and and note that we can also hit this drop down and break it out by class so if I break it out by class run it now I've got only one class right now but if I had multiple classes this could be quite useful because it's gonna it's gonna give me not only the information per class but also the total on the right hand side which so that those classes are redundant because we already have it in projects but the ability to to break everything out by class can give me a double check on the numbers and can run a nice report that breaks everything out by classes now if you don't have the capacity to use classes or you're using classes for something else already you could do a similar thing with the tags so I can go to the tags over here and so now I've got my project here but it doesn't give you that nice total at the end so it's kind of similar tags are like a little bit a tear down from from doing similar functionality as the classes so so if you don't have capacity because you're in a lower software that doesn't have the classes you can try to use the tags in kind of a similar format or if you're already using classes and location tracking then you might use tags for like a similar kind of thing all right so then I'm going to go back to the first Tab and let's imagine now now note that if we recap things here the way we got that 100 000 estimate was probably something like we estimated the cost of the job and then our profit on the job which we said was another 30 percent of the cost right another 30 percent and that's where we got the 30 that gets us to the 100 000. so if we were trying to recognize Revenue kind of as we go on the job recognizing you know the progress in terms of costs then we could we would do a ratio or some of something like this this is what we've actually paid for at this point in time the costs we've incurred divided by the total estimate that would mean that we had we're basically 16.92 percent done so that would mean the revenue that I would recognize if I was on like a trying to recognize a percentage of completion recognized as we go would be something more like the uh 16.923 times the 100 000 right but what we've recognized in Revenue so far is the 10 000 just based on the billing schedule and we recognize that before we even you know paid for anything yet right so that you can see the disconnect between the billing and when you might recognize revenue on a recognize on a revenue recognition so we're going to continue with with the separation between the two and then we'll take a look at the differences uh later so let's take a look at the the next next billing item is going to be in in next month so I'm going to say let's say that happens in month three let's actually record the billing so I'm going to go over here and we'll say okay let's go back and we're gonna go into our projects now let's actually record the receipt of the payment and then we'll record the next the next billing that happened so I'm going to say okay let's go drop down and let's say we've received a payment so now we're going to say project number one and let's say this happened on uh we we let's say this happened actually on seven 0715 uh two five and we got paid by the client for that original deposit that we sent out and it's going to go into the checking account for this invoice and so let's go ahead and say okay save and close and if I go back over here to the balance sheet what happened goes out of accounts receivable and and uh into the checking accounts if I look at checking account so now we see the payment that we've received we have negative still because the expenses were greater thus far all right next thing we're going to be back in our projects over here on the left and we're going to say now we had another bill invoice that we're going to be sending out just ing to our invoicing schedule we can pull that in from our estimate using the progress invoicing and we're just going to say hey look next time the next estimate we had was the 25 25 so I'm going to pull in 25 percent and then it's going to pull in nicely like per line item so it gives us a nice breakout between materials labor and overhead which is kind of made up so that we can see those different line items and then I'm going to say this happened on 080125 for the invoice it's going to go into project one all the classes are going to be lined up this is going to increase the accounts receivable and the other side is going to go to revenue of the 25 000. let's go ahead and save and close it and so now we've got income at the 35 000 if I go to my reports here run it so so now we've got accounts receivable went up for the 25 000 and the other side went to Revenue if I run the profit and loss by uh date now I've got 25 000 recognized in August the second month now note again over here you would think if I had Revenue recognition I should recognize something like 16 and then 25 instead of instead of you know instead of by the billing process 10 and 25 here so then I'm going to say okay let's go back on over let's say that we received we're going to receive and if I look at my Breakout by class so now we've got our Breakout by class here we only have one class so far but you can see the idea so if I go then to the first tab let's say we've received payment on that one I'm going to hit the drop down and say we're going to receive payment and on Project one let's say this happens 15 days later 8 15 they pay us time is passing time is flying so we're going to receive that payment this is going to reduce the accounts receivable and increase cash so I'm going to save and close and then go over here and say okay balance sheet the accounts receivable goes back down and it goes into the checking account all right and then let's say that we're going to have expenses for for month number three of nineteen five twenty seven so let's record those expenses next project happens I'm just going to do it with one expense form again and we'll say this goes to vendor one these are expenses for the job on this is going to be on nine one let's say actually wait a second this needs to be on the same date let's bring it back down just to eight fifteen that were the job that were okay so these are the expenses for that time frame now it pulled over the same stuff from the last time but now I've got new numbers so what I'm going to do is I'm just going to change this to be something like 10 let's say this is 10 000 I'm not gonna make it billable and then this is going to be let's say ten thousand not billable that gets me up to to 20. and actually let's say this is let's say this is nine thousand nine thousand not ninety that gets me to the 19 and then in the overhead we'll say 527. so 527 overhead not billable not billable not billable okay so this is an expense it's going to decrease the checking account the other side is going to go into the cost of goods sold because these items are are telling it to go to cost of goods sold so save it and close it and then I go back on over here we can run it so checking account goes down the other side's going into the expense and the expense here for uh August so I should have done it so that's yeah I should have done it for the next month I was thinking my expenses are off I had two in here for August let's go back in here check it out yeah so this one let's let's change the date to the next month here I'm going to go back and drill down on this one and let's bring it up to 9 15. all right then I'll save it and close it so now if I go back to my reports uh hold on I don't want to save it exit and run it so now my expenses are are in the next month as they've been incurred right okay and so but so that would mean that you would think I would if I was doing my percentage of Revenue recognition that I might recognize something like 25 385 but I'm only recognizing Revenue basically as the billing is taking place let's continue on with the last two just so we can see this play out and see that see what that difference looks like I'm going to go okay let's do the fourth one and we're gonna we're gonna bill for it on the next month let's go back on over and say boom invoice for the next month and I'm going to pull that in from here this one's going to be 30 percent 30 percent and I'll pull that in pulls in nicely and I'll say this is as of nine one let's say and then oh 090125 I just did that and then it did that all right and so then that pulls in nicely for the 30 000 increase in accounts receivable other side go into Revenue so I'm going to save and close check it out so we've got then the balance sheet accounts receivable going up other side going to the profit and loss Revenue being recognized in uh September because that's when we build it and then if I look at it by class there's our breakout basically by class all right back to the first tab you know actually if I tie this out to my little worksheet here I should have recognized the 25 and the 30 a month later this 25 I should have recognized in September and the 30 in October I'm gonna go ahead and just adjust that I'll go back into August and I'll go in here and say this needs to be let's say September so we'll bring that up to line this up and then I'll save that save it and then I'll go back on over here and then in September the second one here needs to be which I'm going to click on one of the thirty thousand dollar one needs to be the next month over in October October let's bring that up so there we have it and then I'm going to say save and close all right I think that lines up so let's say exit run it so now we had our billing schedule was July month one and then we didn't have any and then September October I think that kind of matches our billing schedule over here and then the expenses happened in month two and month three which is uh August and September so you can see some mismatching between revenue and the expenses which is kind of the issue from like a like a revenue recognition principle because we've kind of disconnected these two things okay so then let's go back on over I'm going to recognize my next expenses at this 14 at 201 so let's go back on over and that's going to be for uh October let's go back to the first one see if I can line this up properly and we'll just do this again let's make this October I'll put this now so I don't forget October October 15 let's say and then this is going to go to Project and we'll do the same thing down here I'm just going to say this is going to be materials boom boom and we'll make up a number that'll line up to that let's say let's say 10 for the materials boom I'm not going to make it billable class is going to be class one and then I'm going to say labor is going to be for the four four thousand four thousand not billable class one and then we'll say we've got the overhead overhead and wait not forty thousand four thousand all right and then that's going to be for the 201 we'll say 201 and again not billable not billable class boom and this will this will decrease the the cash account the other side going to cost of goods sold save it and close it project we can see here cash account goes down next tab over running it now we've got October our cost of goods sold 14201 if I look at the income statement by project it's all lined up in this one project okay so then let's do the last one month number five I'm going to bill out for the next month in November thirty five thousand which is just the end of our billing process so I'm going to say all right another invoice coming from the estimate this time instead of putting a percent I could just take the remaining amount which of course is the 35 000 and just pull that in and we'll say Okay boom boom this is as of 11. 11 1 let's say and so there we have that 35 000 this is going to increase accounts receivable the other side go into going to the uh Revenue save it close it tab over running it so now we've got accounts receivable going up the other side go into Revenue if I run the revenue there's the revenue and we don't have any expenses yet tab to the right and run it on our class by class and then let's do the last expenses just to match everything out expenses for this is going to be for November let's say November 15th or so November 15th it's going to go to vendor one do you want to pre-fill uh sure vendor one and this time it's going to be add into the thirty thousand so let's say that it's going to be 15 000 15 000 and then 178 say one 78 make it unbillable unbillable unbillable classes applied cash goes down cost to goods sold is the other side assigned by these items and then if I go to the test company run it there we have this and tab to the right run this something went wrong with that one altogether go back in there 150 that's not right there's an extra zero it should add up to thirty thousand one seventy eight all right now let's save it and close it back run it okay so there's our 35 there's our 3178 and here's our issue here with again the revenue not really lining up to a recognition concept so so so to deal with that you could run basically your projects like this for example and Bill as things happen and possibly make adjusting entries to your jobs report uh so that you can kind of separate the stuff that the bookkeeping department does to external reporting possibly for taxes or whatever and where you might just have to make a year-end adjustment or something like that to properly recognize the revenue on the open jobs and have your beginning jobs kind of line up uh that's one option or you can of course adjust your your process to be more on a on whatever method you're using like a percentage of completion method as you do the data input so once again here's what we've got on the balance sheet let's go ahead and just receive uh the accounts receivable just to close out the AR so I'm going to say let's say receive payments and I'm going to say that we're going to do that on 11 17 that's five I'll receive these two invoices reducing the accounts receivable the other side going into the cash account save and close so at the end of the day we can kind of see here that on the balance sheet we don't get this real breakout between the class tracking because the checking account and the accounts receivable don't really break out unless you're in a versions Advanced of Pro Plus but that's okay we might see it in other balance sheet accounts we'll take a look at later the income statement breaks out here and we can see our our totals for the checking and the accounts receivable with the profit and loss by by month you can see the issue with the the revenue recognition uh being different than like a per percentage of completion or complete a contract kind of concept which isn't an issue once the job is closed it's a timing issue which is usually the biggest problem at the cutoff dates which for small companies might only be at the end of the year at the end of the year when they do taxes or something like that but for large companies you might have to report monthly and quarterly which means you've got these cut off dates where you have to make make sure that everything's properly reported on whatever methods you're using you know more more often and so so so you might adjust this using a pers using an adjusting entry into the period method for smaller companies that might be easier or you again you can adjust it by using a different concept which we'll talk about later you can run it by a job here so that you could see each job we only have one job but it gives you a nice little income statement which kind of sums up over here similarly in the project where you've got income minus the cost and the profit you can also run the project reports so if I go to report by project I can see profitability by project and you might say look this is redundant this here to the profit and loss by class because the classes are being assigned per job in essence that redundancy though can give us a double check and the fact that we can run this by class and it gives us a total at the end up for all classes and not just for the one particular project can be useful when we're trying to figure out our total you know job cost uh kind of of system you you have some other project reports that you can kind of do that with but they're not quite as comprehensive sometimes so if I duplicate this over here for example and I go into my reports you do have a project project profitability summary report but you can see it's not quite as robust 25 to 12 312 31 25 as the classes uh report so those are some of the so those are some of the options in our in our issues so now we're gonna we're gonna do some alterizations with a similar kind of problem and and try to see if we can address some of these timing issues basically as we do the data input