It is possible in QuickBooks to purchase all materials as inventory, as long as they are being “used” in the appropriate invoices as they are taken from Inventory. Most of my clients “want” to track all their materials per job, but the task is a huge undertaking which requires all materials are received into the warehouse as inventory, and a tight tracking system that makes sure all materials leaving the warehouse for jobs are logged to later on be assigned to an invoice or job.
The traditional method is to have all the materials as inventory added with a Purchase Order/Bill (Check or Credit Card charge may work also, but Bill is more common)
And then accounted for via Inventory Adjustment and the adjustment is assigned to the job. The major flaw to this technique, is that as you will get the Profit per customer:job correct, you will not get the profit on the INVOICE itself, which could be useful when pulling a profit per Rep report for example:
But, If I do a Profit & Loss by Rep, I do not get the appropriate cost assigned to the invoice, because is not possible to assign a rep on an invenotry adjustment:
A feasible solution, is to add the materials used into the invoice with the appropriate quantities but prices in zero, this will reduce Inventory Asset and increase Cost of Goods Sold without affecting income. Example:
The drawback here is that the invoice may look strange to the customer, because it has a bunch of zero value items, and even worse this may take 2-3 pages worth of materials that the client is frankly not interested in seeing specially if you agreed to a lump-sum amount. Plus, breaking it down on an invoice may cause some sales tax issues in some states. Example:
So the ultimate solution, is to create a GROUP item that contains all the items that will be used, and make sure the PRINT ITEMS IN GROUP box is not checked:
Then, when you put the group item in the Invoice, all items will show to the user so all correct quantities may be input:
However, when printing the invoice all the details will hide and only the over description of the Group item will show with 1 zero item, which is a lot less confusing for the client:
End result is you will have the Profit posted to the INVOICE (not just the customer:job) which will give you much more reporting flexibility such as an accurate Profit by Rep report.
In this article is a bit advanced in concepts because it is assumed that the reader have received some basic QuickBooks training and that you understand the concepts of Job Costing, Gross Profit, and why you would assign a rep to an invoice. contact me if you got any doubts
Hector Garcia, CPA