Journal entries are a quick and dirty way to get transactions without putting forth the time and effort to enter each transaction. In the short run, you save time; you can forget about the accurate Job Cost Reports in the long term.
QuickBooks set up right and choosing the correct QuickBooks Version (QuickBooks Mac here) is the most critical part of generating accurate reports, including Job Cost Reports, all because it is the foundation upon which your entire financial system is built. Put the wrong foundation under your business, and it will not matter who is doing the bookkeeping because it will always be a mess, and you will never get the reports you need to operate and grow your business profitably. Your Board of Advisors and especially your banker will be unhappy; however, they may not say it outright, just that your loans, lines of credit, and referral opportunities may be limited.
We have seen hundreds of situations where a regular bookkeeper/somebody has input one giant Journal Entry instead of properly coding and inputting each transaction and then told the contractor QuickBooks would not produce accurate Reports of any kind. In a few situations, the bookkeeper has suggested we should use our influence with QuickBooks to get them to fix the problem.
Four things to watch for that could be killing Job Cost Reports:
1. Are there more than three Journal Entries a month?
2. Are credit card charges and payments being recorded with Journal Entries?
3. Are supplier and vendor bills and payments being recorded with Journal Entries?
4. Are the Job Cost and Profitability Reports vastly different from the Profit and Loss Reports?
We have a Bookkeeping System and checklists for everything and including a Quarterly Review Checklist to ensure all transactions are correctly coded based upon the electronic and paper documents our clients provide us.
If you intend to sell your business someday and retire, excessive Journal Entries will not help you get the best possible price because several financial ratios will not calculate using Journal Entries.
From an accounting point of view, there is nothing wrong with Journal Entries, and many companies operate with a set of Journals, Ledgers, and Sub-Ledgers, and they generate financial reports and file taxes with no problems at all.
From a Project Management and business planning perspective, the opposite is true because accounting looks backward into historical records to determine what happened and why. Project Management, Business Planning, and Forecasting looks forward and bases projections on accounting records in the form of financial ratios, job Costing, and uses SWOT Analysis to determine the best place to focus your company's limited resources to optimize profits.
About The Author:
Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or email firstname.lastname@example.org.