Why can't you mark a cost of goods sold type of expense as billable?

Heidi Froelich

Using Accounts Hosted for a client in the construction industry.  We have a lot of our costs recorded using COGS type expense accounts and we also want to use the billable function when recording expenses.  Sadly Hosted does not allow this billable function for COGS types of accounts.  I wonder why not - particularly for construction where a job might be cost plus and it makes sense to be able to bring the costs associated into the invoice and those costs would generally be recorded as COGS.  Does anyone have an easy work around to be able to make the costs billable?

John G

Welcome to the Reckon Community, Heidi.

The account type Cost of Goods Sold is a category that is tied to Sales to product a Net Profit figure.  In this role the COGS cost is borne by the business and recovered when sales are made.

Generally, when inventory items are acquired they are debited to the Inventory Asset balance sheet account.  When those items are sold, the Inventory Asset account is credited for the cost of the items sold and the COGS profit & loss account is debited to allow the calculation of Gross Profit.  

If you assign an expense to a COGS account directly, then the entire cost of that purchase is assigned against sales of the same period.    

Where you are recovering costs for a job from the customer, you should activate the "Track reimbursed expenses as income" option in Edit > Preferences > Sales & Customers > Company Preferences".  On the expense account setup, tick the box "Track reimbursed expenses in Income Acct."  You can add a mark-up when you apply the billable charge on an invoice to the customer.

I hope this explains the workings of COGS and billable charges.


regards,
John.

Heidi Froelich

Thanks John.  Yes I am well versed in the process of stock purchases and how COGS is used in that manner.  

We don't purchase stock items and I think, personally, it is a function issue that this type of account cannot be flagged as billable rather than a strict accounting process within the confines of a system.  You could use the account as you've described and still be able to flag it as billable - but we could argue product capability all day long.

Is there any help documentation on the function you have mentioned as an alternative 'Track Reimbursed Expenses as Income' that I can read to understand how that function works and see whether it would satisfy my needs?

Thanks for your quick reply by the way - I'm trying to sort this out for my client in a hurry of course!! so appreciate your post.

John G

Thanks Heidi,

The way COGS operates in Reckon Accounts / QuickBooks is by design and will not be changed.  COGS as an account type exists specifically to calculate Gross Profit.  It is based on a philosophy that you acquire a larger number of items, store them, sell them on an individual basis, or a least in multiples less than the number you normally purchase and stock.

That philosphy does not sit well for a couple of actions - where you track services as an input cost to the Sale, and where the job includes special, one-off items that you will normally not hold in inventory.  To get them in the COGS calculation they must be treated as "inventory items" so they can be charged against the Sale when included on an invoice or sales receipt.  How that is created and managed in the company file is really up to the user.

You may want to consult a Reckon Accredited Partner who most likely has a solution for just your sort of situation.  Also, you could consider an inventory/job management add-on that will handle your sort of situation natively.  


Hope this helps.


regards,
John

Heidi Froelich

Thanks John.

I will investigate your earlier suggested alternative and have contacted a friend who I believe is an accredited partner.  Will also look into the add ons and see what they can do.