There's no way out of it, this is a complicated subject, and one of the things that makes it complicated is that you have to learn a number of new terms such as Company File, Company Checking Account, Payroll File and Payroll Checking Account.

Until you fully comprehend what we mean by these terms, you're not going to understand the concepts, so to help you along in the article we've added links to these terms that will open a separate little popup window with it's definition.

Selecting these links will not close this page, so you can review the term's definition without loosing your place in the article. You can test this function by selecting any of the following links:

Properly distributing payroll costs, including payroll taxes and benefits, to your projects and to the

cost codes within each project is one of the most difficult and yet vital tasks of any construction bookkeeping system.

In an industry where payroll burdens can add 20-50% to the cost of employees, it's impossible to generate accurate job cost reports unless the payroll burden is included in the individual cost codes. Simply put, if you don't calculate and distribute your payroll labor costs accurately, your job cost reports won't be accurate.

Calculating your actual payroll costs is complicated by a number of factors, including:

1. Payroll Earnings that are calculated by a number of methods including hourly rates (regular, vacation, sick pay, special rate, etc.), salaries (weekly, monthly, yearly), and piecework, all of which are subject to modification by factors such as overtime.
2. Payroll Taxes that include Social Security, Medicare, Federal Unemployment Insurance, State Unemployment Insurance, and local payroll taxes, each of which are calculated differently and subject to changing rates and varying caps.
3. Employee Benefits that include health insurance, retirement plans, child care plans, etc. which are each calculated differently (by week, month, etc.).
4. Employee Paid Time Off, including company paid holidays and paid vacations, the cost which includes most of the other costs and which should be spread across the remaining working hours.
5. Payroll Insurance such as Workmen's Compensation that can be affected by Experience Modifiers, Statutory revisions, special programs, and the type of work being performed.

Posting your payroll costs to projects and cost codes is also complicated by a number of factors:

1. A natural tendency to design bookkeeping systems to post and track the payroll costs by the payroll burden category in which they are be paid (taxes, benefits, etc.), instead of the cost code to which they apply.
2. The difficulty of posting Payroll Taxes, Benefits and Insurances to projects and cost codes when they are instead paid out to entirely different payees such as employees, government agencies and insurance companies.
3. The need to manage the constantly changing costs, payments and balances of your payroll liabilities, all of which are paid to different agencies in accordance with varying schedules.
4. Posting costs to projects and cost codes requires that you employ a separate, independent method of simultaneously tracking these costs by the payroll burden categories.

Unfortunately, no one, including the various government entities that pass these myriad laws, cares one wit about how complicated they've made the job of hiring and paying people, that their laws and requirements make it virtually impossible to ascertain what your payroll actually costs you, or that you need to apply all your payroll costs for direct operations to those operations, not to business overhead. Besides, isn't it better for them that you can't calculate what it actually costs you in government mandated taxes and insurances? This way, it's difficult for you to see the true, aggregate number!

These factors make it difficult to calculate the true cost-per-hour of your employees, which is why many accountants and bookkeepers will elect instead to employ one of the following strategies:

1. Post all employee earnings and payroll burden as business overhead.
2. Post the employee earnings to the cost code and then post the payroll burden (by payroll burden categories) as business overhead.
3. Post the employee earnings to the cost codes and project(s), and post the payroll burden to the project under separate cost codes for the payroll burden.

Any of these methods will result in providing the reports they need to prepare your tax returns, but does nothing to facilitate your need for accurate management information.

Of course, the entire process would be much easier if "someone" would just hand you a bill for your payroll costs each week, broken down by your cost codes. You could then write a check to pay the bill, split the check by the cost codes and amounts on the bill, and you'd be done. Unfortunately, no one hands you this "payroll bill", you have to figure it out on your own, and that's what TimeTrax does. TimeTrax calculates your payroll costs and creates this "Payroll Bill", which is called a Payroll Transfer Schedule, along with a number of other valuable management reports about your payroll.

Once your "Payroll Bill" has been calculated, you must then decide upon which of three methods you wish to employ to post the costs into your company's books and also perform your standard payroll processing functions.

The traditional method of calculating and entering payroll costs is by the standard payroll burden categories, which in a typical week might look something like this.

PAYROLL COST by PAYROLL BURDEN CATEGORY

Net Pay	$1,899.66
Income Tax Withholdings	$ 567.89
Employers FICA	$ 145.35
Employers FUTA	$ 97.86
Employers SUTA	$ 34.45
Vacation Pay Reserve	$ 68.92
Employers Share Health Insurance	$ 43.54
Employees Share Health Insurance	$ 63.40
Workmen's Compensation Insurance	$ 311.05
	========
TOTAL WEEK'S PAYROLL COST:	$3,232.12

However, the same $3,232,12 payroll could also be divided into cost codes, which might look something like this:

PAYROLL COST by PROJECT and COST CODE

Smith Addition / Rough Carpentry	$433.21
Smith Addition / Demolition	$256.87
Smith Addition / Cleanup	$145.66
Jones Residence / Concrete	$563.04
Jones Residence / Supervision	$365.89
White Bathroom / Rough Carpentry	$564.99
Williams Residence / Supervision	$234.33
Overhead / Bookkeeping	$668.13
	========
TOTAL WEEK'S PAYROLL COST:	$3,232.12

As you can observe, both methods divide the same total payroll cost by two entirely different categories. This is the core of the problem: You want your job cost reports to include the payroll costs in the cost codes, and yet you also need to track your payroll liabilities by the traditional payroll burden categories.

The task of tracking your payroll costs by both cost code and payroll burden category requires these three steps:

1. Calculate your actual payroll costs by Project and Cost Code, including employee compensation, payroll taxes, benefits, insurances, paid time off.
2. Enter the costs into your books:
   • By coding a check to an Employee Leasing Company, OR
   • By coding a Payroll Transfer Check to your Payroll Checking Account, OR
   • Make a general journal entry in your Payroll Liability Account.
3. Perform you regular payroll processing functions:
   • Calculating the employee compensation
   • Recording the deductions
   • Writing the paychecks.
   • Paying payroll liabilities.

The generally accepted method of accomplishing these goals is to separate the functions of posting the payroll cost by cost codes in your company books (the Company File) and doing the payroll processing in a separate set of books (the Payroll File) as a subsidiary ledger. This allows you to enter the cost in your Company File broken down by cost code, and yet track the identical total payroll cost in the Payroll File by payroll burden categories.

Visualize it like this: When the Company File "waves goodbye" to the payroll money, it needs to book it by cost code. When the Payroll File "receives" the same money and uses it to write your paychecks, it needs to disburse it by the traditional payroll categories.

There are three general strategies for posting payroll costs to your projects. They all use TimeTrax to calculate your payroll cost by cost code along with one of three combinations of payroll processing and writing the paychecks. The three strategies are:

1. Payroll is processed by you in a separate Payroll File and the actual paychecks are written in your Company Checking Account. This is the most difficult method.
2. Payroll is processed by you in a separate Payroll File and the actual paychecks are written in separate Payroll Checking Account controlled by that file. This is much easier than #1, but you are still doing your own payroll.
3. Payroll is processed by an Employee Leasing Company and the actual paychecks are written in their Payroll Checking Account. This is the easiest method because the Employee Leasing Company handles everything.

In #1 & #2, you are doing your own payroll processing, with the difference being in which checking account you use to write the paychecks. In #3, an Employee Leasing Company handles the payroll processing functions and all you need to do is use the TimeTrax Payroll Transfer Schedule to cost your Payroll Transfer Check to them.

With TimeTrax, this is the easy part. Among it's other management reports, TimeTrax prepares a Payroll Transfer Schedule that itemizes your weekly payroll costs according to project and cost code. This report is commonly known in the bookkeeping business as a Transfer Schedule because it itemizes the amount that needs to be transferred to your Payroll Checking Account to fully fund that pay period's payroll costs. The check you write to actually transfer these funds is known as a Payroll Transfer Check, although the transfer of funds could also be done by a telephone or by wire transfer. The TimeTrax Payroll Transfer Schedule is formatted to match the way you need to enter the information into a QB file.

If you want to do your own payroll processing, you will need to setup a separate QB file as a subsidiary ledger for this purpose. What this means is that your Company File will have only one payroll liability account and no payroll expense accounts in it's chart of accounts. All of these payroll accounts, and the actual calculating of the paychecks and tracking of the payroll liabilities, will be handled in the separate Payroll File.

There are two reasons for establishing a separate Payroll File:

1. You will simplify your main company chart of accounts (and thus your P&L and balance sheet reports) by moving approximately 20 payroll liability and expense accounts to the subsidiary ledger.
2. You will facilitate the ability to have your payroll dollars "leave" the main company chart of accounts divided by job cost codes, and yet be "received" into the payroll file and then paid out by their payroll expense categories (earnings, payroll taxes, insurance, benefits, etc.).

You may establish a separate Payroll File in QB in one of the following two ways:

1. You may open a new company file in QB, follow the automatic setup routine for starting a new company, answer the setup questions, remove the unnecessary accounts from the chart of accounts, create the correct payroll expense and liability accounts and then create the employee template.
   Among other accounts you might need that QB will not ask you about is a separate expense account for the health insurance the company buys for the owners. You need to track this separately from the other employee's health insurance because federal lax law restricts the amount of health insurance a company may pay for an owner.
2. You may use my payroll setup file that is a complete QB Payroll File already configured for this purpose, including the chart of accounts and the employee templates. This Payroll Setup File is included with the PowerBooks Template File.

Once you have created this QB Payroll File, you will use it to handle all your payroll processing in accordance with established QB procedures, including writing the paychecks and printing the 940's, 941's, and W-2's.

Operating a separate QB payroll file and treating your payroll as a subsidiary ledger is an entirely legitimate accounting practice. In the event you need to present your books to a third party such as your banker or an auditor, and this person is observant enough to notice that your chart of accounts doesn't have any standard payroll liability accounts, you can explain, with an air of confidence and legitimacy, that all your payroll processing functions are handled in a subsidiary ledger that is available upon request.

OK, you've set up your separate QB Payroll File and you're using TimeTrax calculate the actual payroll costs by project and cost code. Now what do you do with the resulting data?

Each week, after you have calculated the payroll cost data, you will make an entry into your Payroll Liability Account (in our QB Template we use #2400 Payroll Liabilities). The entry should be "split" in accordance with standard QB procedures, and will be spread across the projects and cost codes in accordance with the TimeTrax Payroll Transfer Schedule.

After you have entered the weekly payroll costs into the Payroll Liability Account, which has the effect of increasing the outstanding payroll liability, you will then write a check FROM your Company Checking Account TO then be deposited into your Payroll Checking Account, which is controlled by your Payroll File and from where you will write your regular paychecks.

Ideally, this check should be for the exact amount of your payroll liabilities, but in the real world, few builders always have the cash to fully fund their payroll cost each week, and sometimes must cover what they can until they can catch-up. However, the Payroll Liability Account will always show the exact amount that you are underfunded, so you can monitor the number closely.

By posting the payroll costs to the Payroll Liability Account, the costs will be instantly and automatically posted to the projects and the cost codes. What this means is that your job cost reports will be up to date, and that the individual cost codes in the reports will include the entire payroll costs, including payroll burden. This is what you're after.

This is the easiest method for posting your payroll costs and processing your payroll. With this strategy, TimeTrax calculates your payroll costs, and the Employee Leasing Company performs all the payroll processing.

The whole idea behind using an Employee Leasing Company is that you don't have to process the payroll or write the paychecks checks yourself. With this strategy, all you do is fax the TimeTrax Payroll Roster to the Employee Leasing Company each week, and when you get their "bill", you use the TimeTrax Payroll Transfer Schedule to split the Payroll Transfer Check to them. The difference between the TimeTrax calculations and the actual bill from the Employee Leasing Company is their fee, which should be coded to an overhead account (usually "Payroll Service Fees") on the Payroll Transfer Check.

If you want to include the Employee Leasing Company's fee in your payroll calculations, just add the percentage of the fee under "Other" in each employees information. Of course there might be a few pennies difference between your calculations and theirs, but you can make the adjustment of a few pennies somewhere in one of the line items of the Payroll Transfer Check.

This strategy of writing your paychecks in a separate Payroll Checking Account is the second easiest method of doing your payroll. The difference between this strategy and the strategy that uses the Employee Leasing Company is that your are doing your own payroll processing in-house, instead of letting the Employee Leasing Company perform the payroll functions.

TimeTrax is used to calculate the payroll costs and create the Payroll Transfer Schedule in accordance with the standard procedures. The next step is to use the Payroll Transfer Schedule to split the Payroll Transfer Check written on your Company Checking Account, made payable to your company's Payroll, and deposited into your Payroll Checking Account.

After you've posted the payroll costs into the Payroll Liability Account and written the Payroll Transfer Check, you can open your Payroll File, deposit the Payroll Transfer Check into your Payroll Checking Account, and process your payroll in accordance with standard QB procedures. Everything to do with payroll, payroll taxes, payroll withholdings, and payroll reports, is handled in the Payroll File, not in the Company File. Remember: The entire cost of your company's payroll has already been posted in your Company File via the weekly entries in the Payroll Liability Account.

The Payroll Checking Account should be used to pay all payroll expenses, including tax withholdings, employment taxes, insurance premiums, vacation pay, and health insurance premiums, to name a few. These payroll expenses should not be paid out of the Company Checking Account because the cost of these expenses was already included in your weekly transfer, and thus these funds are in the Payroll Checking Account, not your Company Checking Account.

When you use a separate Payroll Checking Account and make deposits into it for the total amount of your payroll costs each week, the amount you owe for unpaid payroll liabilities will be removed from your Company Checking Account and will instead accumulate in the Payroll Checking Account, where they will be available when you need to pay the liabilities.

One result of employing this practice is that when you are undergoing your yearly W/C audit, the funds you need to pay the final bill are already in reserve in your Payroll Checking Account because you built up the reserve as you calculated your payroll costs and transferred the funds each week.

This procedure is considered a sound accounting and management practice, and will garner the admiration of your accountant, your banker, your insurance carrier, and your friendly IRS auditor.

If you prefer, you may distribute your payroll costs and perform your payroll functions in your Company File without the benefit of a separate Payroll Checking Account. This is the most difficult of the three strategies because you are writing your paychecks in your Company Checking Account instead of using a separate Payroll Checking Account. Writing the paychecks in the same bookkeeping file makes the entire process of separating the posting of the payroll costs from the payment of the payroll costs more complicated.

Since this procedure is so much more complicated, you would wonder why would anyone insist on doing it this way? I've heard this before, so I've complied a list of the usual "reasons" and my answers.

Reason #1	You don't want to spend the time to open a second checking account. Answer: How long does this really take? Maybe one hour max at your local bank?
Reason #2	You don't want to pay the extra fees for operating a 2nd checking account. Answer: Your Payroll Checking Account, by it's design as an escrow account for unpaid payroll liabilities, is always going to have money in it. Just find a bank the doesn't charge you if you keep a minimum deposit in your account, and you'll never have a bank charge.
Reason #3	You don't want to pay for more checks for the second account. Answer #1: You can buy a thousand checks for $70.00, so we're not talking about a lot of money here. Answer #2: In the end, you're going to use every check you buy, so if you buy more checks for a Payroll Checking Account, then your stack of existing checks for your Company Checking Account will last longer.
Reason #4	You're worried that you won't be able to transfer the payroll funds from your Company Checking Account to the Payroll Checking Account fast enough each week to have the money there in time for the employees to cash their paychecks. Answer #1: Open your Payroll Checking Account in the same bank as your Company Checking Account, and your transfers should be immediate. Answer #2: Your Payroll Checking Account will always have funds in it from the accumulated, unpaid payroll liabilities, so even if your Payroll Transfer Check takes a couple of days to credit, it doesn't matter.
Reason #5	You don't want to waste a check each week just to transfer the funds from the Company Checking Account to the Payroll Checking Account. Answer: Fine, then use your bank's telephone transfer system to electronically transfer the funds instead.

I hope that the foregoing information will eliminate any hesitation you may have to opening a Payroll Checking Account, but if you still insist on writing your paychecks in your regular Company Checking Account, then here's the procedure:

Perform all the procedures for calculating the payroll costs, posting the costs to the Payroll Liability Account and processing the payroll in the Payroll File. However, instead of printing the paychecks, set QB to print paystubs instead. These are just as they sound, paystubs printed on plain paper.

After you have processed the payroll and printed the paystubs, close the Payroll File and open the Company File. Use the pay stubs to write checks from the Company Checking Account to each employee for the amount of their net pay. Each of these checks should be posted to credit the Payroll Liability Account. This has the effect of each paycheck buying down part of the payroll liability.

As you normally process and pay your other payroll liabilities (withholdings, payroll taxes, insurance and benefits) these checks should also credit the Payroll Liability Account, which will also buy down the amount of the liabilities.

With this strategy, you are using the Payroll File to process the the payroll and track the payroll liabilities, but you are actually writing the checks on the Company Checking Account in the Company File.

Payroll Liability Account This is a view of how we've setup the Payroll Liability Account in our QuickBooks Pro Template File. The account is set up as a Liability Account using account #2400. Of course, you could set up this account in your Chart of Accounts using any name and number you wish.		Click to View Full Image
Payroll Liability Account Ledger This is a a view of the Payroll Liability Account Ledger with weekly entries dated on the last day of each payweek and made to "Weekly Payroll". Each entry represents the total cost of the payroll for that week, said cost including employee pay, payroll taxes, insurance, etc. and is split by cost code and project in accordance to the TimeTrax report. A few days after each weekly entry is the transfer check made payable to the Company's payroll account, which buys down the liability that was entered earlier. This check (which could also be a telephone transfer) is deposited into the company's payroll checking account, where the funds are used to pay the actual payroll costs.		Click to View Full Image
Journal Account Split Entry This is the split window of one of the weekly entries showing the actual entries by cost code (account) and project (Customer:Job). The split window only shows three lines of the entry, as you are actually making such an entry you will scroll down and make as many entries as you may need. By making this entry directly into the register, QuickBooks automatically enters the other side of the double entry for you. Once you have made the entry, the costs you entered will be included in all your reports, and specifically the Job Cost and Job Cost Variance Reports.		Click to View Full Image
Full Journal Entry This is a view of the actual Journal Entry showing the debits and credits of both sides of the entry. We don't generally recommend making the entry this way, but this view shows the entire entry and how it is "split" by cost code (account) and project (Customer:Job).		Click to View Full Image

Which ever method you use, the Payroll Liability Account balance will be constantly changing as you post each pay period's payroll liabilities and write checks to pay the payroll expenses. The amount of the outstanding liability will reflect your current underfunded payroll liabilities, and important number to monitor.

Paid Time Off (PTO) is all the time you pay your employees when they are not actually working. PTO generally falls into one of two general categories: Holiday Paid Time Off (HPTO), and Employee Paid Time Off (EPTO). HPTO includes company paid holidays that everyone in the company receives. EPTO is vacation, sick days and other similar paid time off that you may allot to the employee that they may take at their discretion. The only reason to differentiate between these types of PTO is for tracking the amount of EPTO and employee may have accumulated and/or utilized, which in many cases must be compared to the allotted amount for that employee. The difference has no effect on your payroll cost calculations.

In TimeTrax, the cost for paid vacations, sick days and holidays is already calculated into the payroll cost for each week as any other payroll cost. Thus, the funds to pay these expenses accumulate in the Payroll Liability Account and/or the Payroll Checking Account each pay period.

When you are paying an employee for any of these "paid days off", you will NOT include the time into the payroll cost calculations for that week. To do so would have the effect of posting the cost twice.

The correct procedure is to process the payroll without these hours in the transfer calculations, but write the employee's paycheck to include the hours and pay for the vacation time.

A complete discussion of the various methods and the mathematics behind calculating PTO is available for your review in the chapter titled Paid Time Off.

These strategies (and QuickBook's own procedures) are predicated upon the assumption that you can precisely project every payroll cost in advance at the time you are doing the payroll. The reality is that you cannot absolutely determine each cost to the penny until the end of the year because many payroll costs are subject to review and revision by outside parties (like insurance auditors).

For example, you may believe you know your workers compensation rates for each employee, and you can make your weekly calculations based upon this knowledge, but the reality is that you won't know your actual workers compensation costs for the year until after your yearly audit. It's just a fact of life.

You can do a very accurate job of projecting your payroll costs, but you cannot be absolutely accurate to the last penny until the end of the audit year. Therefor, you should anticipate some small variation between the yearly totals of the amounts you calculated and posted each week, and the yearly totals reported in your Payroll File after you have entered all year-end adjustments.

This isn't tough to deal with, you just need to know what to do.

First, it's quite likely that the difference could be a matter of pennies, in which case you could just forget it. More likely it would amount to a few dollars plus or minus. The solution is relatively simple:

1. First, run a report in your Payroll File of your total actual payroll costs as actually paid to the employees, government agencies, insurance companies, etc.
2. Second, run a report in your Company File of the actual total amount you transferred to your Payroll Checking Account, all of which should have already been distributed.
3. Third, review the difference between the two figures.
4. If you accidentally underfunded your payroll costs for the year, just write another check from the Company Checking Account to the Payroll Checking Account for the difference. Post this check to Job #9999, cost code "999 Uncategorized Direct Costs".
5. Now, I know some of you are going to make the observation that this would mean that these payroll costs won't get applied to a specific project or a specific cost code. You're right, but the cost will be recorded in your Direct Expenses for the year, and attempting to split this last small piece of payroll expense to a project and cost code isn't worth the effort.
6. If you accidently over-funded your payroll costs, you can make an journal entry dated December 31 into the Payroll Liability Account to reduce the liability by the amount you overfunded the payroll. This entry should be credited to job #9999 and cost code #999 for all the same reasons enumerated above.

Ordinarily, you wouldn't expect to read information about reimbursing employees for mileage or cash expenditures in an article about distributing payroll labor costs. However, because the QB manual suggests that mileage reimbursement is a payroll item that you should add to an employee's check, I'd thought I'd better explain why the concept isn't a good idea.

You can't add mileage reimbursement to an employee's paycheck with my system because it's not actually a payroll cost, and thus is not factored into the payroll cost distributions you calculate from the employee's time cards and it's not included in the Payroll Transfer Schedule.

In addition, it doesn't make any sense to add an expense reimbursement to an already complicated transaction like a paycheck.

The best way to handle reimbursing an employee for mileage (or any other expense) is to simply write them a check from the Company Checking Account for the amount of the reimbursement. Post this check to the appropriate Chart of Accounts account just like any other normal expense.

QuickBooks Pro 2001 Job Cost Report - Their Way! The following paragraphs will describe in detail exactly why you can't use QuickBooks Pro to perform payroll burden distribution, but it can all be summed up in this sample QuickBooks Report. This is a QuickBooks Job P&L report that is done using every technique they recommend, including using the timesheets and service items. I've added two labor-only cost codes under accounts 4900 that are separate from my regular cost codes specifically to make it easier to identify them in the report. Normally, the labor cost codes would be intermingled with the other cost codes. In this report, you can see that the labor codes include only the actual employee pay, and that the payroll burden costs are in separate expense codes. The total profitability for the project is accurate, but as I said above, the individual line-item cost codes are not accurate because they do not include the payroll burden, and thus you cannot get accurate Budget vs Actual reports and you cannot develop historical unit cost information.

Click to View Full Image

Quickbooks Pro 5.0 & 6.0

Since version 5.0, QB has claimed the ability to distribute payroll costs to your jobs. Unfortunately, there is an issue with the method by which they post the distributed costs.

First, in order to use QB to distribute payroll costs, you are required to use QB Time Tracking (to allocate the hours to the job costs) and you must use QB service items (to assign the costs to the Chart of Accounts). For a number of sound, practical reasons, construction companies shouldn't use items except for a limited number of income items for invoices. See Related Report

Second, if you were to follow the requirements of the QB manual and keep your employee's time with QB Time Tracking and use QB items for all your cost codes, QB will distribute the payroll burden costs by creating a separate transaction for each employee, for each pay period, for each payroll expense, for each project, for each cost code. This has the effect of drastically slowing down your QB file by adding thousands of transactions to the database.

For example, a payroll roster with five employees, each of who worked on three projects (or overhead categories), performing just three types of work on each project (rough carpentry, demolition & cleanup, for example) and each employee having just five payroll burden costs (FICA, FUTA, SUTA, W/C, and Vacation Pay, for example), would create 270 QuickBooks transactions just to post that one week's payroll costs.

Now, I know your thinking: "So what! What do I care how many transactions QB adds to it's database to track these costs? I just want the reports to be accurate." Here's the problem:

QB is, like all accounting programs, a database program at it's core. Every time you open up a QB register or create any type of QB report, QB must read it's entire database of transactions to build the report. How does this effect you? In two ways.

First, the more transactions in a database, the longer it takes the program to read and build reports. You won't notice a problem at first, but when the number of transactions starts to rise to several thousand (at 270 per week, you would reach 5000 transactions in just five months), you will observe increasingly poor performance.

Now, for all it's great attributes, QB is not a particularly fast program. It's generally considered that a limit of approximately 5000 transactions annually just about maxes out the program. While this isn't really a problem for the typical construction company writing a couple of hundred checks a month, it is one of the reasons why very large construction companies can't use the program.

In addition to the increased search time when opening registers and building reports, you will also have an increasingly difficult time actually using any transaction reports. This is due to the fact that when, for example, you are trying to ascertain what transactions comprise the supervision cost for the Smith project, the transaction report will include all those transactions we itemized above.

As you review transaction reports created in accordance with QB procedures, you will observe a number of relatively small entries like $.02 or $1.09 or $.43. These entries typically represent, lets say, one employee's FICA cost for the one hour he worked cleaning up the project at the end of one day.

It's virtually impossible to wade through several hundred transactions to identify the few you are looking for. Even trying to ascertain how much a certain employee earned on a given day on a certain project for a certain cost code can result in several transactions that comprise his pay (divided by the payroll expense categories) for just that one day.

Quickbooks 99, 2000 & 2001

Intuit eventually recognized the problems described above with their payroll distribution methods in QuickBooks 5.0 and 6.0, and quietly revised their procedures beginning with version 99. They eliminated the program's ability to distribute the payroll burden cost to individual cost codes, although they did retain the ability to post the payroll burden cost to a project. This eliminated one multiple in the chain of multiples in the previous versions, but it meant that the individual cost codes would not include the payroll burden. This undermines the accuracy of the job costs and thus negates using your job costs to develop historical unit cost data for estimating future projects.

Now, for all this disparaging talk about QB, you might wonder if you've made the right choice for a bookkeeping program. The answer is a resounding "Yes". Among it's other capabilities, QB will do an excellent job of processing your payroll, tracking your withholdings and payroll tax liabilities, prepare your 940's, 941's, W-2's, and all the other mundane tasks associated with operating a payroll.

The terms used in this article will have the following definitions: