Processing Payroll in your software when using a Payroll Service

When posting to payroll there are several accounts that payroll posts to, some of these accounts are expense accounts which will post the labor and the cost of the labor as well as any benefits that the company pays for their employees.

The reason you enter payroll in your software even though you use a payroll service is to get the costs to the expense accounts and to the proper jobs and cost codes with the accurate burden which the software will calculate. This will replace any journal entry you used to do try to calculate the burden or estimate the burden to each job.

Because you are entering payroll, you will also be creating “liabilities” for payroll, or what the company would need to pay for this payroll। Since your payroll company pays these amounts, you will post these amounts to a “clearing account”. The liability + the net amount of the payroll checks will equal what the payroll company tells you is due to them to cover the cost of the payroll.

When the statement for the payroll comes in from your payroll service, you will post the amount that you owe them as you would normally, but you will not have to expense it to expense accounts since this was done during the processing of payroll। You will only need to credit your payroll GL account and debit the payroll clearing GL account for the total amount that is to be funded. This will zero out the clearing GL account if you record it each time payroll is done. If there is still a balance in the clearing account after this entry, you should review all deductions for payroll to be sure they are accurate and posting to the clearing account.

You may need to complete the payroll process by funding your payroll account (if you have a Cash account specifically for payroll)। You will put money in the payroll account from your general account to cover the cost of payroll. This can be done by writing a check from the general account and expensing it to the payroll account.

Success In-Formation would be happy to asssit you with setting up this feature in your software. We can be reached at info@successif.biz

Getting to 100% complete on jobs

Most software written for construction will automatically calculate a percentage complete on a job. This percentage is a percentage of actual costs to the job budget. If you haven't entered a budget, most software will calculate the percentage as 100% because it will assume your budget should be what your costs are. The way to avoid this problem of course is to be sure you enter a budget for every job.

Another challenge in construction is to get the calculation to 100% complete when the job truly is complete. It is rare that a jobs cost is equal to its budget. There will most always be a slight variance. I recommend the following when a job is complete.

1. Set up a cost code or tracking code called "over/under budget".
2. Review the job (see previous blog) to be sure it is complete.
3. Enter an internal change order (which only posts to budget, not to contract amount) for the amount of the difference so that you force the budget to equal the final costs.
4. Be sure to record the amount in #3 to the code called "over/under budget", this preserves your original budget figures and also allows you to see your "over/under budget" amount by job at any time which would be a great report to view by Project Manager, Estimator or Crew Leader over a specific length of time.

Closing out Construction jobs

Every construction company knows that jobs need to be reviewed and closed out when they are completed, but many times, no one is assigned the specific task and sometimes it just doesn't get done completely. If this is done on a monthly basis, it won't be as overwhelming a task as if it were left to be done once per year.

Following are some procedures for reviewing a completed job and determining it closed

1. Each job probably has several job folders belonging to several different employees throughout the company. I recommend that all job folders be collected when a job is complete to be filed in a "closed job" file cabinet together. After all, the company is the owner of all employees files, if an employee leaves the employment of the company, you will want that folder for future reference.
2. Job reports should be printed out to show the contract amount and the amount billed which should equal (including change orders).
3. Review if there are any pending change orders that have not been confirmed back from the owner, CM or General Contractor as to whether they were approved or denied. (you may find "un-billed money" here). Usually this won't be entered in the computer, so you will have to go through the folder, clipping similar paper together such as all correspondence for each change order together. Use this an an opportunity to organize the file and look for information not handled completely. The information in the folder should be organized logically, if you don't understand it, ask someone who does. Don't leave loose ends.
4. Make a one page document (lets call it "closed job report" for purposes of this blog) in large font that includes the following information: contract amount and amount billed (these should equal each other). Budget (aka estimate) and costs (these also should equal each other for the job to calculate at 100% complete - more about that in a future blog topic), if there is a difference, show the difference clearly. Retention or any Receivable on the job still due if any (if any money is still due, you may not want to close this job). Liens filed Yes or No, Liens released, Yes or No. Have a line for "percentage overhead and profit", divide the cost into the amount billed and put the percentage here. Then, make lines for the estimator, project manager and owner and any other individuals necessary to sign off on the job with space for notes and initials.
5. Show a computerized job report that shows both summary and detail of the overall job cost (listing costs by code with budget to actual variance) as well as billing information.
   Review any Over/Under budget lines on attached job report and highlight them.
6. Staple or clamp the computer reports for the job to your "closed job report" for this job.
7. Place this group of reports on top of the file folders and ask the related parties, PM, Est, Owner to have a couple hours each month where they review the jobs to be closed and ask them to sign off that the job will be closed. (Make a positive experience of this time, maybe one Friday per month, the company brings in lunch and these employees meet in the conference room to review jobs to close out).
8. Once they have signed off on the document, put it in the main job folder, highlight all file folder tabs with a colored highlighter (a color that signifies within your company that this is a closed job) and write on the job folder that it is closed with a date and your initials. This is important in case the folder gets pulled at some later date and it isn't clear that it is a 'closed job'.
9. Change the status of the job in the computer to closed and file these folders in a special file cabinet called "closed jobs" organized by job number.

Once a job is closed, no costs or change orders or billings should need to be posted against it. If you feel that this is a possibility, don't close the job. That is the main reason, you need the approval of all related parties to close the job.

Be aware that this process may require reclassification of costs to various cost codes. PM's and estimators and Owners may find costs in this job that should have been posted to a different job. That is OK..this is why you are doing this. Once the job is corrected, get signatures and close out the job.