Job costing is important to contractors, builders and many other types of small businesses such as plumbers, electricians, architects, landscapers, wedding planners, caterers and many others. When the business is a sole proprietor (or an LLC taxed as a sole proprietor), then the owner takes an Owner’s Draw instead of a paycheck. Thus, you cannot allocate the owner’s time to jobs via payroll. Instead, you can create a zero-dollar check to allocate the owner’s time (i.e. cost) to the job as follows:
- Create an expense account called Owner’s Job Cost Allocation (this account should zero out so there is no impact on the Profit and Loss).
- Create a two-sided service item (by checking the box that says this service is performed by a subcontractor or partner) for the owner’s time which is mapped to the Job Cost Allocation expense account created in step 1.
- Enter a Zero Dollar Check to the owner
- On the items tab, allocate the owner’s time to the jobs as appropriate using the item(s) created in Step 2 and the customer:job.
- On the expenses tab, enter a negative amount for the total to the Job Cost Allocation account.
The job profitability reports will include the expense but there is no impact on the Profit & Loss report (the job cost allocation expense account zeroes out). Voila — quick and easy to get the reporting information needed to monitor job profitability.