This topic introduces the concepts of labor job costing in Q360 as it relates to payroll.

Labor job cost timing

The real-time job costing features in Q360 are based calculating and recognizing costs of jobs as they occur. As discussed in the Revenue and Cost Recognition document, different types of costs including labor is recognized when a time bills are reviewed and posted. This implies that Q360 will write journal entries to post the cost of labor to your designated COGS and attach that cost to the jobs typically ahead of your payroll cycle.

Labor job cost amount

Q360 has two modes of calculating the actual cost of labor on jobs[1]:

Actual Wages (recommended): Uses each employee’s defined hourly rate (and optional burden %) to calculate the actual cost for a single time bill. This yields a more accurate calculation that gets close enough to actual cost of payroll and other benefits and expenses directly or indirectly attributed to the employee.

Standardized Cost: Ignores an employee’s individual wage, instead opting to use the standardized cost defined on the labor master for the type of labor[2]. This has the advantage of “levelling the playing field” amongst jobs, such that choosing one employee over another for a type of labor will not result in cost difference to the job. However, this may yield a less accurate actual cost of labor when compared to actual paid wages.

Labor job cost posting

When posting a time bill, Q360 creates the following journal entries:

GL Account[3]	Segments	Entry Type	Link	Amount
Labor COGS	Branch/Dept of Job	Debit	Job	Hourly Rate x Hours Billed
Labor Contra	Branch/Dept of Employee	Credit		Same as above

When using Actual Wages (method 1 above), and having defined Burden % per employee, Q360 adds the following entries as well:

GL Account	Segments	Entry Type	Link	Amount
Labor COGS	Branch/Dept of Job	Debit	Job	(Hourly Rate x Burden %) x Hours Billed
Burden Contra	Branch/Dept of Employee	Credit		Same as above

Based on the above JE postings, you can glean the following insights:

• Q360 needs a dedicated Labor COGS account that is separate from your payroll wages account
• Postings approximate your actual burdened labor cost, made in real time as time bills are posted ahead of payroll
• The debit side links to the job, therefore giving you real-time insight into profitability of the job. This entry is segmented with job-related information to match revenue with cost.
• The credit side does not link to the job, instead “washing out” Q360 job costing with a below-the-line credit entry to the contra expense account (see below for more information). This entry is segmented with employee related information, to provide insight into job-costed amounts relating to employees from different branches or cost centers.

Labor and burden contra accounts

• These two entity-wide contra accounts are typically defined as expense type accounts and normally receive credit entry to offset the job costing
• Typically classified as 6xxx or 7xxx series accounts
• They are included “below the line” on your designed income statement
• As a result, your bottom line will be net of Q360’s job costing, only really reflecting your actual wages, benefits and other expenses that you have posted back from your payroll system
• These expense accounts reset every fiscal year-end
• A good use for these accounts is to analyze chargeability trends when comparing them to labor COGS account. Chargeability is the amount of direct labor hours (job-related) divided by the total available hours.

Prevailing wages

With US-based jobs that are affected by prevailing wage rules (Davis-Bacon and Related Acts), Q360 can be configured to calculate a job costing amounts that consider the prevailing wage relevant to a technician’s role on a specific job.

Admin time

Admin Time is defined as time logged by any employee that is not attributed to a customer job such as non-chargeable indirect labor or overhear labor. The employee can vary from a front-line technician to a back-office accountant.

In Q360, there are typically year-long internal admin “projects”, one for each combination of branch and (cost center) department. Each project should include perpetual task assigned to each employee in that branch/department that allows them to capture Admin Time.

When such time bills are posted, the Default Extended Accounts rules for the INTERNAL project sale type will direct the debited cost to a new GL account you create to capture the cost of Admin Time. Meanwhile, the same contra accounts will still be used to “wash out” this cost from your bottom line.

Time off

Time Off is defined as time logged by any employee related to paid or unpaid time off. Typical examples include PTO, Sick Leave, Holiday, Jury Duty, and Bereavement. It is recommended that you create a task (e.g. Admin Time) in your internal admin project that allows an employee to log this type of time, which would be included in your payroll export report.

Payroll

As Q360 is not a payroll system, it can be configured to export a report tailored to your payroll system, with time billing data in raw or aggregated form:

• Raw report (recommended): Typically includes a row for every single time bill in a specified period with information such as: employee, date, time logged, time bill category, wage type (standard, overtime, prevailing, etc.)
• Aggregated report: Typically includes a row for every employee, with information such as: employee, total standard time, total overtime, total time-off, etc.

These reports can be exported to Excel, and manually fed to your payroll system. When payroll processing is complete, your payroll system should be configured to export a list of journal entry postings to reflect your actual payroll cost. This can be imported into Q360 using a journal entry import sheet that has the following columns:

• GL Account
• Debit amount
• Credit amount
• Reference Number
• Comment

The GL accounts you use must be ones that you manually manage, which Q360 is not configured to use for job costing. You may segment these imported entries by branch and department by simply including a dash (-) and the 4-digit code that the cost is associated with.

Overtime

Overtime poses multiple challenges including planning, identification and job costing. In Q360, you can either manually classify time bills as overtime, or embed logic in your payroll export report to automatically calculate overtime. The method you use depends on whether you want Q360 to automatically reflect extra overtime amount in job costing (using method 1) or leave it up to you to do so manually through journal entries (method 2). Refer to the best practice document Overtime Management for more information.

[1] Choosing one of these methods is a Q360-wide implementation decision. You cannot mix and match methods.

[2] If choosing standardized costing method (method 2), we recommend using an average loaded cost for each type of labor that considers other costs besides wages.

[3] Refer to Account Lookup Rules topic for more information on how Q360 selects which GL account to use.