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We currently use quick books online and im looking at switching my payroll to a cost of good from a fixed operating expense. Can anyone point me in a direction of how to do this or a company that can help me fix this? Thank you!!!

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I don't use the online version, and I know it's considerably different than the stand alone version, so your mileage may vary. I also use a payroll service that generates my GL entry for me and we simply import it, so again, what I tell you may not apply to your situation.

I don't believe QB will allow you to simply change an expense account to a COGS account. You'll have to create a COGS account for technician labor (not all payroll goes into COGS, only technicians), then pick a date for how far you want to go backward, like the first of the year or first of the month. Now simply open each payroll entry and change the account for your technician pay to the new Tech Pay COGS account. If you don't have your tech pay separated already in your payroll GL entry, you'll have to calculate tech pay for each period and make a new entry in the payroll transaction for tech pay, and reduce the expensed payroll by that same amount.

Of course, anything you do will screw up your bank account reconciliation, so you'll have to undo and redo those. It should be really fast because you're not changing any amounts coming or going from your checking account. You're only changing where that amount shows up on your P&L.

Hope this helps, or at least gets you started.

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  • 3 weeks later...

My background is accounting, I used to work for CPA's, and did also did the accounting for a motocross company in CA. My husband and I now own and operate a mobile auto repair shop. I still do all the accounting, plus service writing, etc. He does the repairs.

It is not hard to change the account type from an expense to COGS, however, it should be something you discuss with your CPA. Usually most payroll expenses are included as expenses - wages to technicians can be COGS, the rest would be expenses (but that makes it difficult when looking at a P&L to determine total payroll expenses very quickly).

If there are prior year entries in your Payroll expense account, and you want to change it from this year forward, the best way to do it would be create a new account in COGS for your payroll, then create a Journal Entry for this year's payroll to reclass from expense to COGS, then use the new account going forward. If you just change the account from expense to COGS, it can mess with the numbers your CPA used for your tax return for prior years.

If there are no prior year entries for payroll, the account type should be able to be changed pretty easily, as explained here. https://community.intuit.com/articles/1145400-account-detail-types

Again, check with your CPA to determine what would be best for you.

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  • Have you checked out Joe's Latest Blog?

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      Got your attention? Good. The truth is, there is no such thing as the perfect technician pay plan. There are countless ways to create any pay plan. I’ve heard all the claims and opinions, and to be honest, it’s getting a little frustrating. Claims that an hourly paid pay plan cannot motivate. That flat rate is the only way to truly get the most production from your technicians. And then there’s the hybrid performance-based pay plan that many claim is the best.
      At a recent industry event, a shop owner from the Midwest boasted about his flat-rate techs and insisted that this pay plan should be adopted by all shops across the country. When I informed him that in states like New York, you cannot pay flat-rate, he was shocked. “Then how do you motivate your techs” he asked me.
      I remember the day in 1986 when I hired the best technician who ever worked for me in my 41 years as an automotive shop owner. We’ll call him Hal. When Hal reviewed my pay plan for him, and the incentive bonus document, he stared at it for a minute, looked up, and said, “Joe, this looks good, but here’s what I want.” He then wrote on top of the document the weekly salary he wanted. It was a BIG number. He went on to say, “Joe, I need to take home a certain amount of money. I have a home, a wife, two kids, and my Harly Davidson. I will work hard and produce for you. I don’t need an incentive bonus to do my work.” And he did, for the next 30 years, until the day he retired.
      Everyone is entitled to their opinion. So, here’s mine. Money is a motivator, but not the only motivator, and not the best motivator either. We have all heard this scenario, “She quit ABC Auto Center, to get a job at XYZ Auto Repair, and she’s making less money now at XYZ!” We all know that people don’t leave companies, they leave the people they work for or work with.
      With all this said, I do believe that an incentive-based pay plan can work. However, I also believe that a technician must be paid a very good base wage that is commensurate with their ability, experience, and certifications. I also believe that in addition to money, there needs to be a great benefits package. But the icing on the cake in any pay plan is the culture, mission, and vision of the company, which takes strong leadership. And let’s not forget that motivation also comes from praise, recognition, respect, and when technicians know that their work matters.
      Rather than looking for that elusive perfect pay plan, sit down with your technician. Find out what motivates them. What their goals are. Why do they get out of bed in the morning? When you tie their goals with your goals, you will have one powerful pay plan.
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