This lesson presents how to customize the expense settings in QuickBooks Online to match your company’s needs. Among other options, we’ll show you how to mark up expenses automatically and designate them as billable so they can be charged to customers.
We’re pleased to provide you this tutorial for QuickBooks Online, our best overall pick for small business accounting software. To get the most from this lesson, we recommend following along in your own QuickBooks account. If you don’t already subscribe to QuickBooks, you have the choice of a 30-day free trial or 50% off for three months.
This lesson is one in our series of Free QuickBooks Tutorials. You can either watch the video below or read the illustrated step-by-step instructions. The video was made with a slightly older version of QuickBooks Online. While the process of customizing your expense options is essentially unchanged, the layout of the screens is slightly different. The step-by-step instructions are from the most current version of QuickBooks Online.
The Importance of Customizing Expense Settings in QuickBooks Online
One of the primary reasons small businesses use QuickBooks is to track their expenses. By customizing your expense settings, your business can do more than track total expenses. You can track expenses by customer to analyze how your profit varies across customers. You can and even bill customers for expenses incurred on their behalf, including a markup of expenses if you choose.
How to Customize Expense Settings
The expense settings are located in your company account and settings. Click on the cog wheel in the upper right corner of the QuickBooks Online screen and select Account and settings under Your Company in the first column:
Then click on Expenses in the left menu to reveal the three categories of expense settings: bills and expenses, purchase orders, and messages:
1. Customize Bills and Expenses Settings
Click on Bills and expenses to view the detailed settings available:
A. Show items table on expense and purchase forms: This setting must be turned on to assign expenses and purchases to “items” instead of directly to expense accounts. Items include the products and services that you sell to customers, so this option must be turned on if you have inventory. The use of items is a powerful feature of QuickBooks, so I highly recommend this option be activated
B. Track expenses and items by customer: To track profit and loss by customer, you must activate this option so that you can assign expenses and items purchased to specific customers. This option must be turned on if you want to bill customers for expenses incurred on their behalf.
C. Make expenses and items billable: This feature will provide a checkbox next to each expense and item on expense forms for you to indicate that the expense or item should be billed to the customer. Marked expenses and items will be available to include next time you generate an invoice for that customer.
D. Markup with a default rate of: If you’ve decided to provide an option to bill expenses and items to customers, you can choose a default markup rate. If you leave this box unchecked, the expense or item will be billed to the customer at the actual cost. You can change the markup when creating an invoice.
E. Track billable expenses as income: There are two methods of accounting for the reimbursement of billable expenses. If you leave this box unchecked, the reimbursement will directly offset the original expense. If you check the box, the reimbursement will be recorded as income. Any markup of expenses will always be shown as income.
If you decide to track billable expenses as income, you must choose whether you want all billable expenses to be tracked in a single account or multiple accounts. If you choose In a single account, all billable expenses will be tracked in an income account named “Billable Expense Income.” If you choose In multiple accounts, a checkbox will be added to every income account information screen so you can indicate which income accounts should be available to use for billable expense income.
F. Charge sales tax: If you are required to collect sales tax from customers on billable expenses, check this box. Invoices for billable expenses will then include a field for sales tax.
G. Default bill payment terms: Most vendors will provide you the payment terms for their invoices, which can be entered either in the vendor information screen or as the bill is input. The default payment term entered here will apply to bills for which the vendor has not specified payment terms. By setting up payment terms in QuickBooks, you will receive reminders when a bill is coming due.
When you have customized all of your options under Bills and expenses, click the green Save button.
2. Customize Purchase Order Settings
Click on Purchase orders to open the various options available:
A. Use purchase orders: Purchase orders can be generated in QuickBooks and then emailed to vendors or printed. Purchase orders can be converted to bills once the order is received. Check the box to enable purchase orders for your company.
B. Custom fields: You can add up to three custom fields to print on your purchase orders. In the screenshot above, Paul’s Plumbing has created a custom field for “Approved by” so management can easily see who approved each purchase order.
C. Custom transaction numbers: If this box is unchecked, QuickBooks will automatically generate purchase order numbers. By checking the box, you can manually input purchase order numbers when they are created. This option is nice if you want to match your purchase order to a vendor’s system.
D. Default message on purchase orders: You can provide a default message that will print on all purchase orders. This message can be changed and customized when you create a purchase order.
When you are satisfied with your choices, click the green Save button.
3. Customize the Purchase Order Email
The last section of expense settings allows you to design a default email message to accompany purchase orders emailed to vendors. Click on Messages to get started:
Customize the greeting, subject line, and message you wish to send with all purchase orders. You can always change the email message when you send a purchase order. For instance, you might add a personal note when you send a purchase order to a long-time vendor. If you don’t like the changes you’ve made, click the green Use standard message button to return to the original settings. The last option is to have a copy of the email sent to the QuickBooks master administrator.
When you are done customizing your purchase order email, click the green Save button.
You have now customized your expense settings in QuickBooks Online. The next lesson in our QuickBooks Online Training Course is How to Set Up Advanced Settings in QuickBooks Online. That lesson will cover a wide array of options that will fine-tune your company file to get the most out of QuickBooks.