This article is part of a larger series on Accounting Software.
In this tutorial, we’ll teach you 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 that they can be charged to customers.
To get the most from this tutorial, we recommend following along in your own QuickBooks account. If you don’t yet have QuickBooks Online, our highest-ranked small business accounting software, you can either sign up for a 30-day free trial or get a 50% off for the first three months.
This tutorial is part of our series of Free QuickBooks Tutorials. You can either watch the video below or read the illustrated step-by-step instructions that follow.
Step 1: Navigate To Account and Settings
Click on the gear icon in the upper right corner of your QuickBooks Online screen and select Account and settings under Your Company in the first column, as shown below.
Step 2: Select Expenses
Next, click on Expenses in the left menu bar to reveal the three categories of expense settings: bills and expenses, purchase orders (POs), and messages.
Step 3: Customize Bills and Expenses
Let’s start by customizing your bills and expenses by clicking anywhere in the Bills and expenses section. The Bills and expenses section includes the following fields:
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 we highly recommend this option be activated.
B. Show Tags fields on expense and purchase forms: Turn this on if you want to use custom tags to track anything of interest across expense transactions.
C. Track expenses and items by customer: This should be turned on 1) so that you can assign expenses and items purchased to specific clients, and 2) if you want to bill customers for expenses incurred on their behalf.
D. Make expenses and items billable: This feature will provide a checkbox next to each expense and item on expense forms, allowing you to indicate that the expense or item should be billed to the client. Marked expenses and items will be available to include next time you generate an invoice for that customer.
E. Markup with a default rate of: If you’ve decided to provide an option to bill expenses and items to clients, 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.
F. 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.
- In a single account: All billable expenses will be tracked in an income account named “Billable Expense Income.”
- 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.
G. Charge sales tax: If you’re 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.
H. Default bill payment terms: Most vendors will provide you with 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 hasn’t specified payment terms. By setting up payment terms in QuickBooks, you’ll 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.
Step 4: Customize PO Settings
Click on Purchase orders to open the various options available.
A. Use purchase orders: POs can be generated in QuickBooks and then emailed to vendors or printed. They can be converted to bills once the order is received. Toggle Use purchase orders on to enable POs for your company.
B. Custom fields: You can add up to three custom fields to print on your POs. This option is great if your vendors request specific information excluded from the QuickBooks PO.
C. Custom transaction numbers: If this box is unchecked, QuickBooks will automatically generate PO numbers. By checking the box, you can manually input PO numbers when they’re created. This option is nice if you want to match your PO to a vendor’s system.
D. Default message on purchase orders: You can provide a default message that will print on all POs. This message can be changed and customized when you create a PO.
When you’re satisfied with your choices, click the green Save button.
Step 5: Customize the PO Email
The last section of expense settings allows you to design a default email message to accompany POs emailed to vendors. Click on Messages to get started.
Customize the greeting, subject line, and message you wish to send with all POs. You can always change the email message when you send a PO. For instance, you might add a personal note when you send a PO 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’re done customizing your PO email, click the green Save button.
The Importance of Customizing Expense Settings in QuickBooks Online
One of the primary reasons small businesses use QuickBooks is to track 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 and even bill customers for expenses incurred on their behalf, including a markup of expenses if you choose.
You have now learned how to customize your expense settings in QuickBooks Online. The next tutorial in our QuickBooks Online Training Course is How to Set Up Advanced Settings in QuickBooks Online, which will cover a wide array of options that will fine-tune your company file to get the most out of QuickBooks.