Accounting for Preventive Maintenance in QuickBooks

HVAC and other specialty contractors regularly utilize preventive maintenance and service agreement to provide a steady flow of income. Here are some useful accounting tips to consider if you are a QuickBooks user. If you receive a prepayment for services that have not been performed, this is considered deferred revenue. According to proper accounting techniques, Deferred revenue is actually a liability until the service has been performed. If your business does not receive payment for preventive maintenance or service agreements until the service is performed, then you do not have a liability, and do not need to consider this information. Normal accounting usually bills when the service is performed. There are several steps involved when you have deferred revenue:

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Different Inventory Methods

How does QuickBooks handle inventory? QuickBooks uses an average cost method to value inventory. This is different from the FIFO (First In, First Out) and LIFO (Last In, First Out) inventory methods. There are three basic methods of inventory:

  1. LIFO Inventory Method
  2. FIFO Inventory Method
  3. Average Cost Inventory Method
Inventory Method Summary This is also probably the single most confusing aspect of QuickBooks. In fact, many businesses choose not to track inventory at all in QuickBooks. However, using the QuickBooks inventory will greatly decrease accounting headaches when preparing financial statements for tax return purposes.

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Why Manual Paper Work Order Systems Fail

The Way It Has Always Been Done: Paper work orders have served their purpose since the dawn of service businesses. Basic components of a paper work order include a customer's name, address, phone numbers, and a description of the problem or service to be performed. The paper work order is then placed in some sort of filing system until it is scheduled or given to a service technician. Once the technician has completed the work, the paper work order is filled out and turned back into the office. Usually, the work order is then reviewed and turned in to accounting for invoicing. Once the work order has been invoiced and any payments applied, it is attached to the invoice and filed away (among years of filing cabinets). An invoice or statement is then generated and mailed to the customer. This is a good system, but it has several flaws:

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