Combine a sales order and billable time into one invoice

A customer has accepted a quote, and I convert it to a sales order. He then has two lots of billable time I want to put on the invoice alongside the order. Why is the sales order not invoicable like the billable time?

Your description of what can be done is incomplete. A sales order can be copied to a sales invoice. Thus, it can be turned into a sales invoice.

The procedure with billable time is different because of basic accounting. A sales order is not a transaction. No revenue has been generated. Billable time, however, becomes an asset when someone performs work. That asset can be sold, just like inventory, which is what invoicing does. So Manager includes the feature to convert accrued billable time to an invoice.

I would have thought that a sales order is a transaction. A sales order, to my understanding, is a contract to provide goods and services and get paid in return, regardless of which comes first, so it is as good as a transaction.

Likewise, when I head to the hardware store and give them a purchase order and collect my goods, that purchase order is a contract to take those goods and then pay a totalled invoice at the end of the month, rather than paying upfront every time I attend the store.

The difference here, to my understanding, is a sales order goes from business > client, and a purchase order goes from client > business.

Is there something I’m misinterpreting here? I am quite new to this.

Yes. A sales order is nothing but a record that someone has ordered something. No goods or services have been delivered and no money has changed hands. A contract requires three elements: offer, acceptance, and consideration. A sales order encompasses only the first two. No transaction has yet occurred. The contract is not complete.

In your hardware store example, goods were delivered. A transaction has taken place, even though the contract is not fully satisfied. But money (consideration) is legally owed. And the goods themselves are part of the consideration.

No, you have it backwards. A sales order is your business’ record of the customer’s purchase order (even if verbal). You have delivered nothing. A purchase order is a buyer’s indication to a supplier that they want to buy something. The supplier might deliver immediately, as in your hardware store example, or later. Whenever delivery happens, it can be on a cash or credit basis. Your hardware purchases are credit purchases, with credit extended on the basis of the promise to pay implied by your purchase order. The contract is not fully complete, but a transaction has occurred because ownership of goods was transferred.

In addition to @Tut’s clear explanation it is also helpful to consult Accounting coach on such things. For this example What is the accounting entry when an order is received? | AccountingCoach they conclude

While there is no accounting entry in the general ledger, it is likely that the company will create a record outside of the general ledger to track the order and to schedule various activities that will be needed to ship the products to the customer.

Most businesses we support are small and have low invoice volumes and therefore we skip the Sales Order records altogether and create directly an invoice based on a purchase order.

Thank you all for the responses, I understand this better now.

so im trying to rap my head around all of this. We run a service business and I am trying to move from quo to manager online.

situation 1
A customer calls and requests a quote, we fill out a quote, the customer calls back and accepts the quote we convert it into a sales order. Wen the tech goes to work on the sales order, he is unable to attach billable time to the sales order.

Situation 2
A customer calls to have a job done at their facility without a quote (T&M Project). A sales order is entered, parts are able to be added but no billable hours can be added to the sales order.

So for a work around, do I create a non-inventory item called “labor” with the techs name (Labor Bill W.) this way I can add this to a service request. under the non-inventory item, the purchase account being payroll expense and the sell account being labor?

Correct. As noted in the prior discussion, a sales order is not a transaction. But billable time worked is a transaction. The technician has created an asset by performing the work. A billable time entry records that transaction, but cannot be added to a sales order because the sales order is not a transaction. The asset would be left hanging in space. So the asset must be created separately via the billable time entry. Then, that asset can be converted into a receivable (another form of asset) by invoicing as explained in the Guide. Once that happens, other things that might have been on the sales order can be added to the sales invoice.

The situation is not perfect, because some of the status tracking features of sales orders are lost. But those were really designed for selling inventory items, not billable time.

Personally, I find sales orders to be of little use for a service business operating on a billable time basis. But that is just my preference.

This is not fundamentally different from Situation 1. Again, I would find the sales order to be of little use. In this situation, there a couple options for adding parts to the sales invoice:

  • Generate the sales invoice from billable time in the Customers tab. Then edit the invoice to add the parts used. This is probably best if you are adding parts you hold in inventory.
  • Record purchase of the parts as billable expenses. When creating the sales invoice, you can include both billable time and billable expenses in the same process. This is all explained in the Guides about invoicing billable time and billable expenses. This is probably best when parts are purchased only for the job instead of being held in inventory.

I suppose you could. But the effort could be wasted, because you are never going to invoice for that non-inventory item if you are using billable time. Furthermore, the labor is not something you purchase and resell. Its value is created only as the labor is expended. Thus, you can use non-inventory items for recording the sale of labor, but never for its purchase. The cost of employee labor has to be recorded using payslips, which create liabilities, not expenses. (Employee labor expended creates credits, not debits.) That is all subject to the presumption that the labor is expended by employees, not a proprietor/owner.

On the other hand, if you want or need all of this to show on a sales order that can flow through to a sales invoice, you should not be using billable time in the first place. You have some basic questions to answer before you can settle on an approach:

  • Do you really need sales orders?
  • Do you want to treat labor as billable time or as a pre-defined commodity quantity?
  • Are the parts you use on jobs coming from inventory, or are they purchased explicitly for the particular job?
  • Is there a reason you need to generate sales invoices from sales orders, or can you generate them from billable time and expenses?

Thanks for the reply, to answer your questions…

  1. I would like to use the sales order just for flow. I feel having the office read over the note the techs have entered before invoicing. I haven’t read completely into it all but I plan to make it so tech users can only view quotes and invoices but can create and update sales orders.

  2. with the work around I had explained, I would not be utilizing the billable time. since we charge an hourly rate on service work it is basically a predefined commodity and the hours would be the quantity. Adding this to the sales order will give the tech the ability to enter note for each trip along with parts that were installed on that particular trip. Again I need to look closer into the features of manager but I may add a column to add the date for each line.

  3. On service, parts are usually a mixture between inventory, local parts purchases, and ordered parts after the initial visit. As far as project work, parts are ordered off the quote that was provided to the client.

  4. I think I covered this in question one.

Like I said, I’m new to this program, I’m a working owner with a business that is growing at a fast pace. We were running quickbooks online for the last seven years and have had nothing but trouble. I have played around with coding a program from scratch but unfortunately don’t have the time to invest in this to make it a finished product to turn my employees loose on it.

Thanks again I look forward to your response.

Your points 1 and 2 will work fine. You won’t need a custom field for dates. You can just put them into the description. Line item custom fields can create more problems than they solve.

For point 3, enter inventory items when appropriate, and when not whatever at-cost or marked up price you want, posted to a suitable income account. When you buy such parts, post them to an appropriate expense account.