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Q: A consulting company has started offering customers the opportunity to purchase "pre-purchased" packs of labor.

Example:
Regular labor rate: $95/hr
Pre-purchase a block of 10 hours at $90/hr ea total: $900
Pre-purchase a block of 20+ hours at $85/hr ea total: $1700

They have many customers that want to pre-purchase labor some choose 10-hour blocks and some choose 20-hour blocks. All clients want the ability to send them a report showing where the hours were used and what their balance is at any given time.

A: You should create a current liability type account called Pre-purchased Labor and an Other Charge type Item (NT) called PPDLabor that links to this account. When you receive a check for a prepayment, create a Sales Receipt (not an Invoice) using the PPDLabor item only for the amount for the Customer. This will put the amount into the liability account. As you do your monthly invoice, bill for the time used and then, on the last line of the invoice, use the PPDLabor item as a MINUS amount to zero out the invoice and apply it to the customer's balance. This will also move that amount from the liability account. You can get a report on the liability account broken down and totaled by customer also to see what is remaining for each one.

Q:  What would be the benefits of an audit done for a foodservice that makes 750,000 annual income?  Also, how much would an audit like that cost?

A:  Some of the advantages to an audit are as follows: banks have higher comfort in audited financial statements which leads to better terms in interest rates, borrowing base, etc.; a CPA can usually identify control system weaknesses; management and employees are held accountable for financial work product; stockholders have higher comfort with audits.  I also believe there is less fraud because “big brother is watching” syndrome.  Cost varies by the client’s ability to be prepared but I would guess $40/$50,000 for audit.

Q:  What does QuickBooks consider Uncategorized Expenses and how should it be entered?  If you have a lump sum loan amount and it was used for several different expenses that were not recorded at time loan was taken, how do you enter it in QuickBooks?  Would it be an uncategorized expense?

A:  QuickBooks Uncategorized Expenses are any transactions that have not been put into an expense account.  The uncategorized expense should always be at zero.  For lump sum amounts you would credit your loan payable and debit the correct expense category.

Q:  What are the fixed operational expenses of a typical manufacturing company?

A:  Fixed expenses are the ones that don’t increase or decrease directly with a change in volume of activity.  A better way to think of fixed expenses is the expense is fixed for a given range of production.  Typically, building or rent cost is fixed.  A 50% increase in production will not increase the rent cost; however, if production quadruples, a larger facility may be required.

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