Question

Does Smart Contractor produce Sub-Contracts and track them?

For example, you have a Sub-Contract with a sub for $100,000. You have a Change Order for that sub for an additional $25,000 and then another Change Order for another $5,000. Then you make a payment to the sub for $25,000. How well and automated is tracking all this through Smart Contractor and how does that work with QuickBooks?

Answer

To do a special contract with a subcontractor, you would create a purchase order and print it as a custom formatted purchase order (in which you would put your contract text).

Then, assuming the subcontract is for an extended period of time in which the subcontractor will be paid more than once, as the work is done and the subcontractor requests payments, Smart Contractor does track the balance on a purchase order (subcontract) and it shows this in the Enter Purchases screen. (You enter payments made to a subcontractor as a "purchase", just like any other non-labor expense).

Each item in the list of items to purchase in the Enter Purchases screen shows the estimated count, the count that has been previously purchased, and the remaining count. So you always know where you stand against the original estimate (which is what the purchase order contract is based on).

Now, as for what happens when you enter change orders that affect the amount of the subcontract purchase order... If you're adding to the original contract amount, Smart Contractor has two ways you can handle that:

1. Cancel the original estimate item, and add a new one for the total new amount, or
2. Leave the original estimate item, and add a new one for the amount being added.

You can't use method 1 if you've already purchased against an item (made a payment to the sub), so in that case you could only use option 2. As for how to handle the subcontract in that situation, you would have to enter a new purchase order for the change order add item, and issue an additional contract to the sub.

I can understand why you wouldn't want to do that (because it would create multiple job items and purchase order contracts to enter purchases against), so the alternative would be to remove the purchases made against the original estimate item, and then use method 1: enter a change order to cancel the original item, and add an item with the new total. This approach has a couple of advantages:

• You would be able to see the changes to the single job item because the old and new amounts would be connected by the change order.
• You would be able to more easily track purchases (payments to the sub) because they would all be against one (estimate and PO) item.

The only disadvantage to this approach is that you would have to remove any purchases (subcontract payments) against the job item in order to change order (cancel) it, and then you would have to re-inter those purchases against the new item. You would have to do this every time there is a change to the subcontract.

As for how any of this would affect QuickBooks, there would be no problem there; Smart Contractor will update QuickBooks accurately no matter which way you handled it in SC.