How to account for salary expenses vs client income in account tracking.
We are a services only business providing social media services to our clients. We are trying to track our expenses vs income per client to see if our pricing is profitable. It is quite easy to track our expenses per client when it comes to our virtual assistants because they track their hours worked per client and report that to us for payment. However, we have a few team members that do not do "client work" only. These people are paid a set salary and do help manage the business, manage the VA's, and work with clients . We want to factor in their salary to the expenses per client. However, we are unsure what the appropriate method is to account for that expense vs client income. Should we disperser their salary's up among the clients we had for the month or just the clients they worked on???
We do use QuickBooks Online and it has been fantastic for giving us the information that we desire. We just want to be sure we are doing what should be done for this area.
Any help or advice would be great!!
Thanks for visiting my site, and what a great question!
When you have salaried individuals that work on a number of clients, there's a couple of ways to break that salary down to individual clients.
You can divided their salary by the number of active clients, or you can have them track their time to specific clients, but then you will have some leftover "administrative" cost left for when they work on more "company level" jobs rather than work done for a specific client.
If you want to go that route, you can apply some of their salary to say, client 1, client 4, and client 6, then the leftover (managerial) hours can be expensed among your other clients as overhead.
But, that said, the easiest route would be to divvy their salary up equally among your clients, and call it "administrative costs" rather than "direct labor costs".
Hope that helps - and thanks for contributing!
If you need clarification or have other questions, feel free to let me know!