Vendor Expense Reports for Insurance Audits – Part 2

This article continues the series ofcreating a report that shows your vendor or subcontractor expenses, for an insurance audit, from your QuickBooks Online software.

However, unlike the first blog in this series, this article will included expenses that have been capitalized into a Work-In-Progress asset account, such as for Spec home builders.

To recap the first article in this series:

Typically for workers compensation and other related liability insurance reasons, an insurance company will ask for financial reports such as:

• Income Statement (P&L)
• Subcontractor or Vendors Expenses report
• Payroll Summary Report
• Copies of previous payroll tax filings

A possible conundrum can be obtaining a report that shows your vendor or subcontractors expenses within a certain time period. The main potential problems can be the following:

1. Lots of vendors listed on this report that haver no bearing on your insurance audit. Example: restaurants, gas stations and departments stores don’t belong on this report for insurance purposes.
2. The vendor field is sometimes not filled in on some your expense transactions in QuickBooks. So you will get a line item titled “Not Specified” in your Vendor Expenses Report.
3. If you are capitalizing some (or most) of your vendor expenses (Example: Spec home builders don’t recognize vendor labor and materials costs until the home sells), then you will have to manually force QuickBooks, via the customization filter function, to include vendor costs that might be in the Works-In-Progress, or Construction-In-Progress balance sheet asset accounts.

Now for this blog, let’s take a closer look at item #3 above.

So, to get started on the Vendor Expenses Report in QuickBooks Online:

1. Go to your Standard Reports function in this software
2. Within the Search bar, type in “Expenses by Vendor Summary” and open this report.
3. I like to “Switch to Classic View” as I can see things better in a report. This link is at the top.
4. Set your report time frame dates per the audit period in question.
5. Most likely you will need to set your Accounting Method to Cash Based, so be sure the Accounting Method is set correctly here (you may need to verify with your insurance company first but typically these reports will be Cash Based).
6. Now, you will also need to added a customized filter to this report to ensure you ALSO include capitalized expenses as well. So to do this:
   • Click on “Customize”
   • Scroll down and click on the “Filter” arrow to open up this sub-menu.
   • Checkmark “Distribution Account” and then click on the drop-down menu field next to this filter.
   • Scroll down and be sure to manually select all associated Works-In-Progress (capitalized accounts), in addition to all those Cost of Goods Sold and/or Expenses types of accounts that you might have posted other non-Spec vendor payments to.
   • Now click Run Report.
7. You will now notice a Vendor Expense Summary report, however this time all the summary listings will be for negative amounts. If you want to change these to positive amounts for aesthetic purposes, simply download a spreadsheet and run a formula to accomplish this.
8. Within this spreadsheet, you can probably delete any vendor name line items that will not be needed here.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.