QuickBooks Online Adds Labor Costing to Project Tracking
QuickBooks Online users could not view payroll costs in project reports, limiting profitability insight until labor costing was added to the Projects feature.
March 2019 QuickBooks Online users gained the ability to track labor costs within projects addressing a long standing gap in job costing.
Background on Project Costing Gap
Before the update many firms relied on QuickBooks Online to organize expenses and income for each project. The Projects feature let users attach bills, time activities and other transactions to a specific job. However payroll wages and employer taxes remained outside this view. Owners could see material costs and subcontractor bills but not the true labor expense tied to a job. This made it difficult to determine whether a project was earning a profit at any point in time.
Symptoms Users Experienced
Users reported that project profitability reports often showed inflated margins because payroll was omitted. To compensate they exported timesheet data to spreadsheets and manually added labor costs. This process was time consuming and prone to errors especially when multiple employees worked on the same job. Some firms delayed payroll processing until after a project closed just to capture labor figures in a separate report. The lack of real time labor visibility forced many to rely on end‑of‑month reconciliations rather than ongoing monitoring.
Affected Versions and Timing
The labor costing enhancement arrived with the March 2019 release of QuickBooks Online Plus and Advanced plans. Earlier versions of the Projects tool continued to exclude payroll from job costing totals. Users who had not upgraded to the Plus or Advanced tier did not see the new labor fields. The change applied to both new and existing projects once payroll was enabled and timesheets were used correctly.
How the New Labor Costing Works
When QuickBooks Payroll is turned on the system can allocate both gross wages and employer taxes to projects. Allocation occurs only when time is entered through a weekly timesheet or a single time activity that is tagged to a project and assigned a pay type before the paycheck is created. The total hours from those timesheets flow automatically into the payroll run. If a user edits time directly inside the payroll screen the labor allocation to projects is disabled for that pay period.
Requirements and Best Practices
To see labor costs in project reports users must first track time in weekly timesheets or via QuickBooks Time. Each time entry needs to be linked to a specific project and to a pay type such as regular or overtime. Payroll should be run after the timesheet is approved and before any manual adjustments are made in the payroll window. Following this sequence ensures that wages and related taxes appear in the project cost summary alongside material expenses and subcontractor bills.
Impact on Project Profitability Reporting
After payroll posts the Projects page displays a total cost column that now includes labor. Opening an individual project reveals a detailed breakdown showing wages, taxes, materials and other expenses. This lets managers compare actual costs against estimated budgets while the job is still in progress. Firms can adjust billing rates or reallocate resources sooner rather than waiting for a month end review. The improvement brings job costing in QuickBooks Online closer to the functionality found in desktop editions.
Closing Thoughts
The addition of labor costing to QuickBooks Online Projects resolves a common pain point for service based businesses. By integrating payroll data directly into project reports the platform provides a clearer picture of true profitability. Users who adopt the recommended time tracking workflow gain immediate insight without relying on external spreadsheets or delayed reconciliations. The change supports better decision making and helps firms maintain healthier margins on their work.