1) Module HUD

  • Module #: 5 / 13
  • Time: 20–30 min
  • Outcome: “After this, you can set up Products and services in a start-simple → grow way so invoices stay consistent and reporting can scale without bloating your Chart of accounts.”
  • Prereqs: [Module 3 — Easy COA Your CPA Will Love]
  • Stop here if: you only need clean invoices + clean monthly financials (you don’t need costs/profit by work type yet).
  • Level tags used in this module: ✅ Baseline / 🛠️ Operator Upgrade / ⚠️ Advanced

2) Answer Box (snippet block)

  • What it is (2 lines)
    Products and services is where you define what you sell (and optionally how you track costs by what you sell).
    It’s the clean way to get detail without turning your COA into a junk drawer.
  • When to use it (2–4 bullets)
    • You want invoices that are consistent and searchable
    • You want revenue by work type (service call vs install vs rough-in)
    • You want costs by work type (optional upgrade)
    • You want profit by work type later (only if you’ll maintain the inputs)
  • The common mistakeS (1-2 line)
    Creating 200 items you won’t use, or keeping one generic “Labor” item and expecting reporting magic.
  • The fixES (1-2 line)
    Pick a path, build a short list, and only add items that you’ll actually use on real invoices.

3) The mental model (keep short)

  • Keep the Chart of accounts simple; use items for detail.
  • Items are primarily for invoice consistency first, reporting second.
  • Start with revenue items only. Add cost detail only if you’ll maintain it.
  • If you want profit by job type (service / remodel / new construction / commercial), that’s handled on the job container (Projects)—not with extra income accounts.
  • The best item list is boring and repeatable.

4) Do this in QBO (step-by-step)

Choose your path (Start simple → grow)

  1. Pick one path you will maintain:
    • ✅ Path A: Revenue items only (clean invoicing + revenue reporting)
    • 🛠️ Path B: Revenue items + costs by item (limited, disciplined)
    • ⚠️ Path C: Profit by item (requires tight revenue + cost alignment)

✅ Path A — Revenue items only (stop after Step 7)

  1. Go to Sales → Products and services
  2. Click New → choose Service
  3. Create 5–12 items you actually sell repeatedly (examples):
    • Service Call
    • Diagnostic
    • Rough-in
    • Trim
    • Install (General)
    • Change Order (optional)
  4. For each item, set the income mapping (keep COA simple):
    • Most items → main income account (example: Contract Income)
    • Service Call → service income account (only if you truly want it separated)
    • Change Order → change order income account (optional)
  5. Standardize naming now (so you don’t create duplicates later):
    • Pick one format and stick to it (example: Title Case, no abbreviations)
  6. Stop here marker (Path A):
    If invoices are consistent and you can run revenue by item, stop.

Pro tip: If an item name needs a legend to explain it, it’s not an item—it’s a secret.

🛠️ Path B — Add costs by item (stop after Step 11)

  1. Keep the item list the same on invoices (don’t drift)
  2. Decide what costs you will code by item (keep it limited):
    • Example: key materials packages, key subcontract scopes
  3. Enter those costs in Expenses in a way that allows consistency, and apply the same item names you use on invoices where applicable
  4. Stop here marker (Path B):
    If costs by item show up consistently for the limited scopes you chose, stop.

Warning: If you can’t code costs consistently, do not “graduate” to profit by item. That’s just wrong with extra steps.

⚠️ Path C — Profit by item (stop after Step 14)

  1. Confirm both inputs are stable:
  • Invoices consistently use the items
  • Major costs you care about are consistently coded to the same items
  1. If you have mismatch (invoice says “Labor” but costs say “Rough-in”), fix the invoice item habit first
  2. Stop here marker (Path C):
    If item-level profit is stable month-over-month, stop. Don’t expand the item list unless it changes decisions.

5) Real-world example (mandatory)

You’re a plumber with two jobs.

Job A: Remodel

  • Invoice items: Rough-in $7,000; Trim $6,000
  • Costs you choose to code by item (Path B+):
    • Materials package (Rough-in) $2,300
    • Sub labor (Trim) $1,200

Job B: Service

  • Invoice item: Service Call $425
  • Parts $60

Now you can see:

  • Revenue by item (what you sell repeatedly)
  • Costs by item (if you chose Path B)
  • Profit by item (only if both are aligned)

6) Run this report now (mandatory checkpoint)

  • Report name: Sales by Product/Service Summary
  • Filters/settings:
    • Date range = last full month
    • Click Run report
  • What “good” looks like:
    • Top items match your real work (not 40 one-offs)
    • No duplicates caused by sloppy naming
  • What “broken” looks like:
    • Everything is one generic item (like “Labor”)
    • Same work appears as multiple item names
  • One fix if broken:
    • Rename/merge duplicates in Sales → Products and services, then enforce the standard on every new invoice.

7) Lab (do it on your file)

  • [PASS/FAIL] You created 5–12 items max in Products and services
  • [PASS/FAIL] Each item maps to the correct income account
  • [PASS/FAIL] You invoiced using items (not custom one-off text lines)
  • [PASS/FAIL] You ran Sales by Product/Service Summary and it reflects reality
  • [PASS/FAIL] You deleted/merged at least 2 near-duplicate items (if they existed)
  • [PASS/FAIL] (Path B/C) You coded at least 10 cost transactions consistently to your chosen method
  • [PASS/FAIL] You wrote down your stop point: Path A, B, or C

8) Knowledge check (3 questions)

  1. Why should work-type detail live in Products and services instead of the Chart of accounts?
  2. What must be true for “profit by item” to be trustworthy?
  3. What’s the fastest way to prevent item list chaos?

9) Next + Related

  • Previous: [Module 4 — Bank Feeds]
  • Next: [Module 6 — Progress Billing, Deposits, Retainers]
  • Related modules (2–3)
    • [Module 3 — Easy COA Your CPA Will Love]
    • [Module 8 — Labor Costing in QBO]
    • [Module 9 — Enhanced Job Costing & Profit Reporting]
  • Don’t do this warnings
    • Don’t rebuild your estimate template as items. You won’t maintain it.
    • Don’t add items “just in case.” Add them when you will use them weekly.
    • Don’t create a second COA inside items.

Fast now = slow forever.

FAQ (short)

How many items should I start with?
5–12. If you need 50 items to bill a month, your invoicing process is the problem.

Do I need items to do job costing?
No. Items help with work-type reporting. Job costing is job container + assigned costs.

Should I create separate items for every material?
No. Keep items at the work-type level unless you run inventory (different system).

Can I add items later?
Yes. Start simple, add only when it changes decisions you make.

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