XX codes are used in ESC for departmentalizing your costs. Departmentalizing refers to breaking your sales out into different categories or income centers, so that you can see not only how much you have sold, but the amount of sales generated by specific kinds of activity. Construction industries often break their income between new construction, retrofit, and service, while a computer company might split their sales between new systems, service, and upgrades.
These different businesses use departmentalization to see how much of their revenue comes from each activity, so they can find problem areas, or expand a highly profitable area. In ESC, in combination with an accounting package (QuickBooks or Peachtree), there is a method to departmentalize your sales and costs to help give you a truer picture of where your profits are generated from. Each department gets its own sales income account, and might even have sub-accounts under this account to further break out the sales information (for example, labor vs. material vs. other). Each department in ESC is set to target a specific account number appropriate to the department. If sub-accounts are being used for further tracking, then a billing code would be set to point to the proper sales account of a particular type.
Before You Begin:
- Make sure proper sales and cost accounts have been created in ESC and matched to the proper accounts in your accounting package.
- Setup sales departments using your sales income accounts. (Company → Enter Departments)
To setup XX codes:
- In your accounting software, ensure that you have all your general ledger accounts properly setup. ESC will use those accounts to match up to for proper use invoicing, accounts payable bills, inventory and XX codes. Once you run the integration wizard within ESC, all necessary accounts should be matched between the programs (ESC does not need all QuickBooks accounts, such as Equity, Expense or Asset accounts) for this process.
- In ESC, you will need to setup your sales and cost accounts as matched pairs. In the example below, you will notice that all of the income accounts are set to the 300000 series of numbers and the cost accounts are set to the 400000 series of numbers. The bold numbers represent the department number that is embedded in each account:
|Departments||Sales Accounts||Cost Accounts|
|01 Residential Install||301000 (Income - Res. Install)||401000 (COGS - Res. Install)|
|02 Commercial Install||302000 (Income - Com. Install)||402000 (COGS - Com. Install)|
|03 Service||303000 (Income - Service)||403000 (COGS - Service)|
|04 Replacements||304000 (Income - Replacements)||404000 (COGS - Replacements)|
|05 Agreements||305000 (Income - Agreements)||405000 (COGS - Agreements)|
Note: An account must be setup for every department.
- Open your Company menu and select Enter Departments. Edit each Department to set the Income Account field to the correlating Sales Income account.
- Next go into the System Setup screen (Company → System Setup) and modify the cost account. Manually type in the full cost account number but replace the two characters that represent the department number with the characters XX. Using the accounts shown above as an example, you would put 4XX000 in this field. The XX will be replaced by the department number used on the invoice or other transaction. Make sure the account name does NOT follow the number or an error will appear.
- Lastly, modify and billing codes that you want XX codes to be applied to. You will need to modify only the Cost Debit fields in the Enter Billing Codes screen (Sales → Enter Billing Codes) for these codes. Make sure the account name does NOT follow the number or an error will appear.
Now that the XX codes and accounts are properly setup, you can create invoices that will automatically use general ledger accounts based upon the particular sales department selected on the invoice.
- Log into ESC as the Admin user to be able to view all of the behind the scenes accounting in the program.
- Go into the Enter Sales Invoice screen and create a new invoice for a customer and select sales department 03.
- In the body of the invoice, we can use an inventory part and a billing code to sell items to our customer:
- To see the behind the scenes accounting in the invoicing screen, click on Activities and then click on the view details option.
- You will notice that the Cost Debit accounts are assigned the 03 designation due to the XX codes.
There is a second method for departmentalization that only works for users utilizing the QuickBooks integration. QuickBooks uses a function called Classes to break sales income and other accounts down, and ESC can send over department information to these classes. Since Classes function exactly as Departments in ESC do, ESC sends over the department name as a Class in QuickBooks. There is no necessity to create multiple chart of account listings for different departments, as QuickBooks will simply break out the Class information whenever a report is run by Class.
Therefore, all ESC sales could go to the same account, as well as costs, and the report in QuickBooks will separate the dollars based on class, eliminating the need for multiple accounts, XX Codes, and special billing codes.