In a service business, employees often track the amount of time they spend on each customer. Some of that time might be billable and some might be unbillable -- if you have to perform rework or fix an error, for example, that time is unbillable. Employees also have unbillable time for company meetings and other activities. To handle unbilled labor, set up codes to use when you enter employee time sheets. Enter both billable and unbillable hours for each employee. Generate reports to monitor how much unbillable labor you have and how the time is being spent to help improve your productivity.

Create Codes

Identify the categories of unbillable labor you want to track. For example, you might have an unbillable category attributed to a customer, such as "Rework," and categories not attributed to any customer, such as "Paid Time Off," "Meetings," "Training," "Sales" and "Other."

Launch QuickBooks and open your company database. Choose "Lists" and "Item List" from the menu.

Select "Item," "New" and then choose "Service" to add a new unbillable labor category. Type a name for the category -- for example, "Unbillable" -- type a description, enter "0" as the Rate, choose your non-taxable code and select the general Services account. Click "OK" to save the item.

Choose "Item" and "Add/Edit Multiple Items." Click in the first blank row. Type a name in the Item Name column; for example, "Rework." Select "Unbillable" in the Subitem column, enter "0" as the Sales Price, select your general Services account and choose your non-taxable tax code.

Click in the next blank row and add the remaining unbillable labor categories. Choose "Save Changes," "OK" and "Close" when done.

Enter Time Sheets

Choose "Employees," "Enter Time" and "Use Weekly Timesheet" to enter an employee's time into QuickBooks.

Click in the "Customer" column if the non-billable time can be attributed to a customer. Leave the Customer column blank if the unbillable time is general overhead. Select the appropriate code from the Service Code column to record the category of non-billable time. Enter the other information the same way you enter billable time, but type an "N" in the Billable column.

Choose "Save & Close" to save the employee's time sheet.

Run Reports

Choose "Reports," "Jobs, Time & Mileage" and "Time by Item."

Select "Modify Report..." and click the "Filters" tab. Select "Item" from the list of filter fields and then click in the "Item" selector box and select the "Unbillable" service code.

Click the "Header/Footer" tab. Type a new title for the report -- for example, "Unbillable Time" -- and choose "OK."

View the report, make other changes as appropriate and choose "Memorize..." Type a name, such as "Unbillable Labor Report," check the "Save in Memorized Report Group" option and select the appropriate category.


Create an unbillable labor report by employee to assess each employee's productivity and the amount of rework performed.


Make sure you train employees how to code their unbillable time properly. If employees don't code their unbillable time properly, the reports you use to analyze the time won't be very meaningful.

The steps in this article apply to QuickBooks 2013 and earlier versions. Later versions of QuickBooks might have slightly different steps to handle unbillable labor.