How shall I tag work that I have outsourced to a colleague?

Accounting
1

Hello dear helpers,

for a big job, I have asked a collegue to carry out a part of the repair work for me. I am invoicing the job as a whole and he is invoicing to me. How shall I tag the payment to him?
Is it “professional fees”? Since it is a big amount, I want to make sure, that it is treated as cost of sale.

Bests,
Philip

2

Hi @philip_ihle

When you say ‘colleague’, is this someone who is employed by the business and works with you, or do you both work for another employer?

3

By “colleague” I meant, that he has the same profession. He is not employed by my, he runs his own micro company and I have only asked him to help me out on this one occasion. Could he be called a “subcontractor”?

Sorry for not being clear, I have troubles using the right terms…

4

Typically you’d tag this to " Sub-Contractors (6002)". This will appear under expenses on the P&L (Not COS), but it’s still offset against income.

5

Hi Phillip,

I would recommend that you place him under sub-contractor labour, as this is essentially what he is.

If you need any more help, please feel free to ask.

Kind regards,
Chris

6

I would also add a new nominal code at 5004 so it appears in cost of sales.

Kind regards,
Chris

7

Thank you Chris and Glenn!

Chris, why would it be advantages to have it under cost of sales? My feeling tells me so, but do you have a more funded explanation?

Bests,
Philip

8

Hi Phillip,

In terms of tax it would not be advantageous or disadvantageous to place it in cost of sales. However it will allow you when viewing your P&L to directly separate out your direct costs and your overheads. Some people find this gives them a better view of their business and its profitability.

Kind regards,
Chris

1 Like
9

Hi Chris,

this is definitely the case for me, I did exactly as you suggested- many thanks!

10

Happy to help.

Kind regards,
Chris