QuickBooks for Flippers - Inventory vs COGS

[Mauricio Duarte]

Hi everyone!

Newbie here. Please be kind. 

I've recently formed an LLC with a partner to flip houses. We've purchased our first property and the project is underway. I'm a CPA (originally an auditor, now in consulting), so I understand the importance of keeping accurate accounting records. I've signed up for Quickbooks to help with that.

I’ve read a lot on here about capitalizing all expenses during construction to inventory and then moving those expenses to COGS once the property is sold—makes complete accounting sense. However, from the little I know so far about QuickBooks, it just doesn’t seem that it’ll help with maintaining historical data. I have set up WIP accounts for WIP LABOR and WIP MATERIALS. Each of those WIP accounts are assigned Classes (Landscaping, Flooring, Light Fixtures) so I can run reports later to help me better budget future flips. NOTE: I use the Customer/Project field to assign properties to my transactions (I know some people use Classes instead).

But here’s what I fail to understand. When the property sells and I transfer all these transactions to COGS by posting a journal entry, I will lose all of this granularity. Unless I create corresponding COGS accounts (i.e., COGS LABOR and COGS MATERIALS) and post individual journal entries to assign each transaction a Class (which is a lot of work), I will lose all the detail I’ve been accumulating in Inventory up until the sale. 

Am I missing something here? Why not just post all transactions during the rehab directly to COGS? The only issue I see with doing this is if you have a property that is in construction between two different fiscal years. If you charge everything to COGS and the property is not finished by the end of the fiscal year, you’d need to move those costs to Inventory and then back to COGS once the property sells. 

For those of you who are more familiar with QuickBooks and post the costs during rehab to Inventory, could you please let me know what you do to transfer those costs to COGS and not lose all the detail for reporting purposes? Maybe the answer is not to post journal entries, but to just change the accounts where the transactions are mapped once the property sells, which is still a lot of work. 

Please help. Thanks!