In many industries, subcontractors perform work on your behalf, and you later bill back these costs to your customers. This process—often called pass-through invoicing—ensures that subcontractor costs are recorded separately and then recovered efficiently. The method you choose for invoicing largely depends on how you record the vendor (subcontractor) invoice in your system via the AP Invoice Entry Distribution. Below are two common approaches.

Option 1: Simplified Cost Recovery Invoicing

Overview:

In this option, the subcontractor cost is captured on the AP Invoice Entry and posted to your designated cost/expense account. Then, on the AR Invoice, you can then apply a MISC salecode configured solely with a Sale account. Using this salecode, you would only enter the sell amount—the recovered revenue— In this scenario only the sale amount is recorded on the AR Invoice, with all cost tracked separately on the AP Invoice Entry.

How It Works:

• AP Invoice Entry Distribution:
  In the AP Invoice entry program, record the subcontractor’s invoice in the system by entering it into your designated cost/expense account. This step ensures that the subcontractor cost is tracked internally.
  
  

• Customer AR Invoice:
  On the customer AR invoice you would then use a MISC salecode configured with a Sale account to charge out the recovery revenue .In this scenario the customer invoice will only display the recovery revenue, while the underlying subcontractor cost will be captured internally on the AP Invoice entry and will not be tracked directly on customer invoice.

Outcome:

• Internal Tracking:
  The subcontractor cost is fully recorded on the AP Invoice Entry.

• Customer AR Invoice:
  The customer AR invoice displays only the revenue recovery amount, resulting in a clean and simple document.

Option 2: Detailed Cost Recovery Invoicing

Overview:
If you prefer to include both the revenue and the underlying cost breakdown on the customer AR invoice you can follow the steps bellow: In this setup on the AP Invoice Entry you would post the subcontractor invoice amount to the Inventory/Distribution account of your choice.

Then, on the AR Invoice, you would use a Misc Salecode configured with a Sale account, a CoG account, and an Inventory account. On the AR Invoice, you would then enter both the sale amount (representing the recovered revenue) and the cost of goods directly on the document. The cost of goods entry will then automatically clear the corresponding balance from the configured MISC Inventory account. This method allows you to track the cost directly associated with that invoice while maintaining detailed internal tracking.

How It Works:

• AP Invoice Entry Distribution:
  In the AP Invoice entry program, record the subcontractor’s invoice towards the account of your choosing, ensuring the cost is captured internally.
  
  

• Customer AR Invoice Creation:
  On the customer AR invoice you would then use a MISC salecode that is configured with mappings for a Sale account, a Cost account, and a MISC Inventory account. When entering the MISC item on the customer AR invoice, you would then include the cost amount and the sell amount directly on the document. This setup allows the invoice to track both the total recovery revenue and a breakdown of the underlying subcontractor cost.

Outcome:

• Internal Tracking:
  The subcontractor cost is recorded as usual on the AP Invoice Entry.

• Customer Presentation:
  The customer AR invoice provides a detailed view that includes both the recovery revenue and the cost breakdown.

Choosing the Right Option

Your choice between the simplified and detailed approach depends largely on how you prefer to record the vendor invoice in your system via your AP Invoice Entry Distribution:

• Simplified Cost Recovery Invoicing (Option 1) is best if you want a clean, easy-to-read customer AR invoice that shows only the recovery revenue, with the subcontractor cost tracked separately on the AP invoice Entry .

• Detailed Cost Recovery Invoicing (Option 2) is ideal if you want to track both the Cost and the Sale directly on the document. This method leverages a MISC salecode that includes mappings for a Sale account, a Cost account, and a MISC Inventory account.