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Thread: Any product-based businesses here do cost accounting?

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    Default Any product-based businesses here do cost accounting?

    I'm a bit disappointed that Quickbooks Online doesn't have much in the way of cost accounting. The products setup screen does have a field for product cost, but that's it. One field. When I did a google search for cost accounting to see what other people recommend doing, all I got were links explaining how to do job cost accounting for service-based companies. I know it's similar. But not quite what I want. Maybe I'm thinking about it wrong.

    What I want to do is to track all costs that go into my products. For example a particular dog toy costs me $12.50 to buy wholesale from the distributor. Shipping it to me = shipping cost for the whole package divided by the number of units in the package, say $1.50 each. When my customer buys it, the box I pack it in cost me $50.00 divided by the number of boxes in that package, say $0.45. I stuff a little tissue in the box so it doesn't rattle around and that cost a few cents. Print the order and the postage on standard sheets of paper, so that's a few cents per sheet. A few more cents for tape to seal up the box and tape on the postage label.

    I'm pulling numbers out of my behind, just to illustrate what I'm thinking. After I add all that up, I'd get a figure of like $15.75 total cost to me to sell that dog toy. From there, my pricing spreadsheet can help me make sure I don't sell it at a loss. It would be nice if I could do that in Quickbooks instead of a spreadsheet.

    Do other product-based services do all that computation up front and then enter the final number into Quickbooks? Or do you use Excel? Am I working to hard at this or on the right track?
    Sharon, Owner/Operator
    Something Special Pet Supplies

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    I use a spreadsheet that will account for all physical items that go into making a saw blade. From there I go with a % markup to set a single blade price, and a discounting formula for volume purchases. I also include a figure for exchange rates.

    Example for a 24" x 100 tooth blade (numbers are pulled out of thin air and in USD):
    Saw plate = $100
    Carbide tips = 100 tips at $0.50 per tip = $50
    Silver solder to braze tips = 100 tips at $0.30 per tip = $30
    Total cost in USD = $180

    300% markup on physical material cost = $540USD
    Exchange rate (floating rate and has cushion built in to cover) = 40%
    Selling price in CDN dollars = $540+($180x40%) = $540+$72= $612

    Out of the final $612 selling price all other overhead needs to be accounted for.

    I'm going to be sitting down within the next few months and re-evaluating my formulas. I want to be able to better account for labor, machine time and cost, rent, and consumables. This should allow me to have a better handle on pricing and allow for me to set 2 tiers (direct and distributor).
    Brad Miedema
    Fulcrum Saw & Tool

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    Default Yes, I do inventory tracking and cost accounting

    Inventory tracking and cost accounting have rather imprecise definitions. Here are definitions in Wikipedia:
    https://en.wikipedia.org/wiki/Cost_accounting
    https://en.wikipedia.org/wiki/Inventory

    I will explain how I utilized Quickbooks 2004 to do "what I think you are talking about". I set up "items" in QB. An item is an inventory item that has a cost, sale price, number on hand and the income account Income:Collars. I think the term you used was product but QB calls it an inventory item. Say you write a check when you purchase 100 collars for $1000. The entry in QB increases assets:inventory:collars by 1000 and increases the count of the item collars by 100. Then you sell me 2 collars for $50. In my business I recorded sales with an invoice. (there may be other ways to record sales info.) On the invoice I would say I sold the item collar, 2 units and it would extend the price to $50 if the item sale price was $25. QB would allow you to enter any price you wanted on any invoice even if you had set the sale price $25. Lets say that was everything that happened in the month. When you run a profit and loss report it will include Income:Collars - $50. Then right after the income section of the P/L would be the COGS, Cost of Goods Sold, listing COGS collars - $20. The total income section would say Gross Income $50, COGS $20, Net Income $30. The Balance Sheet would include the Asset:Inventory:Collars - $980. If you run the inventory report it will show collars on hand - 98.
    I tracked other costs, packaging and shipping by including packaging charge and shipping charge on the invoice. So my P/L would have an Incomeackaging and Income:shipping and expenses were broken down similarly for comparison.

    I now use QB Online and have to do my own inventory tracking and enter the COGS manually. It is certainly a step backward. I want my Quickbooks 2004 back!
    There is certainly accounting software available now that will do what you are talking about but the cost is not in "hundreds" and the cost is every month!

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    Interesting feedback so far. I'm currently doing a spreadsheet very much like what Fulcrum described for his saw blades. I would like to do what John describes he did in Quickbooks 2004. Even though I'm a cash-based business (as in no accounts receivables), I also use invoices to record my sales. That way I can split the income into different accounts: sales, sales tax, transaction fee, shipping, etc. Then I immediately record the cash payment to settle the invoice.

    John, are you saying that QB online doesn't let you configure your inventory items the same way QB 2004 did? I'll take a look at mine this weekend and see if I can set it up the way you describe.

    On the other hand, it doesn't seem right to configure all of the things that Fulcrum and I describe as items and then have to itemize them on each invoice. The system should track them behind the scenes, I think. For example, we shouldn't have to include a line item "markup" on each invoice. It's puzzling....
    Sharon, Owner/Operator
    Something Special Pet Supplies

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    I use Sage (Peachtree) and most of what you want to do could be done easily in that program. You could set up an assembly that was the item, plus a few cents for tape, a few cents for labels, packing material etc. The part that could not be done would be the $ 50.00 box since you don't know how many you are putting in it. However you could make it part of the invoice but at no charge which would do all you want. In other words you would invoice the box for $ 0.00 but it would have a cost of $ 50.00 and it would not matter if you were putting 50 pieces or 500 pieces on the order.

    The version of Sage we use isn't cheap but there are cheaper versions that would probably do the same.
    Ray Badger, Turbo Technologies, Inc.
    www.TurboTurf.com www.IceControlSprayers.com

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    [QUOTE=SumpinSpecial;125162 >> I'll take a look at mine this weekend and see if I can set it up the way you describe. [/QUOTE]
    I am curious about what you found when you tried to configure QB Online as I outlined. I will admit that I have not tried those options in QB Online. What did you find?

    [QUOTE=SumpinSpecial;125162 >> it doesn't seem right to configure all of the things that Fulcrum and I describe as items and then have to itemize them on each invoice. The system should track them behind the scenes, I think.[/QUOTE]
    Obviously I did not explain the process adequately. It does do it behind the scenes. You do have to enter some line items like shipping which varies with each order but not profit margin. Subject is too deep to cover completely in a forum.

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    I was working in QB Online today and noticed that an invoice item might be an inventory item or a non-inventory item. Those options indicate that QB Online does offer some form of inventory control / tracking. Maybe QB Online offers more than I have indicated in my posts. And of course, they might indicate that it is available and an unsuspecting user might go thorough a lengthy set-up process only to find that the option is available AT ADDITIONAL COSTS. My apologies if I am only sour grapes.

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    You're right, John, about the additional costs. I found that I did not have the option to set up inventory items, only non-inventory and services. Pretty LAME! I have to upgrade my subscription to get the inventory items feature. So I'll do it in Excel for now. I don't get why they assume that small businesses are all service contractors!
    Sharon, Owner/Operator
    Something Special Pet Supplies

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    I use spreadsheets to account for hundreds of items in my supplies. I find the most important thing is to assign item numbers to everything. I list my sold items in one column, date in another, a column for item numbers, a column for amount used in sold item (mine is mostly fabric, so it is in sq inches). If there are multiple item numbers for sold items I have extra columns to account for them. When I am done listing everything I sort on the item number column(s) and add up everything sold with each item number and then transfer these numbers to another spreadsheet which keeps track of all the total amounts of every item. I am sure there are faster ways of doing it with quickbooks, this just works for me. I also keep at least four backups of everything and have all of them hooked up to the computer when adding or editing anything. Then I update all my backups at the same time, but I keep one of them and backup one step behind so in case I mess up backing up I still have one copy of the original before the edits. I also throw one copy into the cloud and update that occassionally as an additional backup.
    Last edited by suezw; 02-14-2017 at 03:27 PM.

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