Inventory & Non-Inventory

[goingloco]

My client has a new embroidery business. At first, the owner wanted to track inventory, but has since decided it too cumbersome and time consuming. There is not enough staff to handle the daily input necessary to track it properly. I am there once a week to process payroll, payables and receivables. So, going forward in 2004, we are not going to track inventory. We will be using purchase orders for control purposes only. Any suggestions on how to process purchase orders without items???

Secondly, there are items purchased that are part of the embroidery process....thread, needles, computer tapes, etc. Would these purchases be considered COGS or expense? How do we incorporate them into the scheme of things?

Any suggestions are appreciated.

[brecor]

The first part is sort of difficult. The purchase orders pretty much link to the items. Maybe fill out the purchase order, print it, then cancel out of or delete it? You won't have tracking that way in the software though.

As far as the second part, anything used up to get the final product would be a COGS. So just record the bills, checks, etc for those purchases to a COGS account. Not sure if that's answering the question or not?

[goingloco]

Yes brecor....you did answer my question. Thanks for your response. What I was thinking about doing for the po's is setting up and item "COGS" and link it to the COGS account on the purchase side, and sales income on the sales side. Then, bring everything in and out on this one item. What do you think??

Thanks again!!

[brecor]

Well i don't think any actual numbers will be recorded with a po. It won't go into your COGS account on the purchase side until you receive items with a bill. And the sales side won't be affected until you record an invoice with that item involved.

[goingloco]

I think that is exactly what I want. I would not use po's at all but we need something to receive the items against, checking colors, sizes, etc. Once I receive them officially with a bill, the dollars will hit COGS and then as I invoice the items out, hit sales. All without any real detail.

Which brings up another question. Come 01-01-04 when we change over, how do I handle the accounts with balances??? COGS, Sales Income, Inventory Asset??

Thanks again Bud!

[brecor]

Well any Income or expense accounts 0 out at the beginning of your Calendar/Fiscal year. If you would want to do a fresh start on the inventory, you would probably have to do an inventory adjustment on 12-31. I would do that after you have run any reports for tax purposes for '03. Or do a backup file so you have the past years info intact and make changes in another file for future. Or create a new company file for '04 and just export/import your list info to it.. Many possibilities on way to go.