Comments on: Understanding QuickBooks Inventory Cost http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/ The Authoritative Source for Small Business Accounting Solutions Wed, 16 May 2012 22:51:51 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Charlie Russell http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-2/#comment-119145 Charlie Russell Mon, 30 Apr 2012 22:54:29 +0000 http://www.sleeter.com/blog/?p=282#comment-119145 Cheryl, hard to say without having hands on the file. COGS postings going forward are going to be based on the average cost you have for the items at the time of the sale. If you did just a "quantity" adjustment, that doesn't change the average cost, and I can't tell if the average cost going forward is going to be accurate or not. If you did a "quantity and value" adjustment, then you have reset the average cost to some value - if that is a correct value, then you are OK going forward (but I can't tell if your COGS valuation will be right in the past). There are a bunch of things interacting here so it is not possible for me to say if you have it set up right or not. And, going forward, it is only accurate if the client changes their ways and moves materials through the system correctly. If they continue to make the same mistakes as before, the problem comes back. Cheryl, hard to say without having hands on the file. COGS postings going forward are going to be based on the average cost you have for the items at the time of the sale. If you did just a “quantity” adjustment, that doesn’t change the average cost, and I can’t tell if the average cost going forward is going to be accurate or not. If you did a “quantity and value” adjustment, then you have reset the average cost to some value – if that is a correct value, then you are OK going forward (but I can’t tell if your COGS valuation will be right in the past). There are a bunch of things interacting here so it is not possible for me to say if you have it set up right or not.

And, going forward, it is only accurate if the client changes their ways and moves materials through the system correctly. If they continue to make the same mistakes as before, the problem comes back.

]]> By: Cheryl D http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-2/#comment-119129 Cheryl D Mon, 30 Apr 2012 21:16:05 +0000 http://www.sleeter.com/blog/?p=282#comment-119129 Charlie - I am having the same inventory problem with a client as Barry is having. Their system was set up before I got to them, and we have been trying to make it work for the purposes they need. They mainly wanted to be sure that everything (office furniture) that they were buying was getting invoiced when sold so that nothing was falling thru the cracks. These were big items and were only supposed to be used once - from PO to bill to invoice everything was supposed to flow through the system. Then things got crazy and the items were being re-used without being "purchased" back into stock. QB was average costing and then the P&L looked like Barry's. I noticed in the item listing that I had some negative "quantities on hand" since we were selling and not purchasing, so I did an inventory adjustment to COGS as a test and zeroed out those negatives on the items that I knew were complete. Will this give a more accurate reading in the COGS on the P&L? Charlie -
I am having the same inventory problem with a client as Barry is having.
Their system was set up before I got to them, and we have been trying to make it work for the purposes they need. They mainly wanted to be sure that everything (office furniture) that they were buying was getting invoiced when sold so that nothing was falling thru the cracks. These were big items and were only supposed to be used once – from PO to bill to invoice everything was supposed to flow through the system. Then things got crazy and the items were being re-used without being “purchased” back into stock. QB was average costing and then the P&L looked like Barry’s. I noticed in the item listing that I had some negative “quantities on hand” since we were selling and not purchasing, so I did an inventory adjustment to COGS as a test and zeroed out those negatives on the items that I knew were complete. Will this give a more accurate reading in the COGS on the P&L?

]]> By: Charlie Russell http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-2/#comment-114940 Charlie Russell Sun, 15 Apr 2012 17:10:30 +0000 http://www.sleeter.com/blog/?p=282#comment-114940 Barry, it is hard to give a specific answer without seeing your file, and knowing a lot more about your situation. In a very general sense, if you went back and entered all the purchases/receipts, that should resolve things. However, it does depend on how long a time this has been going on, how much work that entails, what you did as far as entering the expenditures for those item purchases (assuming you have been entering the checks you wrote?), and more. You may want to work with a qualified consultant who can look at your situation and work out a plan with you. And, then, you have to work out a solution that will keep this from happening again as you move forward. Barry, it is hard to give a specific answer without seeing your file, and knowing a lot more about your situation. In a very general sense, if you went back and entered all the purchases/receipts, that should resolve things. However, it does depend on how long a time this has been going on, how much work that entails, what you did as far as entering the expenditures for those item purchases (assuming you have been entering the checks you wrote?), and more. You may want to work with a qualified consultant who can look at your situation and work out a plan with you. And, then, you have to work out a solution that will keep this from happening again as you move forward.

]]> By: Barry http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-2/#comment-114780 Barry Sun, 15 Apr 2012 04:10:11 +0000 http://www.sleeter.com/blog/?p=282#comment-114780 Hi Charlie, I am looking at my company file that has has been selling invertory and not booking any receipt of items. All the inventory is current showing negative balances. In the P&L the COGS is 4 time the sales figure. I am trying to record the receipt of itmes for the first time. I am not an account so forgive if I am using the wrong wording. If I record all my billes for inventory purchased, would this fix the problem in the P&L? If that wont work, do I need to recreat the inventory items so that a more accurate average cost figure would affect the P&L and BS? How do I fix my problem? Hi Charlie,

I am looking at my company file that has has been selling invertory and not booking any receipt of items. All the inventory is current showing negative balances. In the P&L the COGS is 4 time the sales figure. I am trying to record the receipt of itmes for the first time. I am not an account so forgive if I am using the wrong wording.
If I record all my billes for inventory purchased, would this fix the problem in the P&L?
If that wont work, do I need to recreat the inventory items so that a more accurate average cost figure would affect the P&L and BS?
How do I fix my problem?

]]> By: Charlie Russell http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-2/#comment-110181 Charlie Russell Mon, 26 Mar 2012 15:59:33 +0000 http://www.sleeter.com/blog/?p=282#comment-110181 Rany, QuickBooks doesn't have a way to prevent that from happening. Rany, QuickBooks doesn’t have a way to prevent that from happening.

]]> By: Ramy http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-2/#comment-110157 Ramy Mon, 26 Mar 2012 12:40:04 +0000 http://www.sleeter.com/blog/?p=282#comment-110157 Hi Charlie, I have item X cost 2 USD - sometime my salesman is sell it at 1 Usd ( negative margin ), so i check that every end of month but too late. Please any way to block the sales of any items sell it ( UNDER - COST ) Thanks Hi Charlie,

I have item X cost 2 USD – sometime my salesman is sell it at 1 Usd ( negative margin ), so i check that every end of month but too late.

Please any way to block the sales of any items sell it ( UNDER – COST )

Thanks

]]> By: Charlie Russell http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-1/#comment-108709 Charlie Russell Sun, 18 Mar 2012 16:43:52 +0000 http://www.sleeter.com/blog/?p=282#comment-108709 Joseph, it is hard to give a specific answer without having hands on the file. If you are using inventory parts, and your average cost is zero, then you aren't handling the purchase/receipts transactions correctly. That is where the average cost will normally come from. I can't tell you how to fix that going backwards without knowing how long you have been using the system. Moving forward, you need to fix your processes so that these values are being captured correctly. Joseph, it is hard to give a specific answer without having hands on the file. If you are using inventory parts, and your average cost is zero, then you aren’t handling the purchase/receipts transactions correctly. That is where the average cost will normally come from. I can’t tell you how to fix that going backwards without knowing how long you have been using the system. Moving forward, you need to fix your processes so that these values are being captured correctly.

]]> By: Joseph Wein http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-1/#comment-108626 Joseph Wein Sun, 18 Mar 2012 05:06:33 +0000 http://www.sleeter.com/blog/?p=282#comment-108626 Charlie, Thanks for your time and great replies, Need some problem solving. I just ran a report as to see my profit on some sales I did, and realized that some items I make 100% profit, when I went in to those Items the cost is filled up, but the avg. cost is empty, after reading some help and the community I realized that the report derives the information from the avg. cost field is there any way I can modify that field so my Profit and income are accurate ? Thanks for your time and appreciate your help Joseph Charlie,

Thanks for your time and great replies, Need some problem solving.

I just ran a report as to see my profit on some sales I did, and realized that some items I make 100% profit, when I went in to those Items the cost is filled up, but the avg. cost is empty, after reading some help and the community I realized that the report derives the information from the avg. cost field is there any way I can modify that field so my Profit and income are accurate ?

Thanks for your time and appreciate your help

Joseph

]]> By: Charlie Russell http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-1/#comment-106120 Charlie Russell Mon, 05 Mar 2012 21:52:05 +0000 http://www.sleeter.com/blog/?p=282#comment-106120 Katrina, that is more complicated than I really should go into in a blog comment like this. Changing the asset account WILL affect existing transactions, so that probabl isn't what you wan tto do. There are all kinds of things going on here - the best idea may be to see if you can get them to use proper procedures as they move forward. If they are using "inventory parts" but not consuming them, the quantity is building up and that means it is worthless to do that work. Get them to "build" the items to pull the components properly. Or if it makes sense in this situation, create new items that are "non inventory" parts so that you don't have to worry about quantities and such. Katrina, that is more complicated than I really should go into in a blog comment like this.

Changing the asset account WILL affect existing transactions, so that probabl isn’t what you wan tto do.

There are all kinds of things going on here – the best idea may be to see if you can get them to use proper procedures as they move forward. If they are using “inventory parts” but not consuming them, the quantity is building up and that means it is worthless to do that work. Get them to “build” the items to pull the components properly. Or if it makes sense in this situation, create new items that are “non inventory” parts so that you don’t have to worry about quantities and such.

]]> By: Katrina Cerkez http://www.sleeter.com/blog/2011/02/understanding-quickbooks-inventory-cost/comment-page-1/#comment-106114 Katrina Cerkez Mon, 05 Mar 2012 21:10:16 +0000 http://www.sleeter.com/blog/?p=282#comment-106114 I have a client who uses QuickBooks Enterprise Solutions 2011. They currently caring inventory, and are tracking inventory in QBs; however, they are not actively using inventory. Meaning that they are purchasing items and posting them to the Inventory Asset account, but they are not removing the items from inventory when they are used in the manufacture of a product. In addition, because the parts are not being pulled from inventory in QBs and thus charged to the job, the PNL per job do not show the accurate COGS. I have suggested that they change each inventory item "Inventory Information" field "Asset Account" from "Inventory Asset" to "COGS:Materials" so that the Job Costs are tracked properly. They are concerned that if we do that, all historical data purchase under that part would also be moved to the COGS account. They have already created an AJE to move the 2011 and prior Asset Inventory used to COGS. So if we change the account at this point will it only change any new items we enter or will it change all parts ordered under that part number? Please advise. Thank you. I have a client who uses QuickBooks Enterprise Solutions 2011. They currently caring inventory, and are tracking inventory in QBs; however, they are not actively using inventory. Meaning that they are purchasing items and posting them to the Inventory Asset account, but they are not removing the items from inventory when they are used in the manufacture of a product. In addition, because the parts are not being pulled from inventory in QBs and thus charged to the job, the PNL per job do not show the accurate COGS. I have suggested that they change each inventory item “Inventory Information” field “Asset Account” from “Inventory Asset” to “COGS:Materials” so that the Job Costs are tracked properly. They are concerned that if we do that, all historical data purchase under that part would also be moved to the COGS account. They have already created an AJE to move the 2011 and prior Asset Inventory used to COGS. So if we change the account at this point will it only change any new items we enter or will it change all parts ordered under that part number? Please advise. Thank you.

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