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MissBianca

Total newb needs help with setting up inventory and accounts

Posted By

Hi,

I'm trying to setup Sage 50 and I'm becoming more and more confused! I do use Sage at my day job for entering payables and receivables, so I'm familiar with a lot of the program, but not familiar how to set it up to use for my side business making soap.

Since I make soap I buy ingredients, mix them up, and sell the finished product. So far I've set up COGS for every ingredient I buy (plus shipping), and matching accounts for Inventory Assets, as well as set up the General & Admin Expense accounts.

Now, the confusion starts when I try to enter a purchase invoice for something that is not an ingredient (inventory), when I click on the Report option to see if it's posting it tells me No Data To Report. So I'm assuming it won't debit any of the COGS accounts until I build something and enter a sale? Is that right? 

All I really need Sage to do for me right now is tell me how much money I'm putting into the business versus how much I'm getting out (purchases and sales). This is only my second year (last year I just handed all my receipts to an accountant at the end of the year so I didn't have to deal with any of this!), and I'm very very small (I have 2 retailers) and I'm not planning on being profitable so I don't REALLY need to track all my inventory at this time. Should I set up Sage differently? I used the wizard so I'm not even really sure how I got all these accounts and processes.... 

I know I should be taking a course to learn the ins and outs, but I'm hoping I can get enough help here to get me going in the right direction. So, thank you in advance if you can give me a hand!

  • 0
    Hi,
    If inventory on hand is not significant (if you don't carry much compared to sales), or if it doesn't change much from month to month, then it might be easiest to avoid the complexity by setting up the goods you buy as a 'Service Item' rather than an inventory item.

    When using only 'Service items', each purchase is immediately expensed, and each sale is recorded as 100% revenue, so you can't report on some of items like profitability by product, or by customer. But if your margins are consistent between products, and between customers, you won't have to use those reports since you can tell what's going on just from the sales numbers. (i.e. if you mark up the finished product by 40%, and your sales are $1000, you know that your gross margin is $400.)

    You can keep a G/L account for inventory, do periodic (yearly or monthly) counts to come up with a value. You record the difference as adding to, or subtracting from, cost of goods sold.

    At this stage of your business, it's probably most important to focus on where your cash, receivables, and payables are, and sort out the inventory at year end.

    Using Sage 50 inventory when manufacturing, to keep track of the value of goods on hand is complicated to set up and time-consuming to operate. If it's also un-necessary, then you should consider keeping it simpler.

    I hope that helps, please post back.
  • 0 in reply to RandyW
    That does help, thank you!
    Any suggestion on which "type of business" to pick from the wizard?
  • 0 in reply to MissBianca
    It's most important to choose the correct 'Ownership structure'. From there it doesn't matter too much, just pick the type that's closest to the core of your business.

    For your candle manufacturing, if selling wholesale job lots of candles was more the core of your business than the selling part, then you would choose manufacturing rather than retail sales.

    The account charts are fairly similar between companies, you have the option to prevew the account list before it's created, and it's fairly easy to modify the chart if you need to.

    You likely won't need half or more of the accounts that are created, but it's far easier to prune off the parts you don't need, or to mark them inactive, than it is to set up the needed inventory or payroll accounts from scratch.
  • 0 in reply to RandyW
    Ok, thanks again!

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