Quickbooks Pro and inventory for production of framed prints

[MichaelEzra]

Does anyone here has experience in setting up Quickbooks pro inventory for tracking the use of raw materials in production of framed photographs?
Foamboards, mats, paper rolls get "broken down" for each individual product created (multiple products from each raw item), while frames are the opposite - it is assembly from sections (single product from multiple raw items).
Can't figure out how to handle these within this software. Any advice is much appreciated:)!

[Stephen Ray]

I think QB Pro only accommodates simple inventory of items to be re-sold (in whole) as opposed to a more complicated manufacturing process such as yours. Your process is “portioning” of your raw materials.

QB uses the qty and item ID from the line item fields on the invoice to deduct from the On Hand field in inventory. QB doesn’t know how you’ve portioned a case, roll, sheet, etc. of material and therefor cannot calculate the On Hand result.

[MichaelEzra]

Thanks, I suspected that. I suppose that one way around that in QB is to use a temporary work in progress account, so raw materials get moved there, the outcome of the work is creating of inventory items which are ingredients of the final product with 1-to-1 mapping. E.g. move 2 rag mats to work in progress, result is 4 16x20 rag mat portfolios. Not sure yet what to do with the leftovers:)

[Stephen Ray]

I'm curious as to what exactly you are asking QB to tell you or do for you?

[MichaelEzra]

As IRS requires inventory management, I am trying to setup QB to answer that requirement.
Ultimately, inventory gets expensed via cost of goods sold.
But goods and their cost don't easily translate to cost of raw materials due to complex "portioning", which as you mentioned QB are incapable of accommodating natively...
So I am looking at ways to implement this translation in QB indirectly.

[Joe Towner]

https://community.intuit.com/articles/1501320-create-build-and-work-with-inventory-assembly-items

This may be a good starting point.  Things you'll need to have categories for are waste and demo.  As to things like paper, increment it in feet, not as a roll.

-Joe

[MichaelEzra]

Thank Joe, this can work for assembly of the framed print from the correctly sized assembly parts (mats, prints, frames, acrylic, foamboard, etc)

The complication is that assembly parts are not purchased correctly sized initially, but made from raw material (E.g. 32x40 mats cut into 16x20 window mats, which become assembly items).

[Joe Towner]

Well, you could enter .25 of the 32x40 mat - or if you're going to cut them down in advance, specify a job and (-) the large sheets and (+) the small sheets, plus account for your time (nothing is free).

Inventory is a huge thing, here's a simmilar thread.  Take away the 'photo' description of the business, it's just raw materials & inventory.

Here's some videos to take a peak at - at first glance they may answer a lot of your questions. https://www.youtube.com/user/BSPforQB/videos

[BobShaw]

You may be overthinking this. I don't know anything about the IRS but when I ran a framing business I regarded moulding, glass, mat board as consumables and just wrote them off when purchased.

I used my own software called GetFRAME to see how much material was used in each job and costed it accordingly.
It doesn't track usage at the moment but could be added.
Demo is here
http://advantageconsulting.com.au/hikashop-menu-for-products-listing/category/17-getframe-custom-framing-software.html

[MichaelEzra]

Joe & Bob, thank you, I will take a look!

[bwalker]

Michael, what you're referring to is known as "Bill of Materials" capability. Quickbooks Premiere is capable of providing that and is truly the way to handle your inventory needs as it allows for proper Cost of Goods Sold.

Billy Walker

[framah]

I agree with BobShaw.  Been doing that for 25 yrs and not keeping track of any inventory. I list it as materials bought for the business and then list income from sales of anything in the store.
Never had any problems doing it that way.

I have a framer friend who goes nuts every year trying to count all of her inventory  and try to figure out smalls and cutoffs.  Waste of time but that is how she set her business up.
If you want to keep track of your inventory, I suggest getting actual framing software like Lifesaver. You can keep track of inventory as well as price updates on materials and also work done and sales and a customer base. It is a more thorough software for a framing busines than anything Quickbooks could provide.

As a side note, it costs about $599 a year if you want to get updates on every framing company out there and their price list. If you only want to keep track of your own inventory and sales, then I guess it would be a one time cost.

It is worth the yearly expense for me to keep up on price changes of moulding, mats etc.

[bwalker]

I imagine a portion of the items used might sometimes be termed consumables/waste but the majority of it would be called inventory for sure. Whether you get caught or not really has nothing to do with what the product is and I assume doing it the way you did left you holding an inaccurate P&L?

You may be overthinking this. I don't know anything about the IRS but when I ran a framing business I regarded moulding, glass, mat board as consumables and just wrote them off when purchased.

I used my own software called GetFRAME to see how much material was used in each job and costed it accordingly.
It doesn't track usage at the moment but could be added.
Demo is here
http://advantageconsulting.com.au/hikashop-menu-for-products-listing/category/17-getframe-custom-framing-software.html

[framah]

My accountant has no problem with my way of accounting for my materials as she said there are those 2 ways to handle it... mine and the inventory way.

[bwalker]

I assume instead of calling the materials inventory you're just calling it materials. If it's hitting an asset account it would basically be inventory with a different name which would be fine. If you're immediately expensing it out is where the problem would come in. Example: you receive $5,000 in materials and put it into a materials account as an asset or do you immediately list it as an expense? Raw materials is technically inventory as is assembled materials. It would be expensed as Cost of Goods Sold at the time of sale. If that is not taking place you're P&L is wrong unless you happen to always expense the materials in the exact same month as the revenue behind the materials sold.

My accountant has no problem with my way of accounting for my materials as she said there are those 2 ways to handle it... mine and the inventory way.

[framah]

...and here I thought  that I was making a decent living because i was able to pay all of my bills and own a house and a nice Mercedes, take vacations, have a nice workshop to play on my lathe and basically enjoy my life due to how i run my business and now I see  that I've been wrong all along.

Whew!! Good thing you showed me the errors of my ways, otherwise my business could have gone down the drain after only 25 years.

[bwalker]

That's quite a leap from what I said. No one said you can't stay in business doing things wrong on your books. What was stated if you re-read is your P&L would be wrong. How you came up with your comments is beyond me. It might help others if they know how to handle the books properly was the reasoning for my comments. It's your business so if you feel it's beneficial to you to have things mis-stated that's fine with me. I would recommend newbies perhaps start out on the right foot however. IMHO that's better advice to hand out to people. But I guess I could be wrong on that.

...and here I thought  that I was making a decent living because i was able to pay all of my bills and own a house and a nice Mercedes, take vacations, have a nice workshop to play on my lathe and basically enjoy my life due to how i run my business and now I see  that I've been wrong all along.

Whew!! Good thing you showed me the errors of my ways, otherwise my business could have gone down the drain after only 25 years.

[kimballistic]

Generally speaking the IRS requires inventory tracking only if your gross annual sales are greater than $1,000,000.

https://www.irs.gov/publications/p334#en_US_2017_publink1000313270

Kudus to all who meet this requirement!