Help! Mfg. accounting-inventory/COGS chart of accounts
 

I need help! while at one time I could craft up a simple chart of accounts and perform reasonably sound bookkeeping, a new women's apparel and merchandise company I am launching has me stumped.

We are creating: purses and apparel, so buying raw goods. Direct costs for one of the purses are:
Purse
Porcelain tile
Bead Chain
Connector
Freight in

others will have aluminum plates and rivets, others will be embroidered. See pic.

For a shirt
shirt
image transfer
transfer labor
freight in

I want to track down to the style of purse (3), color, artwork type (embroidered, tile, plate) etc.

I am using MYOB AccountEdge and slogging through setting up a ton of accounts but am not positive I am doing it correctly.

We will have Direct Materials and Finished Goods, there really won't be any work in process. Either it's done or it's not.

We will sell direct over the web and to boutiques.

Any help on the subject is much appreciated, and I can explain more about what we are doing too.

thanks

Shaun

http://forums.pelicanparts.com/uploa...1093370546.jpg

I have NO idea what you're talking about Shaun, but those purses look really cool. Things are insane out my way, but we need to get lunch again, I'll see if I can roust some other cambridge pelicanites to come as well. I might even permit you to sit in the 944 :)

Shaun,

It seems you are trying to be very specific. While I don't know that particular application (MYOB), couldn't you set up a couple of summary accounts to track direct materials and have subsidiary accounts to track all your seperate materials? Are you buying each item from a different vendor? Sounds like a back office nightmare? :) Then whatever mechanism (time cards, job tickets) you use to complete an item will move it to finished goods again with it's own summary account.

FWIW and for such a (presumably - based on your other threads) small operation, it sounds overly complex.

I'm kinda interested in what your trying to do. I might be able to serve as a sounding board, PM me.

Steve, CPA (only licensed in VA :D )

Nice product there.

Do we get a secret Pelican coupon code whe odering for our "significant others"?

Shaun,
I haven't worked with MYOB - but can't you keep actual account numbers to a minimum, but track RM on a part number basis under a couple of accounts, and track FG similarly under unique part numbers or SKUs? If you have unique account numbers for each distinct part, you're going to create an accounting nightmare once operations ramp up.

Steve, sent you a PM. If you want to talk more, my email is shaun@g9girl.com.

A secret Pelican discount? How's 25% off retail sound? here are a few pages from our sales catalog, work in progress! Also, a pic from a recent photoshoot. We've got 19 styles of apparel (T's, tanks, shorts, hoodies, intimates) with 30 unique designs, 3 purses and stationary all pretty much ready to go in launching G9Girl.

All artwork is from acrylic paintings done by my partner.

let me know what you think.
http://forums.pelicanparts.com/uploa...1093376304.jpg

http://forums.pelicanparts.com/uploa...1093376341.jpg

http://forums.pelicanparts.com/uploa...1093376438.jpg

Very nice. I will definitely show this to my daughter. Although she's only seven she digs this type of thing.

Dave, here is where I am at. Does this look right? I am a true analysis freak, so I want to report down to the last detail. MYOB does have a "build a finished good" module with an auto-build feature, so that should help. I still don't know how to treat Freight In regarding Raw Materials, and guess that it goes into the Finished Goods total, then translated to COGS sold on a sale.

Thanks so much for your help.

Inventory Accounts
http://forums.pelicanparts.com/uploa...1093377410.gif

COGS Accounts
http://forums.pelicanparts.com/uploa...1093377437.gif

Sales Accounts
http://forums.pelicanparts.com/uploa...1093377462.gif

Shaun,
You have another PM in response (in case you didn't see it pop up).
-Steve

OMG...he's using a MAC!!!!
Buuuurn him!

Who is the model!?!

hey Buddy, you don't want to go there! Not until you show me the PC laptop that you put to sleep at home on cable, walk down the street to the coffee shop, open the screen, have it automatically connect to the wifi network, work all morning, come home, plug it in to your home cable and automatically connect...no shutting down, restarting, changing configs. It just works 100% of the time.

and did I mention it NEVER crashes, never gets viruses, etc. :) :) :)

To me, it looks like the data entry on your A/P's is gonna really suck. I'd consider being more generic on your COGS and do your actual 'cost' accounting at the inventory level. Then again, it's been quite a while since I have done this stuff and am trying to remember where it all fits on the balance sheet :) Those purses are nice, if I may say so myself! That bowler bag looks to be a big hit...

Shaun,
Your AP staff and controller will literally mutiny with those accounts. Think 5 years ahead when you have thousands of part numbers in raw materials, and all manner of legacy SKUs for finished goods. That accounting package is going to be slower than molasses. Your accounting staff will not be able to reconcile inventory accounts because there are too many of them, and period-end closing will be really tough. Again I don't know if you can do this in your MYOB - but your 1310 and 1330 accounts should pretty much end there, with minimal subaccounts.

As far as the freight-in goes: I'd build the freight into your raw materials cost. Generate your purchase orders so that freight is included as a line, and when you receive the item against your PO, freight is allocated to materials on a per-unit basis. At that point, it flows through inventory and ultimately COGS and you don't have to do separate accouting for it beyind setting up your POs.

thanks Dave. I understand. But how do you get detailed reporting on what it costs to build a purse, track inventory for materials to build a purse and then sales?

I want to be able to run a report that says:
We sold 7 Red Bowlers with plates and only 2 Red Bowlers with tiles and be able to make product decisions based on sales.

I hope you don't mind, but here's another question: We just opened a bank account and set up a balance. I've been spending for 2 months against Capital Paid In.

To simplified data entry, can I use the purchase journal, set to automatically debit an Asset clearing account and then make a GJ entry Crediting that and Debiting my Capital Paid In? It would be much easier than making GJ entries for 100 or so small receipts and I would have the vendor info.

Hey, I just noticed you have a purse named after the Cayenne :)

I think that report would come from the sales side. You could probably have a detailed SKU report that shows the actual 'built' item and its components. Does MYOB have a fabrication module?

And our blue Carmel purse is Minerva Blue.

MYOB has an auto build function. See screenshot. I detail how we buy things, like bead chain in 1 foot increments at $.30 per foot, and in the build, I specify what it takes to build a purse. When I hit Auto-Build in another screen and tell it how many to make, it should do all hte math and journal entries.

What I don't like is that it also asks you to select Income, Inventory and COGS accounts for a finished purse. Inventory is easy, COGS is easy, but I've got at least 3 different ways to sell the puse: direct, web, wholesale and then automatically makes the entries once something is sold. I got the program because it can account for up to 30 price points for a given product (important to us), so clearly I've got to do some more investigating.

http://forums.pelicanparts.com/uploa...1093389760.gif

As far as reports on what it costs to build a purse, you would work up a standard cost based on what it cost you now and stick to that for a while. When you see costs escalating up (materials getting more expensive, etc) you would revisit it. What you are producing (likely) isn't very expensive in that you need to track hundreds of dollars worth of meterial going into each item.

The other guys are right though, your A/P staff (you?) and controller (you again ;) ) are really going to hate that after a while - trust me I'm an accountant's accountant. You will likely rather make once a month or once a week JEs to record that changes. You will likely record your sales as the happen but can computer COGS after the fact by doing a count of inventory.

If you are day to day involved (as I assume you are) you will know what's selling and have a better pulse on the business than when you have others working for you. Wait until that time to produce all those reports. And then consider whether it's worth your money to have someone produce them - y ou may not need them.


In short, yes. Tedious as hell though. You might want to just find all the common vendors and put them in in total (this time only ;) ). Put them all in individually on a going forward basis.

This sounds exciting (the business, I'm sure everyone but dtw, bb80sc and I have all dropped off because theres no Kerry/Bush content. :D Keep us posted on your sucess!!

gosh, Im with VAsteve's final opinion. I see a lot of people go out and spend big bucks and big time on accounting software to record and track what can be done with a few sheets of notebook paper. Keep your life as simple as possible intill you need the detailed info. Spend your time marketing.

Call me crazy, but this thread is actually making me miss accounting a bit :) I use to reconcile every account to the penny every month. There were several times when I just could not get things to reconcile. Then, I'd wake up at 2:00 in the morning and the answer would be there. Sure enough, I'd go into the office the next day and that "was" the solution. BTW, my wife just saw this thread and she really likes the purses. Let me know how to order one!

Good luck.

Hi Brad,

I too like the precision, I just wish I knew what I was doing! I am a far better marketer than accountant, that's for sure! I know just enough to get me in trouble.

Which purse would you like? Just let me know which one and color, take 25% off the suggested consumer price, add $4.50 for shipping.

You can PayPal orders@g9girl.com, or if you want to send a check, send to:
G9Girl, Inc.
74 Foster Street
Cambridge, MA 02138

I'll get one out straightaway.

Thanks so much.

Shaun

Wow! I'm having flashbacks to my business. We had the same exact problem, but we made window screens. Each screen was made up of a certain amount of extruded aluminum, four plastic "L" corners, screen mesh, plastic spline, and mounting hardware.

We used Quickbooks, but seems like we had it set up to remove each item from our parts inventory every day as we added finished screens to our sellable inventory.

My opinion is that there's a point where you just spend the money and call your accountant. You don't want to get 6 months into this venture and then find out your accountant wants/needs it done a different way.

Good points above- there may not be the capacity to make the reports you need in MYOB, but you may not need to invest in a new ERP system/acctg package just yet. Every package these days has the ability to dump data to excel - you may be able to do the analysis and reporting you need from there, depending on your excel skills.

Costing, as mentioned, should be based on your BOM (bill of materials). Looks like you've got the right idea on generating those. Either in MYOB or excel, you should have no problem analyzing your sales mix, determining profit leaders,etc, by tracking revenue and associated margins by SKU.

Not sure I know enough to offer an opinion on the purchase entry issue? Are you saying that you have 2 months worth of purchases you need to put into your package, to correctly reflect the cash burn you did before you bought the package? Yeah you could probably just run a batch entry through the P&L...if it was me I would probably just key them all individually but that's the accountant in me.

Hi Dave,

thanks for the advice, looks like I am good to go on the whole inventory, COGS, sales issue. yes, I can dump to excel, I'm just one for automation and running reports internally would have been great.

In truth though, if this business works out in the scale I hope, a custom written application that ties bookeeping with web-based orders (both online store and boutique/teen-based sales reps) with inventory mapping will be the way to go. I could probably get something written in Filemaker Pro for $5K or so.

RE: entering historical data, I set up a temp clearing account in liabilities as a credit card so that running each transaction through the bank register defaulted to that account, I now have vendor historical data and even created a few jobs like "purse design" such that all R&D with purses was categorized.

Next I'll just make a JE against the CC account and credit my Capital Paid In.

Got our final heat transfer images for testing in today and they look great. Early September we'll have a complete line.

OK, on to setting up a merchant account...

OK I make a living, selling, installing and customizing Accounting Software.

What you need is a package that can

1. track your actual raw materials into inventory (GL Account RAW MAT 1300). Purchasing and AP
2. Has BOM (Bill of Materials) and can do a build in which it pulls the required items from your RM inventory, rolls up the costs and allows you to either enter actual or a factored labour componenent
3. Put those finished materials (GL ACCT 1310 Finished Goods) into stock with the cost as built attached.
4. Track the sales of each built item against it's cost. (SALES GL Acct 4000, COGS Account 5000 ,maybe a pair for each product type if you want to break that out. IE purses, shirts)
5. Allow you to report on sales of sku's with COGS vs Selling for a profit analysis. Plus a few million other reports for AP/AR Fast/slow moving etc.

You mention a WEB interface as well.

And you need GL for statements, probably could use Bank Reconcilition functions, straight AP for expenses. Maybe a Kitting function to allow custom combo's that are put together only on order. IE a leather purse + gold chain strap

You might be able to get a custom app written for $5k, but it is only going to have what you think of when it is being written, and everything you want to add will cost another $1k.

Looks like MYOB has some of that, however it doesn't appear to have an actual BOM function, or any WEB capabilitys.

I suggest taking a look at something like Simply Accounting Pro which has a BOM and offers a predefined 'Webstore' option. Only problem is it is only available for PC's. Mac's aren't very common in accounting departments.

Note, I have not actually used Simply Accounting, I sell a higher end package, but I try to stay current on what is available so I know whether I am going to be put out of business by a $250.00 system soon ;)

Shaun, I've been using MYOB for my (service) business for over 8 years.

Your account setup looks good.

But I think you may be trying to do an analysis within MYOB that is much better handled separately. Consider that assembly and packaging labor and overhead/utilities, plus a portion of G&A, plus actual packaging materials are all part of your COGS.

Because fixed (and some variable) costs will have a 'sliding' impact on COGS, this is a separate analysis better handled in Excel, IMHO.

Using Macs for accounting is just like using Macs for anything else: just like a PC without the crashes, viruses, worms, trojans... and massive lost productivity.