Accurately Tracking Profitability for Fabrication Services (Inventory Item vs. Non-Inventory Item & Production Costs)

1

Hello everyone,

My business has three main arms:

  1. Manufacture of handles

  2. Manufacture of hangers

  3. Metal Fabrication & Powder Coating services

My primary challenge is to get a clear Profit & Loss statement specifically for my Metal Fabrication & Powder Coating services. Currently, the “Inventory - cost” line on my P&L lumps together all production costs, making it impossible to directly compare my Fabrication sales against its specific production expenses.

Here’s my current setup and where I’m encountering issues:

  • For “Metal Fabrication & Powder Coating services,” I’ve created an Inventory item named “Metal Fabrication & Powder Coating services.” My reasoning for this was that we custom-make unique items for each client, and creating a new inventory item for every single custom job would be too cumbersome.

    • Question 1: Is using an Inventory item for custom services like “Metal Fabrication & Powder Coating services” the correct approach, or should it be a Non-inventory item?

  • When I create a Production Order in Manager.io, all the raw materials (like steel, powder paint) that go into a custom fabrication job are consumed to “produce” this finished item of “Metal Fabrication & Powder Coating services” inventory item.

  • I attempted to use a Non-inventory item called “Services” instead, but I found that I cannot create a Production Order to produce a non-inventory item as a finished item.

    • Question 2: What is the correct workflow or setup in Manager.io to account for raw materials and other direct costs for a service (which is not a standard inventory item that I stock)? How do I properly record the consumption of raw materials for a service without “producing” an inventory item?

  • I have created a dedicated Division for “Fabrication Services.” I can manually select this division when creating a Sales Invoice for a fabrication job. However, I still don’t see the associated cost of production for those fabricated items being attributed to this division on my P&L.

My ultimate goal is to generate a P&L for the “Fabrication Services” division that clearly shows if its sales revenue is greater than its direct production/service costs. This includes both raw materials and other direct expenses.

Given that some raw materials (like powder paint) are purchased in bulk and used across multiple divisions, and considering my two-stage production process for handles/hangers (Raw Wire > U/F Unfinished > Finished Handle), what is the best practice in Manager.io to accurately allocate all direct costs (especially raw materials) to the “Fabrication Services” division?

Any detailed guidance on the proper accounting workflow for custom fabrication services in Manager.io would be greatly appreciated!

Thank you!

2

I’m still trying to understand the process. Do you order specific production materials based on a customer order, with the intention of consuming them exclusively for that work order? Or do you keep stock items in inventory and then release them into production after receiving a customer order?

3

For bucket handles, we purchase metal wire, and powder coat them.

For metal fabrication, we purchase whatever is required, say, metal bars, and also powder coat them.

All the things that we purchase are in our inventory (wires, bars, powder coating paint etc).

For the metal facbrication, the final fabricated item is based on customer to customer. Sometimes it’s a chair, sometime a table. We have not created indiviual inventory items for these. Instead, right now, we have created an inventory item called ““Metal Fabrication & Powder Coating services” which is produced as 1 unit, and then sold and delivered as 1 unit, thereby zero-ing the inventory. Which is fine.

Is that the right way to do it?

The issue i’m facing is, I don’t know the costs that my fabrication business is experiencing. Because inventory cost combines fabrication + Hangers + handles. I’d like to see them separately.