Maybe this is not an appropriate topic here. But I am asking for help as a Manager user.
Our business is to provide broadband internet service to residential, corporate user & re-seller.
During installation, we charge a one time, non-refundable charge as “Installation Charge”. And the monthly recurring charge is paid by the residential customers every month.
Resellers pay only the bandwidth price every month.
Number of Residential Customers > 1,000
Number of Corporate & Reseller < 50
Q # 1
How should I categorize sales or service revenue? Is there any special rules for “One Time Installation Charge”?
I) Purchase monthly Internet Bandwidth from ISP/IIG company (all bandwidth is not sold each month. It can not be stored. It is to be either sell or waste within one month)
II) Pay other providers for data connectivity
III) purchase cables, switch, routers, network tools & equipment, device & accessories from suppliers which are used-
a) to establish broadband connection to residential & corporate customers. These materials are low cost, owned by us & related to “installation charge”.
b) to establish connection to resellers. These materials are costly, owned by us & there is no “installation charge”
Q # 2
What would be the procedure to record “Cost of Sales/Service”? And how would be the “inventory system”?
Please provide me a solution for setting up this business into Manager.
Thanks in advance.
No. You can establish however many income accounts as you wish in order to have visibility you need into your sources of revenue.
It does not sound like you need inventory at all. Inventory is for recording goods held for sale or production. But the implication is that you are selling the goods. Instead, you are consuming the goods as you provide the service.
Your residential and corporate customers are like purchasers of home repair services. You would not charge the latter for 10 nails or 3 screws to fix a door frame. You would expense the nails and screws and charge for the repair.
It sounds like the equipment supplied to resellers might best be handled as fixed assets.
The bandwidth is also an expense, not inventory, since it cannot be stored.
You are correct, these are not Manager questions. You should consult an accountant. Then, if you have questions on how to implement the accountant’s recommendations in Manager, post them here.
Firstly, its a management decision as to how simple or complex the business requires the accounting to be. Is inventory of a sufficient enough cost that it requires inventory management. eg generally office stationary doesn’t get managed by inventory.
Second, what level of reporting or analysis is required to understand the different parts of the operations. eg do you need to track between different customer types.
Manager has the capabilities but you need to decide what/how you want things handled
We normally store huge amount of inventory/materials in our Store Department & use “Material Requisition Form” to issue any materials for service use.
The bandwidth is not inventory or it is logical inventory. And we can not expense the full bandwidth because all are not sold. I am not sure what to do here.
It is necessary to know how much cost to or profit from residential, corporate & resellers individually.
Then your internal documentation “Material Requisition Form” needs to cater for the requirements of the down stream processing (accounts department). eg different coloured forms for each client type or different sections on the one form for the different clients.
Why not. If you spend 1000/mth buying bandwidth then the cost is 1000/mth. Just because you only sold 90% doesn’t mean the cost is only 900 - once again depending on management requirements (knowing wastage or undersold bandwidth) then the unsold could be proportioned to a wastage account.
Then the use of tracking codes would assist here