Hi, I’m new to managing my accounts with a computer based program so please bare with me as I’m learning as I go. I apologies in advance as well . I chose Manager as it looks to be a great program with lots of features, but still easy enough for me to understand. I would like to use the cloud version, but want to make sure it’s a suitable program for our business, and one that I can operate easily to do our main business tasks. I originally used a cashbook as our business was quite small, but in the last few months it has grown and it’s getting harder to keep all the paperwork under control. I’m no expert with accounting but I’m always reading accounting pages to learn so I think I know the basics.
So far I’ve read all the guides as well as looked through the forum for anything I wasn’t sure on. This helped me with the majority of what I needed to do which was fantastic. I managed to set up my chart of accounts and put all our business information in manually, however I’ve become stuck on a few things, and after spending the last fortnight reading everything I could find on the forum, as well as accounting websites, I haven’t progressed any further now. I actually think I’ve just completely confused myself, and I’m probably complicating things more then I need to as we are not a large company and what we do is fairly simple accounting wise. I think it’s just time to bite the bullet and ask for help as I can’t figure this out.
I have two main issues which are the “Cost of Goods Sold” in chart of accounts, the other issue I’m having is with the Inventory & Manufacturing side of things. I guess these two are really under the one issue. I’m not sure exactly use/ add these functions for our business so the figures all work out properly. I’ll try to explain our business which hopefully will help make sense of my issues. Sorry in advance for the long read, I couldn’t explain it any other way.
We are a timber business that also makes custom furniture on a very small scale. We are Australian based, registered as a sole trader, not GST registered, and our business is only ran by myself & my partner (basically a work from home business) so no employees. All our outlays are paid on the day with cash/card, and all our income is either cash/ bank deposit. Our business was origionally a hobby so it was kept fairly simple. However in the last few months our small business has had a lot more work then usual, which has ment more customers, more timber cut etc. So it’s getting harder to keep track of everything with a pen and paper.
With regards to stock/purchases, the majority of our timber we have is in log form from. We source these logs from tree cutters or property owners that don’t want the logs or to have the added expense of taking it to the tip, We generally don’t pay for the logs unless it’s a very large log worth the expense. But paying for logs may only happen a few times a year, the rest are free. So our only real outlay the majority of the time is the expense for us to run our crane truck to collect the logs & take them back to our property. We then cut the logs into slab form using our portable mill. Again no real cost other then the running cost of the portable mill with petrol, chains and replacement parts.
We then sell the timber we have cut in a few different forms to customers. We sell rough sawn slabs (green & seasoned), slabs that we work on (dress, sand, paint etc) as well as we custom make furniture which we sell either to order or from our display room. Our only real outlays for furniture or slabs that we have worked on as far as materials go are things like paint, screws, sandpaper, glues and the running costs of the machines, tools, electricity etc.
To the best of my knowledge & from what I’ve read, most of these items would come under consumable materials and really shouldn’t be listed as inventory, as we don’t sell the products, or store a large amount of them. To date this is what I’ve always written them down as on our paper system as there is no real way to track the exact use of these items to each job. Of course from time to time there are items like hinges, handles etc which are job specific, but that side of things I know I can bill directly to the job. So basically our stock on hand would be the above consumables, which I’m not sure should even be classed as stock as such. And our inventory is basically the timber we cut, any small amounts we do buy and the furniture we make that stays in the display room for sale. For these items I created a account under expense called “cost of goods sold direct consumables” and all the paint, sandpaper, screws, bolts and other indirect materials like paint cups, paint brushes, dust masks etc I’ve placed in this account.
For all the Logs, Slabs Cut, Finished Slabs & Custom Furniture created for the display room and for customers, I put all these items in the inventory tab. I started with just the Logs (obviously with no amounts attached to them as they don’t cost anything), and then use the manufacturing tab to turn the logs into slabs raw, then manufacture again to turn those into finished slabs, or furniture etc. The main issue with this, although it’s good for keeping track of the logs/ timber or furniture I have on hand or made for a customer, it does nothing as far as working out the cost of goods sold, as there is very little cost assosiated with this process. And the main costs are all in the expense account. I did contimplate listing all the items in consumables into the inventory, however our items come from different stores, different brands and different prices. So it would take me forever to list them all, let alone try and work out how much of what product/brand etc went into each item manufactured. So this really isn’t a option. So I figured if I use inventory to basically keep me informed as to how much timber/ logs etc I have on hand. And when I have sales, the cost of what’s in inventory goes into the automatic expense account that’s linked with inventory “Cost Of Inventory Sold” , then somehow get my chart of accounts to link the inventory sold expense account, with the cost of goods consumables account I made my profit and loss statement would be correct. It would also somewhat give me the necissary accounts RAW MATERIALS, WIP & FINISHED GOODS accounts manufacturers are supposed to have, it just wouldn’t list all the times in consumables. I’m assuming the Inventory account is the raw materials, WIP is the manufacturing tab & finished goods is just that. I just wasn’t sure if my inventory account had the raw materials listed, as well as the finished goods that it would mess the accounting side of things up as it’s all under inventory.
My other issue is again with cost of goods sold. How do I make a section Cost of goods sold & value of stock on hand show up on my profit or loss statement or balance sheet for my year end accounting? as manager dosn’t currently have this. I need this for my financial reporting here in Australia. I read a heap of posts on the forum for cost of goods sold, I seen others had the same issue, but I didn’t understand how they worked around it, or made it work. I’d also need my cost of goods sold to calculate the inventory plus the consumables account as well as I guess other overheads according to accounting for manufacturing “I think”.
Sorry for the very long read, I hope I’m not too far off understanding this . If we just purchased everything like most people Id would be a lot easier for me to make this work as I understand the principle of it all. Just not sure how to apply it for my situation.