Inventory in Service Industry

I am in the service industry whereby we purchase mostly finish products to execute a job. Is it possible to use manager to keep track of these goods as and when they are used to execute these jobs. Also how does manager account for this usage in relation to the Inventory at hand?

If you sell the items as what they are, they are inventory. For example, if your service is automobile maintenance, but you stock repair parts in order to perform the maintenance, you are selling inventory. The items should be created as inventory items and all Manager’s inventory management features should be used. Read the three-part Guide beginning here: Manage inventory - Part 1 Introduction | Manager.

If you purchase incidental items for immediate consumption on the job for a client, use billable expenses. For example, if you are an installation technician, and you purchase brackets to mount a television on a wall for a customer, record the purchase as a billable expense and invoice the expense directly to that customer. See these Guides: Record billable expenses | Manager and Invoice billable expenses | Manager.

If you purchase general goods that might be used on several jobs, record them as ordinary operating expenses. For example, if you are a carpenter and periodically buy large cartons of nails, record a purchase invoice or payment for these consumable supplies.

I think what @Timms is talking about is a Job Costing workflow. He wants to capitalise the consumption of his inventory in the service/job and calculate his job profit margin in the end.

Exactly what i meant to ask @Abeiku. Thanks

A Job Costing Suggestion (Exploit the Inventory Module)

  1. @lubos, I was thinking about how job costing could be implemented without any complexity to Manager. I believe the Inventory module could be duplicated and modified for a Job Costing module. The idea is to create Jobs like inventory items to accumulate costs for job costing purposes.

  2. For this purpose, create a control account made up of Customer Jobs where jobs will be listed with their accumulated costs under assets until they are billed to customers and then the cost moved to profit/loss (custom expense and Income accounts).

  3. Suggested Modifications to the inventory creation form for Job Costing:
    • Add a field to select customer to link them to the job (a drop-down to select the customer)
    • Change Item code to Job number and make job serial number generation automatic if possible (automatically generate job number)
    • Change Item name to Job name
    • The check box used to set inventory item as inactive can be changed in this proposed module to Job completed. Used when the customer has been invoiced for the job and the job cost has been moved to profit/loss.

  4. Suggested Modifications to the inventory tab for Job Costing:
    In the Job tab, there shouldn’t be the Quantity to receive, on hand, to deliver and the average cost columns like in the inventories tab because a job is a single item and can be service in nature. If a production order is used to transfer cost to a job in production, the quantity field for the output (which is the job appearing like a regular inventory item) would be 1 and greyed out. The same should be the case when jobs are selected for any other transactions.

  5. Aside Production orders, Payments, journals, expense claims and invoices could all be used to charge costs/expenses into a job same as it is done for inventories. With regards to job estimates, we can use Sales Quotes to generate Job estimates for the customer. Custom fields can be used to capture extra business details such as scheduling details, Progress status, Linked Sales Quotes, linked Sales Order number, Delivery date, Sales rep’s name, date completed, Job supervisor, notes, estimated job cost etc.

  6. Optional
    Cost of jobs for customers could be shown in the Customer tab just as how uninvoiced billable expenses are shown in a column in the customer tab to have a one-stop-shop to see all the receivable balances of customers (Billable time & expenses uninvoiced, Jobs uninvoiced and the invoiced balance). It will also enable the ability to select multiple jobs right there for generating sales invoices

  7. Reports
    A report to compare Revenue to Job cost to know the profit margin on the jobs must be added to reports, Once again the Inventory Profit Margin report could be copied for this purpose and renamed.

  8. Conclusion
    The idea is that the inventory module can be copied and slightly modified for users who want a Job Costing Module. Job Costing Module is long overdue and is present in all the full-featured accounting solutions out there. I know implementing this idea would require some additional coding especially with the suggestions in Paragraph 4 and 6. But these suggestions are the only ones which would make the proposed module appear different from how the Inventory module works.

  9. Special Accounts can be used to track the input cost of a project but it cannot provide the following:
    A would be Job Profit Margin report similar to the Inventory profit margin.
    Ability to select a job as a finished item ( Just as inventory items ) in Production Orders to enable capitalisation of manufacturing/construction input costs to the job.
    This suggestion plus what Lubos may add in my view will create a simple but powerful Job Costing Module.