Hi guys,
I’ve searched all the topics i could about consignment but it’s mostly people putting their goods in others places whereas my question is about people who put their goods in my store on consignment.
Basically, how should I enter these goods into my inventory so we can see what we have on hand, sold, etc… but we haven’t paid for it yet… and then when we do pay the supplier how to do that.
Ya, just how it sounds…how do i enter consigned goods into my system? Then i would sell them on a regular sales invoice, adjusting the inventory level automatically… but then again, how to handle paying the consigner when he/she comes in to pick up her money
thanks in advance!
tim
Just create the Item under Inventory Items and that will put them on the listing. If you have both consigned and non-consigned items then to be able to identify them separately you could either use the code field starting with a “c” or a “c” at the start of the Item Name - or something relating to the Consigner
As you are not purchasing these items for a value - you normally can’t enter any quantity but this can be got around if it becomes important.
When a consignment is sold it will show up as a backorder so that it can be traced.
To pay the Consigner - Cash Account - Spend Money - with the Account line being the Inventory Item Code/Name with the Qty = 1 and Unit Price = amount being paid.
Then you can make the item - inactive - to clean up the Inventory Item List
Set up a test company and practise with a few entries.
I think the approach described raises several problems:
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It misrepresents your position at any time by including in inventory items you do not and never will own, even briefly, regardless of the value that may be assigned.
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You will constantly be creating inventory items for things you intend to sell only once. Even if someone else consigns a similar item, would you resurrect the old inventory item? Probably not.
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You will have an ever-growing list of inactive items with unfulfilled back orders.
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You would end up with revenue from inventory sales with no associated cost of goods sold.
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It does not address what to do with consigned items that do not sell. All consignment stores I know of accept consignments only for defined periods of time. They try briefly to sell the item at a favorable price, perhaps lower that in a couple stages if it doesn’t move, but always give it back to the consignor after an agreed period if it does not sell. In some cases, they offer a service of donating unsold consignments directly to a charity if the consignor does not wish to return for it. How would you process this in Manager?
The use of inventory for this purpose just seems wrong. In a normal accounting sense, you are not holding (as in owning) goods for regular sale or production. Instead, you are collecting a commission for providing the service of storing, displaying, and documenting a sales transaction for (but not actually selling) someone else’s goods. That is not a scenario where one would think of inventory in the usual sense. And it may result in difficulties with tax authorities, who may require you to collect taxes at the time the transaction goes through, on a product you did not own.
I cannot foresee all the potential complications. And t don’t have a better solution in mind right now. But this might be a situation where a separate stock monitoring system is much less work. Perhaps a spreadsheet list would serve your record-keeping needs. Manager would be used to record your own transactions, which are the charging of commissions. Even then, it is doubtful you would need to create your consignors as customers.
Someone else may have better ideas.
See this:
http://www.accountingtools.com/consignment-accounting
It doesn’t solve the problem of how to handle the accounting in Manager, but it gives a good overview of consignment from a general accounting perspective.
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@Jon’s link is an excellent summary. I would imagine that for a typical consignment shop, all the actions described for the consignor would not occur, for the simple reason that most will have no inventory records. (I am thinking of clothing, furniture, personal goods,etc.) But those for the consignee match what I was thinking.
The Inventory is being used for Management rather then Accounting purposes.
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The Inventory Item Listing will fully detail all items available for sale - how can that misrepresent the inventory position.
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You can either create or re-name previous Items from the same consignor. Having similar items from different consignors is no different to having similar items from various suppliers.
3a) Computer businesses have an ever growing list of inactive items due to technology changes.
3b) There will be “no” unfulfilled back orders as payment to the consignor creates an inventory item purchase and this cancels out the backorder.
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The payment/purchase from the consignor will create the cost of goods sold.
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If consignment items don’t sell and are returned to the consignor - delete the inventory item
By doing test entries of everyday situations will show potential complications - my testing hasn’t.
The model outlined didn’t charge commissions, but made deferred purchase payment following the sale
The accounting is handled perfectly by Manager - which just shows you how adaptive Manager is.
Because, as @Tut pointed out, the consigned property is never actually in the consignee’s inventory. That’s the whole point of consignment. The consignee never takes ownership of the property; it’s never in his inventory. The property is for sale, but it’s not for sale by the consignee; it’s for saly by the consignor, with the consignee acting as his agent. Remember, inventory is an asset, and consigned property is an asset that the consignee does not have. Putting it into the consignee’s inventory would be no more correct than a real estate agent putting the apartments he is representing onto his own PP&E asset account.
What @Brucanna suggests may indeed “work” in Manager – I have no doubt that it does – but it violates generally accepted accounting practice.
The consigned items are only names on the Inventory listing and have neither quantities or values, so there’s no assumed ownership or asset values - but provides management traceability.
No different to any other business which may have inventory listed with zero quantity and value at any particular point in time. Just items on a listing.
The Real Estate Agent don’t get apartments delivered to their premises where they need to keep track of the Inventory Items within the premises.
You have suppliers who specify up front a price and payment, and
You have suppliers who specify a deferred price and payment. Market arrangements.
That doesn’t mean that the traceability of the two can’t be amalgamated
How does having an inventory item listed with zero quantity and zero value - violate any accepted accounting practice - there isn’t even a transaction involved. When the item is sold there is a cash/credit sale and a cash/credit purchase - couldn’t be more normal.
Functionality shouldn’t be lost due to perceived technicalities - just the accounting system being used as an excellent management tool.
I guess I missed the entire purpose of your suggested approach. If the inventory items created for consignments never have quantities, how is putting them into Manager useful for tracking what is on hand for sale? In that situation, all you have is a list of things that were once in the store but doesn’t tell how many you ever had or whether they are still available.
For consigned items - assign an identifying code or prefix the item name with a code.
Once the item is sold and paid, make the item inactive.
If the item is returned - delete the item
Therefore all listed items with codes are currently held consigned items.
As with any stock system, appropriate day to day processes are required along with periodic stock takes.
If you wanted cleaner separation, set up a Custom Control account for Consigned Inventory items only or perhaps the new special accounts (?) - but haven’t dabbled with them yet.
For more complexity - observe how consignment stocks are managed at major produce markets.
Lots of growers, fewer agents and wide variety of buying customers - all amongst bidding frenzy’s
If my suggestion may be right.
I think you should add a new business just for the purpose of tracking the inventory of those consignment u keep and bill those clients in your main business. The second business u add shd only serve as inventory management system.