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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 14985  
Subject: Help with Inventory and Books Date: 8/14/2012 7:39 PM
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I have kind of fallen into a new business venture selling vintage jewelry in an online shop.

It kind of happened quickly and without planning, and I'm scrambling to put together a bookkeeping system and an inventory system.

Right now, I'm just planning on using Excel spreadsheets for the bookkeeping until I get everything caught up-to-date and an tracking regularly. Then I'll consider transferring it to Quickbooks. (This is a small, single proprietor, at-home in my spare time kind of business.)

But the inventory has me stymied. I buy a lot of jewelry in lots and then break it into individual pieces or small sets and sell it. How do I determine my cost per item?

It's easy if I'm buying 22 pairs of earrings. Just divide what I paid for the lot by 22. That's good enough for me.

But what if I buy three brooches, two necklaces, five pairs of earrings, a belt buckle, twenty-five pairs of cufflinks, a necklace-bracelet set, a necklace-bracelet earring set, etc., etc., ad infinitum? Some of the pieces will be worth far more than the others and just dividing my lot cost by the number of individual pieces seems weird.

And yet it seems like the only way to go.

Any suggestions?

Also, in an inventory spreadsheet, what exactly should I track? More or less than all this:

Item name
Item number (mine)
Item number (in online shop -- I sell in two venues)
Description of item
Cost of item
Date acquired
Date sold
Sale price

Anything else?

TIA,
MOI
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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14640 of 14985
Subject: Re: Help with Inventory and Books Date: 8/14/2012 8:37 PM
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Not too different than a typical inventory except you don't have a known purchase price for each piece.

If you buy a lot of so many items, it would be reasonable to list each item in your inventory and assign a prorated value to it based on the purchase price.

The key thing would probably be identifying all your various pieces of inventory. You might do that by giving each item a unique inventory number that is attached to the item with a label or on a plastic pouch containing the item.

At the end of your fiscal year add the value of your previous years inventory and all the inventory purchases you have made for the year. That gives you the total value of your purchased inventory.

Take an inventory of what you have left, adding up the purchase value of all your remaining pieces.

Subtract the value of what you have left from the total value of your purchased inventory. That give you the cost of goods sold.

Subtract the cost of goods sold from your total sales, which gives you your gross profit.

You are led through this process if you examine the back of the Schedule "C" form for reporting business income if I am remembering correctly.



Seattle Pioneer

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Author: MichaelRead Big gold star, 5000 posts Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14641 of 14985
Subject: Re: Help with Inventory and Books Date: 8/14/2012 8:38 PM
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It's easy if I'm buying 22 pairs of earrings. Just divide what I paid for the lot by 22. That's good enough for me.

But what if I buy three brooches, two necklaces, five pairs of earrings, a belt buckle, twenty-five pairs of cufflinks, a necklace-bracelet set, a necklace-bracelet earring set, etc., etc., ad infinitum? Some of the pieces will be worth far more than the others and just dividing my lot cost by the number of individual pieces seems weird.

And yet it seems like the only way to go.

Myownigloo


Jo Anne, get your supplier to quote on lots of, say, ten or more of each item. That gives you a baseline of cost per item. Your cost per item, bought in smaller amounts, will be higher yet you will have a handle on the numbers.

If you have a batch of differing items check with the previous quote given as to the total of the order received and work out how much that amount tallies with your cost.

I assume you’re buying wholesale. What is your markup on all items? Most jewelry is 100 percent which means if you do have a sale you won’t be losing. When you get Quickbooks up and running make sure you have a duplicate sales column reserved for sales items. Gives you a good overview of what does sell when there’s a sale.

I’d suggest reposting your OP where two people I know are good at sales are and can give good usable advice: FreethinkerKW and desertdaveatAOL

There’s some things that do well for selling on the Internet: offer free shipping if the order is above a certain amount; specify how many days it will take to ship and by what means. Stuff like that.

All the very best to you in this new venture.

MichaelR

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Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14642 of 14985
Subject: Re: Help with Inventory and Books Date: 8/14/2012 9:03 PM
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It's easy if I'm buying 22 pairs of earrings. Just divide what I paid for the lot by 22. That's good enough for me.

If you're buying 22 identical pairs of earrings it's good enough for me too.

But what if I buy three brooches, two necklaces, five pairs of earrings, a belt buckle, twenty-five pairs of cufflinks, a necklace-bracelet set, a necklace-bracelet earring set, etc., etc., ad infinitum? Some of the pieces will be worth far more than the others and just dividing my lot cost by the number of individual pieces seems weird.

Not only weird, but backwards. Profit is made when you buy merchandise, not when you sell it.

For 23 years I bought and sold military surplus. Most of the buying was in lots. Big lots, little lots and some onesies and twosies.

Going in I'd have a pretty good idea what the item(s) would sell for. If it was a lot of 123 pairs of combat boots I'd go through them looking at the sizes and conditions.

If the lot was all or mostly small or all large sizes I'd lower my buying price because those sizes tend to sell more slowly. If the lot was mostly medium sizes (USA men's sizes 9, 10, 11) I'd be willing to pay more.

If you're buying at auction inspect the lots before and after you bid on them. Be sure they are what they're purported to be. Sometimes I'd find the count was off (always a lesser number, never a larger number for some strange reason ;-).

OK, so let's say you've got a lot of 23 earrings; 10 pearl and silver, 10 diamond chips and gold plating and three solid 22 karat pairs.

Add up how much you expect to be able to sell the 10 pearl and silver for plus what you'd get 10 diamond chips and gold plating plus the three solid gold pairs.

Divide that total in half then subtract 10% 'cause things happen and set that amount as your maximum bid. (I'd always try to go lower than that.;-)

Now you know exactly how much you paid for each piece. I always tried to sell at Keystone http://retail.about.com/od/glossary/g/keystone.htm (twice the buy price).

Unless you're facing some stiff competition always try for Keystone pricing. Try to go out of Keystoning only on those item you face competition on. You see the profit is in the buying. ;-)
http://boards.fool.com/so-the-capriciousness-of-the-market-d...

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14643 of 14985
Subject: Re: Help with Inventory and Books Date: 8/14/2012 10:01 PM
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Jo Anne, get your supplier to quote on lots of, say, ten or more of each item. That gives you a baseline of cost per item. Your cost per item, bought in smaller amounts, will be higher yet you will have a handle on the numbers.

If you have a batch of differing items check with the previous quote given as to the total of the order received and work out how much that amount tallies with your cost.

I assume you’re buying wholesale. What is your markup on all items? Most jewelry is 100 percent which means if you do have a sale you won’t be losing. When you get Quickbooks up and running make sure you have a duplicate sales column reserved for sales items. Gives you a good overview of what does sell when there’s a sale.

Not quite practical for my business. It's a vintage resale business. I'm not buying from a "supplier," per se. I'm scouring estate sales and auctions (live and online) for good buys. When I buy in a "lot" it's because someone is selling a bunch at once rather than trying to find buyers for each and every piece, such as in a parent's estate and the children can't be bothered and are in a hurry to sell.

So it's not exactly wholesale and it's not something that you can really price individually as if you're selling a lot of identical items because you're not.

I’d suggest reposting your OP where two people I know are good at sales are and can give good usable advice: FreethinkerKW and desertdaveatAOL

And do you know where that might be, pray tell? (MOI asks plaintively.)

MOI

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14644 of 14985
Subject: Re: Help with Inventory and Books Date: 8/14/2012 10:03 PM
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Not only weird, but backwards. Profit is made when you buy merchandise, not when you sell it.


We're not communicating.

I'm not asking how to bid. I know how to bid.

And I know what I'm buying and how much I can sell it for and its condition before I bid.

OK, so let's say you've got a lot of 23 earrings; 10 pearl and silver, 10 diamond chips and gold plating and three solid 22 karat pairs.

Add up how much you expect to be able to sell the 10 pearl and silver for plus what you'd get 10 diamond chips and gold plating plus the three solid gold pairs.

Divide that total in half then subtract 10% 'cause things happen and set that amount as your maximum bid. (I'd always try to go lower than that.;-)

Now you know exactly how much you paid for each piece. I always tried to sell at Keystone http://retail.about.com/od/glossary/g/keystone.htm (twice the buy price).

We're definitely not communicating. I can't make heads nor tails of that in terms of accounting. But thanks for answering!

MOI

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14645 of 14985
Subject: Re: Help with Inventory and Books Date: 8/14/2012 10:07 PM
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If you buy a lot of so many items, it would be reasonable to list each item in your inventory and assign a prorated value to it based on the purchase price.

This is what I was thinking. Kind of estimate what I think each item will sell for, what its market value is, tot it all up and then get a ratio with which to multiply against what I paid for it and get a cost for each item. I can do this.

At the end of your fiscal year add the value of your previous years inventory and all the inventory purchases you have made for the year. That gives you the total value of your purchased inventory.

"Previous year" meaning, again, fiscal year, right? That's going to be my next series of questions someday because I was put on a fiscal year reporting schedule by the state tax board. It's the first time I've had to deal with other than January through December! This is going to be fun.

Life is forcing me to become a bookkeeper/accountant. Which is okay by me.

You are led through this process if you examine the back of the Schedule "C" form for reporting business income if I am remembering correctly.

Thanks. I'll check that out!

MOI

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14646 of 14985
Subject: Re: Help with Inventory and Books Date: 8/14/2012 10:46 PM
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<< If you buy a lot of so many items, it would be reasonable to list each item in your inventory and assign a prorated value to it based on the purchase price.

This is what I was thinking. Kind of estimate what I think each item will sell for, what its market value is, tot it all up and then get a ratio with which to multiply against what I paid for it and get a cost for each item. I can do this. >>


Actually, what I'd do is pro rate your cost based on the price you pay divided by the number of pieces. There's no real need to be fancy estimating what this piece or that piece cost.

You bought ten pieces for $100? The cost of each piece is $10.

Let's suppose that's your only purchase and you sell two pieces, one for $31 and the other for $5.

Your inventory shows eight pieces cost $10 each, so your end of year inventory value is $80.

Your purchases totaled $100.

Your cost of goods sold is $100-$80 or $20.

Your gross sales were $31 + $5 or $36.

Your gross profit is sales - cost of goods sold

$36 - $20 = $16


You can have as big an inventory as you like, but you can't count it as a business expense until you sell it.



Seattle Pioneer

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14647 of 14985
Subject: Re: Help with Inventory and Books Date: 8/15/2012 2:15 AM
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You can have as big an inventory as you like, but you can't count it as a business expense until you sell it.

You CAN'T? Really?! This is news.

MOI

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14648 of 14985
Subject: Re: Help with Inventory and Books Date: 8/15/2012 2:21 AM
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Well, this leads to my next question.

Since I'm on a fiscal year from July 1 - June 30 set by the CA State Equalization Dept, does that affect when I file my Schedule C with the IRS? Or do I close the books quarterly or monthly or what? I'm having the hardest time thinking with the fiscal year.

MOI

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Author: stockmover Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14649 of 14985
Subject: Re: Help with Inventory and Books Date: 8/15/2012 2:51 AM
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Since I'm on a fiscal year from July 1 - June 30 set by the CA State Equalization Dept, does that affect when I file my Schedule C with the IRS? Or do I close the books quarterly or monthly or what? I'm having the hardest time thinking with the fiscal year.

Hey MOI,

I would suggest that you post this on the Tax Strategies message board. That is where our tax pros hang out.

http://boards.fool.com/tax-strategies-100155.aspx?mid=302020...

HTH

Rich
Arizona

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14650 of 14985
Subject: Re: Help with Inventory and Books Date: 8/15/2012 12:57 PM
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Since I'm on a fiscal year from July 1 - June 30 set by the CA State Equalization Dept, does that affect when I file my Schedule C with the IRS? Or do I close the books quarterly or monthly or what? I'm having the hardest time thinking with the fiscal year.
==========================================

http://biztaxlaw.about.com/od/businessstartupsteps/f/fiscaly...

•Type of business. A sole proprietorship, or a business that is taxed as a sole proprietorship (single-member LLC, for example) must use a December 31 fiscal year-end to match the personal tax year end.


http://www.irs.gov/businesses/small/article/0,,id=98673,00.h...

If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval.

Jean

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14651 of 14985
Subject: Re: Help with Inventory and Books Date: 8/15/2012 1:03 PM
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You CAN'T? Really?! This is news.
=========================

Inventory is an asset until you sell it. Then it becomes cost of goods sold, reducing gross income.

As far as valuing the lots.

I'd just take an educated guess for each piece. So if you bought 10 things and paid $100.00 (to keep the math simple) if they were equal value it's easy. If not value 3 things at 5.00, 2 things at 7.00 etc. until you get to the $100.00. It's harder and not really needed to be accurate, just reasonable. If one item was worth $90.00 and the other 9 $1.00 it becomes easier.

Hoped that helped.

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14652 of 14985
Subject: Re: Help with Inventory and Books Date: 8/15/2012 1:40 PM
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Since I'm on a fiscal year from July 1 - June 30 set by the CA State Equalization Dept, does that affect when I file my Schedule C with the IRS? Or do I close the books quarterly or monthly or what? I'm having the hardest time thinking with the fiscal year.
==========================================

http://biztaxlaw.about.com/od/businessstartupsteps/f/fiscaly......

•Type of business. A sole proprietorship, or a business that is taxed as a sole proprietorship (single-member LLC, for example) must use a December 31 fiscal year-end to match the personal tax year end.


http://www.irs.gov/businesses/small/article/0,,id=98673,00.h......

If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval.

This puts me back to square 1. I have to have two fiscal years to make this work. I've been assigned a July-June fiscal year by California (because I didn't start selling until July 2012) and the IRS wants me to do a calendar year.

I guess I can do this. Since one closes the books monthly, right?

MOI

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14653 of 14985
Subject: Re: Help with Inventory and Books Date: 8/15/2012 1:41 PM
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I'd just take an educated guess for each piece. So if you bought 10 things and paid $100.00 (to keep the math simple) if they were equal value it's easy. If not value 3 things at 5.00, 2 things at 7.00 etc. until you get to the $100.00. It's harder and not really needed to be accurate, just reasonable. If one item was worth $90.00 and the other 9 $1.00 it becomes easier.

Oh, it all helps. This method is what I'm inclined to do because with jewelry lots, often there are miscellaneous pieces -- LOTS of miscellaneous pieces -- out of which I may find a wearable piece or two that I can sell and handfuls of things that I'm going to offer in a junk lot on eBay anyway. That's where it gets tricky.

MOI

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14656 of 14985
Subject: Re: Help with Inventory and Books Date: 8/18/2012 12:49 PM
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<<Since I'm on a fiscal year from July 1 - June 30 set by the CA State Equalization Dept, does that affect when I file my Schedule C with the IRS? Or do I close the books quarterly or monthly or what? I'm having the hardest time thinking with the fiscal year.>>


Well, you need to do an inventory at the end of the year in order to figure your cost of goods sold and gross profit for the IRS.

What information is needed for your state taxes? Is this to figure state income tax, a tax on inventory or what? You might have to do a separate inventory to conform to the desires of your political lords and masters in Callie.



Seattle Pioneer

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Author: Myownigloo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14657 of 14985
Subject: Re: Help with Inventory and Books Date: 8/18/2012 1:23 PM
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What information is needed for your state taxes? Is this to figure state income tax, a tax on inventory or what? You might have to do a separate inventory to conform to the desires of your political lords and masters in Callie*.


I don't know yet, but they provide a free workshop which I am attending on September 6th which will instruct me all of this, so I'm not worried so much about the state. Now I just have to figure out the Fed by the end of the year. I think I can manage. I've been setting up an Excel spreadsheet for the inventory and putting in the info as I get time. It's coming together.

Thanks for your help!

MOI

(*Actually, you're not too far off there. It's the state that is the scariest. The California State Board of Equalization is nastier than the IRS used to be.)

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