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Bookkeeping


#1

Guys,

Is anyone using any kind of bookeeping software for your jewelry
business? Or do you know about any that you recommend? What does your
bookkeeping consist of at all? As I understand it should be expenses
and incomes, also inventories of material, work in process, finished
items? How often you update your books? Well… as you can see I would
be grateful for any or advice in this regards.

Thanks a lot.
Vera.


#2

Vera If you’re a jewelry store you should have a point of sale
program to track sales and inventory.

But it you’re small QuickBooks would do O.K. I have a setup for
jewelers “QuickBooks for Jewelers” It’s the income, expense, cost of
goods setup. It’s $99. Has a setup CD if you haven’t started yet and
a book to run you through it and an altering method if you have
started up.

Your store should have 3 income categories Showcase Sales Special
Order Sales Shop sales

And cost of goods for those.

David Geller


#3
Is anyone using any kind of bookeeping software for your jewelry
business? 

I use Quicken 2004 Home and Small Business. I generate invoices,
track business bank account online, track accounts receivable,
income/expense, sales tax, and deductable mileage.

As for inventory I do it once a year the old fashioned way and count
and weigh everything then put the numbers into a Excell spreadsheet
for income tax reporting.

If you’re going to need better inventory control/reporting and other
features then you probably will have to spend the extra bucks for
Quick Books or similar software…

Rick Copeland
Silversmith and Lapidary Artisan
Colorado Springs, Colorado
http://home.covad.net/~rcopeland/


#4

Dear Vera, I am going to teach a class at Metalwerx early next year
about metalsmiths and business. I feel that a bookkeeping system is
just part of what is necessary to successfully run a small business,
an efficient bookkeeping system will reflect what is in the business
plan. I have a shall, we say, holistic approach to business and
metalsmithing, the entire thing has to be integrated, business and
bookkeeping are not separate issues from crafting. One does not exist
with out the other ( this is the Zen of metalsmithing, or so it
sounds).

One huge problem I found with a computer program to run a small
business was that if you don’t know bookkeeping and basic accounting
, the program can get you into worse trouble than a manual method,
also computers crash. The program you purchase will only know what
you tell it anyway. It is easier to loose data which can be very
important to decision making with a program if you don’t know the
basics. It can be more difficult to give your accountant what they
need to accurately make your tax returns with a program if you don’t
know the basics.

Bookkeeping is not a big deal if you know the basics…oh
wait, it is a big deal, in fact it’s a HUGE deal for the survival of
any business. Sam Patania, Tucson


#5

Sam, I wholeheartedly agree with what you say. If you don’t
understand basic bookkeeping, financial computer programs keep asking
for stuff and you don’t know what they want. And it’s hard to figure
out what they’re doing with your numbers! Once you do learn a little
bit about bookkeeping and accounting, it makes SO much more sense!
Sure, you can stumble through yourself, but taking a class is ever so
much more efficient, and you have someone to explain stuff to you
that you might not “get” from reading a textbook.

At one point in my career, I decided to pursue an MBA. I was
associate publisher at AJM, and was dealing with the business aspects
of running a magazine for the first time. Although I had plenty of
support from MJSA’s business staff, I decided it would help if I
understood more about finance and management. My first course was a
class in Financial Accounting – and it was amazing how much more
sense everything made after I took it! Just understanding the
terminology was a huge help – I could now speak the CFO’s language.
It’s also helped me now that I’m out on my own: tax time is simple,
because I understand WHY my accountant is looking for this or that,
and I can normally anticipate those requests; and when my husband and
I refinanced our mortgage, it was child’s play to prepare a
Profit/Loss statement for the bank. You don’t have to pursue an MBA
to gain this type of knowledge. In addition to classes like Sam’s,
local community colleges often offer basic bookkeeping and accounting
for small businesses. (Community colleges are often a bargain when it
comes to tuition, and most of the time you don’t have to be on track
for a degree to take courses.) You can also check with local business
organizations, like the chamber of commerce for recommendations –
local small businesspeople may well have taken a similar course that
they’d gladly recommend. The Small Business Administration Web site
(www.sba.gov) is another resource to explore, with lots of tutorials,
explanations, and samples to help reinforce what you learn elsewhere.

BTW, I never did earn the MBA. In fact, that financial accounting
course was the only one I took on that path – I got pregnant with my
son right after I took that class, and he turned my life upside down.
(Kids have a way of doing that, don’t they?) But that one course has
been tremendously valuable, and if I had it to do all over again, I
would sign up for it without hesitation. One of these days, I may go
back for the rest of the degree!

Suzanne
Suzanne Wade
Writer/Editor
Phone: (508) 339-7366
Fax: (928) 563-8255
@Suzanne_Wade1
http://www.rswade.net


#6

Suzanne, I decided to start taking accounting and bookkeeping
courses at the community college here in Tucson when my MYOB blew up
and all my back ups were corrupt. I decided that at $70 an hour my
accountant was not the most cost efficient way to learn. After that
experience I went on a binge about the financial aspects of craft.

One thing that the accountant and the accounting classes didn’t
teach, at least at the levels I took, was managerial accounting. I
’discovered’ this phrase in an accounting book then followed that .
Another thing not taught in those basic courses is the art and
science of purchasing of inventory or tools. I found myself
constantly spending too much for pie in the sky ideas and not
concentrating on staying alive and positioning myself for success.

Ideas like profit margin, expense percentages compared to gross
income, return on investment and a business plan have all come
together to form a solid company. Being able to produce financial
statements from a program is good but understanding them and
integrating that knowledge into your business plan is something else
all together.

I have been through the mill about all this stuff and hoped to pass
on that knowledge and save someone allot of time. I even felt that
was a more important contribution to this community than any
metalsmithing technique. If you can’t make a living metalsmithing you
won’t have the time to developed and how to survive and thrive is now
my sermon. Sam Patania, Tucson


#7

Hello all to those interested in this bookkeeping thread.

I have had the good fortune as a result of my “real jobs” to take
formal accounting courses. However, my “other job” of being an art
enamalist (jewellry for me is wearable art) is starting to play a
more significant role in my life. Consequently, I have now created a
sole proprietorship as a result of some modest sales and other happy
events.

I have purchased Simply Accounting for $159 Can and it has blown me
away with its power. So before I leap in I was hoping that one of you
might be able to provide me with advice in setting up my chart of
accounts. For example, for current assets I am considering the
following as Fixed Assets: Tools (is this too broad?), benches, and
fixtures; Current assets: Cash float, gases, Inventory - enamels (the
quantity I work with for each piece, I can’t see myself trying to
trace the cost to each piece I make), metals separately as copper,
sterling, fine silver, 14k gold, etc. (because the cost is easy to
trace), and work in process and finished goods. Do you pool your
finished work or itemize them separately. My intuition tells me to
itemize each item separately.

Any advice would be greatly appreciated. And I really support Sam’s
contention about the importance of cost or management accounting
versus financial accounting.

David


#8

Sam,

OK, maybe you do need to start work on an MBA, since that’s where I
encountered those concepts. But I figure I came at the whole issue
backward. (How many people’s first business class is at the MBA
level? :slight_smile:

Actually, given my choice, I would always suggest opting for a class
like yours, which focuses explicitly on the things an artist and
metalsmith needs to know. The more focused the class, the more
useful stuff you get out of it. A focused class like yours allows you
to cram into a couple of days stuff you’ll go to school for months to
learn, without the “extras” that you don’t need. (This is very cost
effective, too!) So anyone out there who can get to Sam’s class at
Metalwerx --I say, go, go!

But if an MBA isn’t an option, and neither is studying with Sam or
someone like him… I say better to learn the basics through a
community college class than remain completely ignorant of
accounting. Once you have basic bookkeeping down, you can look for
more advanced courses to learn about inventory, financial statements,
and “managerial” (or “financial” accounting, as my textbooks called
it). And if you have to learn it on your own, well, at least the
books and your accountant will be a bit easier to understand. But by
all means, learn this stuff! As Sam says, it’s absolutely essential
if you’re going to run a successful business!

Thank you, Sam, for pointing out more details about what artists
need to know!

Suzanne

Suzanne Wade
Writer/Editor
Phone: (508) 339-7366
Fax: (928) 563-8255
@Suzanne_Wade1
http://www.rswade.net


#9

All;

Thanks to David Geller, you can now d/l his chart of accounts as an
Excel file:

http://www.ganoksin.com/ftp/Jewelry-Store-Sample-Chart-of-Accounts.xls

Hanuman


#10

David, this is an area I got into real trouble with my accountant
in. The reason is that when I got my MYOB program, I had the
consultants who sold me the program set it up with the chart
accounts which was already horribly outdated.

The way I would have some one set up their program is to go to your
accountant and ask them what they want to work with, have them be
your consultant. This will save so much time on the back end, when
tax time arrives. This eliminates the need for them to unscramble (
at their hourly rate) your set of books. The one hour spent with the
accountant will save many hours over the next few years and maybe as
long as you have a working relationship with that accountant.

None of us in Orchid land can tell you what specific accounts your
business will need. We can give a framework.

Tools can fall into at least 2 categories, depreciable and one of
your cost of sales accounts as they are used up. Any large tool
purchase can and should be depreciated ( an asset) .

Any purchase of gas would be in the cost of sales area, it is used
up as so you have sales or you create inventory.

Inventory is an asset account.

Each job can be timed and weighed for the basic Time plus Materials
formula necessary for costing. I did this with production items over
a period of time, that is doing a time study. This gave me a real
objective handle on how much time it takes for a particular project.
For one of work, an open ended estimate or experience will usually
get me by, I still make mistakes in this area though. Usually to my
detriment.

I use a starting inventory and ending inventory for the tax period.
This is taken by a physical count periodically and entered as a
journal entry. During the inventory period I take a physical work in
process count also as well as stones and metal( by weight). The
stones I have priced per piece or by the carat, the metal I use the
current spot price to derive the dollar figure and average it out
over metal forms ( sheet is less than tri-wire). Scrap is weighed
also.

This whole thing gets so complicated so quickly that I cannot look
at it separately, it needs to be done like I do math, on paper or
spreadsheets and in front of me or I screw it up. I can post my chart
of accounts if you want.

Sam Patania, Tucson


#11

Dear Suzanne, yes that would be quite a start, at the MBA level. My
apprentice this last year took classes which were part of an
entrepreneur program. Her text book was wonderful and I ate it up.
Check if your community college has such a program and what it has to
offer. The class I offer will be for those in business already who
are wondering how to take the next step. To take care of the
bookkeeping and accounting is the start but, also marketing and PR as
well as business plan. I have 2 days to teach all this and anticipate
raising more questions in my students minds than answering but, I
will always be around after the class to answer questions online. I’m
certain to raise questions about the students own business and direct
attention to those areas which need attention, the areas which are
holding the business back.

Thrown into this is dealing with the government and what reports are
necessary, payroll , shop efficiency and security. These are items
which I include in my business plan, which won’t be dealt with in any
length during class but, I feel it necessary to flesh out the plan as
much as possible. Sam Patania, Tucson


#12

SAM I don�t know if your email was directed to me or another David.
When I go to jewelry stores I meet with the owners the night before
for dinner and go over this. I tell them to bring their accountant.
100% of love my chart of accounts.

Your accountant sets up the books for their benefit, not yours. A
P&L is not for them, it�s for us. As You might have seen I divied
the store into 3 categories�

A.	Showcase Sales
B.	Special Orders
C.	Shop Sales

Special orders is unimportant. I take it away so I can see showcase
sales. Why? So I can find a store�s turn. Turn is how many times in
a year we sell our INVENTORY. It is:

Cost of goods from the CASE divided by average inventory.

So the cost of goods must be separated.

In my chart of accounts tools and gas & Oxygen ARE in cost of goods
for the shop as IS the jewelers wages and the jewelers taxes.

As far as depreciable tools, your right, that�s the accounts job at
year end to help you divide it up. For the most part you can write
off up to $25,000 in a year (I believe the number is right). So most
hand tools are written off as an expense. Over that an account is
setup called maybe SHOP EQUIPMENT and each month or yearly a percent
is written off.

THAT�S what you need an accountant for.

You mention Inventory is an ASSETT. You are correct, most jewelers,
when they write the check, call if COST OF GOODS. That�s wrong. But
I use Inventory for things you can track piece by piece. So most
findings are ordered on Monday and sued on Wednesday, I have people
write the check as cost of goods � SHOP right away.

My stores usually have a point of sale system. So REAL JEWELRY is
inventory and the POS tells us when it�s sold. I set stores up in a
perceptual inventory system in QuickBooks. Counting is for accuracy,
not getting your cost of goods. I don�t worry about calculating each
job, most won�t or can�t do it. So we look at WEEKLY shop sales and
compare it to WEEKLY shop costs to see how we are doing. Trying to
time a job doesn�t take into account down time, weekly pooling does.

I hate saying this, but �trust me�, 90% of accountants don�t
understand retail nor the jewelry business. Want to see? Ask your
accountant this million dollar question:

�How much inventory should I stock? What should my turn be?�

You won�t get an answer.

The answer is �You should stock NO MORE inventory than you can sell
in one full year.�

The answer to what should our turn be, the answer is �1.0�. Tell
that to your accountant and you�ll hear �that�s ALL?�

I hear that answer all of the time. They should know.

David Geller


#13

While of course you want to be able to produce the reports you need
for the “man”, the real function of accounting is to produce the
reports you need to make decisions for yourself. The main concerns
are to track the profitability of a “line” and to value the
inventory/assets. If you can do these things, you can produce what is
necessary for the man. In addition a properly designed inventory
tracking module will allow you to track useage. If you are optomistic
look for a program that has inventory ( both fixed - for equipment
etc, and raw/wip goods), ar and ap modules. If you are into
art jewelry/ or unique works; look for a job costing sheet.


#14

Hi Sam, My name is Diana and I help run a home-based jewelry business
here in Tucson. I am scheduled to take ‘Running a Craft Business
Workshop’ at Parks and Rec this weekend. You mentioned a class you
are teaching and I’m wondering where/when/and cost of the workshop.
If there is still time and room in the class, I may be interested.

Thanks


#15

Dear David Geller, I was actually writing to another David ( I think
this Orchid is rotten with Davids) but I completely agree about what
it is that accountants do for a jewelry business. My approach for
setting up a chart of accounts beginning with the accountant is not
to say that is the end all beginning. You as a business owner need to
know what accounts are necessary for you particular business. That is
the trick though, if you don’t have experience in bookkeeping for the
business you are in you don’t know what accounts are necessary.

Working with your accountant to set up the chart of accounts is just
that- working with -which means a give and take. That is a perfect
opportunity to discuss with them what types of things they will be
seeing in the future for your returns. I feel that setting up a chart
with out your accountant’s input is shooting yourself in the foot and
ultimately will cost you more than the hour it should take to discuss
it prior to the set up. I say that because I have worked with the
same accountant for 10 years and if I didn’t have his input I would
pay him year after year to relearn my system, every time he produced
a return since I am not his only client it is unrealistic to expect
him to remember with a 12 month hiatus.

The job timing studies I did in my own studio were done with a stop
watch per job by the smith. If they got up to go to the bathroom ( a
practice I as business owner try to discourage…) they would stop
the watch. This approach works with items which are in my product
line and are produced over and over again. The bathroom time
ultimately has to be paid by the consumer, I can’t absorb that so it
also has to be accounted for but, strictly time on the job was
studied for my own costing and internal managerial knowledge. After
all ,the smiths have different bathroom rates. Sam Patania, Tucson