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.