Inventory/Accounting questions

Jewelry Discussion
1

Hi Folks,

I went out yesterday and bought QuickBooks Pro to get my bookkeeping
in order and to get myself “professionally” organized. I had intended
to use the inventory feature for both finished goods and components.
Components can be combined, throw in a little labor and you have a new
inventory item of finished goods. Of course, in invoicing, balance
sheet and stuff are also important features, but I’m currently getting
by in Excel with that.

Almost exactly a year ago there was a discussion about accounting
software (QuickBooks, Peachtree) and tracking inventory. I wish I had
read that before buying and installing the software. Apparently the
inventory feature for QuickBooks is great if you are buying wholesale
then turning around and selling the same product at retail. And it’s
not really geared for one-of-a-kind items, which much of my stuff is,
or stuff I’m “manufacturing” from existing inventory items. Colene
Abramson provided some guidance on how QuickBooks may be made to
function for this purpose, and I’ll probably end up trying to
implement her suggestions.

My question is how do other people do it? By that I mean manage
inventory of stones, raw materials, findings and components and then
finished goods? Are people “flying by the seat of their pants” (on
instinct), or not bothering to determine a value of on hand materials?
To use the accounting terminology I’ve just learned, “current assets
that are not finished goods for sale.” What about the value of tools
and equipment? Do you just guestimate, or do you actually have a
detailed list and assigned value for significant tools and equipment?

Any suggestions, insights or advice are appreciated! Thanks, as
always… you people are AWESOME!

Dave - Wearing my accounting hat and it’s giving me a headache!

Dave Sebaste
Sebaste Studio and
Carolina Artisans’ Gallery
Charlotte, NC (USA)
dave@sebaste.com
http://www.CarolinaArtisans.com

2

Hi Folks,

I went out yesterday and bought QuickBooks Pro to get my bookkeeping
in order and to get myself “professionally” organized. I had intended
You Might look into Ibis or Jewelery shopkeeper. I am currently
swithching from quickbooks for the same reason. There realy isent a
good program that resolves that problem.

Joel McFadden

3

Dave, I’m going fulltime jeweler this year and my account told me to
buy QuickBooks Pro. It interfaces his system. I have the same
question and am plan to use Excel for inventory (per his suggestion).
He (accountant) said I could import into QuickBooks what I needed from
Excel. I have not tried it YET and am concerned about investing a
lot of computer time building something that will be awkward to
use/maintain. If you get any good input, please pass on. tx, Regis

4

Hello all. As I tell my customers- I am a great goldsmith but a lousy
shop-keeper. I rely on a program call “Jewelers Shop-Keeper” from
Compulink. It is geared toward the jewelry industry and provides for
makeup/breakdown of pieces, inventory and job control, ar and ap, and
a zillion other features. It can provide for a slide show of your
pieces as well as providing any type of reporting you can want. If
anyone has any specific questions, please p-mail me. I have been using
this program for about 8 years and couldn’t get by without it.TBear

5

Hi Dave, My wife and I also do almost all original pieces and the
inventory tracking features of quickbooks is not designed for non
buy/resale items. I have a masters in finance and have been using
quickbooks for about 4 years. I manually adjust (on a quartly basis)
my Inventory accounts using the Gen’l journal adj. option. As for
inventory it is actually split into 3 sub groups: raw materials, work
in progress, and finished goods. However I keep it simple and use
excel and Access for inventory prior to it selling. Please feel free
to contact me with any questions TJ & Penny

6

Dave, I have not been able to find software to combine all the
components that go into a finished piece either. That is without
taking too much data entry time. We do all our pricing outside of our
job tracking and accounting software. We use price lists for labor
and common findings and predetermined markup for less common
findings. I have found that even simple tasks like sizing can vary a
great deal in labor and so a computer key for sizing up one size, for
instance, will not always be accurate. Most shops simply don’t have
time to keep a 100% accurate inventory of all stone, findings and
metals. Also, thanks to federal express, we are able to operate on
more of a just-in-time basis. That said I often worry about waste,
loss and undercharging. I just can’t find a cost effective way to get
my arms around it.

I did have a job tracking program written for the shop. We us bar
codes on every job and that makes log in, billing and searching much
better. But it doesn’t solve the inventory and being certain you
charged enough problem. I do break down the total time and cost on
several jobs every week to be sure we are in the ballpark. I also ask
my goldsmiths to the same on jobs we estimated up front for the same
reason. Then my quality control person does that again before
delivery. even with all that we still screw up. I don’t know how to
fix it. I do know that I can only use Quick Books as a check book, it
was too cumbersome to use for invoicing, that’s why I had a program
written to suit my needs.

Mark P.

7

Hello Dave,

Let me take a long walk of a short plank and see if I can help.
First, let me say that I am making no assumptions about how much or
how little you know about accounting. I just want to start off with
first principles. I am no account, but for a variety of reasons know a
wee bit (making it very dangerous)

first point: we have revenue, expenses, assets, liabilities and
equity.

next: revenue and expenses are recorded on the income statement
assets and liabilities are recorded on the balance sheet.

second: assets are entities to provided future economic benefit. You
give up money, time and materials to acquire assets which then at
some time in the future are exchanged (sold) for money or something
else. The main point about an asset is that its benefit is not
realized until some future date.

third: whether it be a big shop or a little one that makes something
to sell, three major entities go into making the thing it will sell in
the future. These are raw materials, direct manufacturing labour, and
shop overhead. The overhead include resources forgone that cannot be
traced to making the finished good in an economically feasible manner
so we have to allocate what we believe is a reasonable portion.

So the raw materials are assets. As one works on the raw materials to
create the item costs are recorded in what is known as the
Work-in-Process account. This account is an asset account. Once the
work, is completed we can add the cost of the overhead. Now we have a
Finished Good. This is still an asset. (Noticed that we have not used
the word “inventory”.)

When we sell the finished good we immediately recognize income (cash,
account receivable) and match it with an appropriate expense, in this
case, the Cost of the Finished Good Sold. At this instant the
finished good, having future economic benefit, becomes converted from
being asset to being an expense, a resource immediately foregone to
acquire a benefit (in this case, income). The selling provides sales,
the departure of the good is the cost of sales leaving a gross profit.

As far as I know, these are some of the very basic principles to
managing the accounting side of a business.

May I suggest that you try tracking the cost of the creation and sale
of a single item on paper alone.

Let’s pretend it is a sterling brooch.

Cost of the a sheet of silver. Fraction of the sheet used to make the
brooch. therefore cost of the Raw Material + cost of the pin back
findings. + Hours worked on the brooch x cost of labour. Direct
Manufacturing Labour + Hours worked on the brooch x cost of the
overhead. Manufacturing Overhead (the solder, gas, etc) = cost of the
finished brooch. Finished Good (asset) Sale of brooch. Revenue - Cost
of brooch to make (Cost of Sale) = Gross Profit.

What I have left out is all the really difficult stuff about making
and selling a wide variety of indistinguishable goods cross over from
one year to the next. Or what you do with the scrap? Is the saw blade
broken half way through cutting the brooch out overhead or a direct
cost, etc etc?

Hope this helps. If I can help more please contact me off line.

David Popham in Victoria BC where today at 9:00 am the sun was low and
the storm had yet to break so that the landscape was magical for very
brief five minutes

1 Like
8

Dave,

You might take a look at M.Y.O.B. It has the feature you want. We
don’t use it because we have one line of jewelry with 10 petroglyphs X
15 stones X 6 styles = 900 different possibilities. We would have
spent more time accounting than making jewelry, counting the pieces on
each strand of 4 mm beads, figuring breakage loss, etc. I’m sure there
are ways around this but we didn’t have the time to run two accounting
programs while we figured it out.

If you don’t have an absurdly extended line like we do it might work
for you.

We use Quickbooks and are constantly trying to work around the
program’s shortcomings

Some close friends with a silk painting and clothing business have
used M.Y.O.B. for years. One of the principles is a Harvard M.B.A. and
he highly recommends it. You can set it up so it does the “build” as
you sell a piece.

John Flynn

9

I was going to pass on answering this but I am going to throw my 2
cents in. If you want to be a jeweler, be a jeweler. If you want to
be an accountant, be an accountant. There are many independent
bookkeepers out there, who, for quite reasonable amounts of money,
will take care of all your bookkeeping needs. Usually, they either
have, or can easily get, systems that will interface with the ones
your accountants are using. You could spend 20% of your time doing
bookkeeping and not making jewelry to earn money from, or you could
take a small percentage of the extra money you will make by not
spending that time bookkeeping, and pay a bookkeeper. I found out a
long time ago that it is best to delegate the things you are not good
at and spend as much of your time as possible on the things you are
good at. On the other hand, if doing numbers moves you, then go for
it. Daniel R. Spirer, G.G. Spirer Somes Jewelers 1794 Massachusetts Ave
Cambridge, MA 02140 617-491-6000 @spirersomes
www.spirersomes.com

10 
Dave, I have not been able to find software to combine all the
components that go into a finished piece either

When I started my store seven years ago, I experimented with several
“Accounting Programs” to find one that would me to use it to track
inventory and to use as for point of sale receipts. None were a
perfect match but I found that MYOB was the best fit. At the time,
it was quite reasonably priced but has gone up a bunch over the
years.

It will allow you, for example, to set up a ring as a built item with
sub items. IE Ring, Item # ring1001. It requires shank1002, Head
1003, head 1004, three heads 1005, and stone2001, stone 2002, and
three stones 2004 for a complete product. When you sell Ring1001,
all of the inventories for the other items are reduced and the proper
accounting is done on the Cost of Goods side. Note I said when the
ring “sells”. There are some drawbacks to this software but it is
the best fit for an off the shelf package that I have found. You can
get evaluation copy from MYOB.COM.

I don’t like this program, but I dislike it less than all the others
I have tried.

11

Dave,

I tried QuickBooks and it just didn’t do the job for me. I bought
MYOB Accounting Plus (less than $200) and really find it to be a great
program for tracking inventory, as well as handling all bookkeeping
functions. When you finish a piece, you enter all of the components
you’ve used and the program will then subtract those items from your
raw inventory list. It also has an excellent ‘reports’ component –
sales analysis, etc. Here’s a link to their page:
Unleash Infinite Business Potential - MYOBelieve - MYOB Australia. Good luck. Off to Tucson for the
first time, Susan Serna, Flor de Luna,

Anchorage, AK