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Putting Jewelry into the POS & QuickBooks


#1

How to handle building your own inventory and entering that data
into QuickBooks and your Point of Sale program

If you’re using a Point of Sale program (POS) that doesn’t have it’s
own accounting module like The Edge or you only use QuickBooksC this
paper will show you how and why to enter items in both programs if
you make your own inventory for stock.

In helping jewelers across the country I find this is one big reason
for their QuickBooks to be a mess. So let’s look at how the circle
evolves in a sale. Let’s use an example that you buy a 14kt ring
from “Asia Imports”. Here’s what your store bought:

The Ring:

  1. 14t ring, weighs 4 pennyweights
  2. Contains a center 7x5 oval emerald
  3. Surrounded by 12 - 2 point round diamonds
  4. Made by the factory, it’s beautiful

The ring cost you $800.00. Here’s how the store would handle the
transaction:

Sally the salesperson gets the ring and invoice and enters it into
the POS as inventory, gives it a sku number, tells the POS the cost
is $800.00 and retail is $1,599.00.

Does the POS ask how much the diamond costs or how much the gold
cost or how much center emerald cost? Does the program ask how much
labor was to make the ring? No. Just tell me total costs! That goes
into the POS.

Barry the bookkeeper gets the invoice from Sally and in QuickBooks
enters the bill for the ring for $800 from Asia Imports. He uses the
chart of account “Inventory Asset” as we have increased inventory in
the store.

The POS’s inventory level increases by $800 as does QuickBooks’s
inventory level.

All is good in the world.

This is what happens when the ring sells. If you use The Edge,
Jewelry Shopkeeper or another POS program and data flows into
QuickBooks:.

  1. When someone sells the ring in the POS, inventory in the POS
    is now lowered by $800.00, the cost of the ring.

  2. The POS moves the $800.00 from inventory and puts it into
    Cost of Goods Sold.

  3. Then the POS makes an entry into SALES for the $1599.00.

  4. An entry is also made in “Sales Taxes we collected” for the
    sales tax owed.

  5. An entry is made saying we collected so much money in a Visa
    credit card sale.

Similar things happen in the QuickBooks when you export your data or
you do a manual journal entry to enter your sales:

  1. The cost of the inventory you sold, which has been sitting in
    Inventory Asset, moves out of Inventory Asset and is moved into
    Cost of Goods Sold

  2. Inventory is now lower, and cost of goods is higher by
    $800.00.

  3. Sales have now increased by the $1599.00 as has your bank
    account, which gladly accepted the customer money at full retail!

Important

When you enter a bill in QuickBooks for Inventory it is not Cost of
Goods sold. It’s not a cost until it’s sold, not when it’s bought by
you, nor the bill is paid. If it takes 3 years to sell, then that’s
when it turns into a Cost of Goods Sold. When you pay the vendor that
merely pays the bill you owe.

In the above example of the $800 ring, all of the ring went into
"inventory". You didn’t care how much the diamonds cost you nor what
the labor costs. All you cared about what the $800 cost.

So how do you build your own inventory in your POS and in QuickBooks
and get the correct costs? Easy and its only two steps.

Point of Sale Program

  1. Enter the item your shop made for stock into your POS as if
    you bought it from a normal everyday vendor. Suggest the vendor
    name be your company name, i.e. “Jewelry by David” as an example.

  2. Your cost will be a combination of three things added
    together:

    a. Your costs for the metal

    b. Your cost for the stones

    c. Your best guess estimate of labor for your store to
    manufacture the piece. (Most people forget this important
    line and more on that a ways below).

  3. Retail will be your normal markup.

QuickBooks

When you buy any inventory item from a vendor in QuickBooks you
enter the bill to “Inventory Asset” account. When you make the piece
yourself all of the components would also go into inventory asset.
There’s no difference if a ring costs you $800 or if the ring costs
you in bits and pieces:

$125.00 + $550 + $125 = $800.

So here’s how to enter your costs into QuickBooks for the cost of
the ring you make and I’ll use examples for the $800.00 ring you’ve
made.

  1. 5 pennyweights of 14kt gold, costing you $25.00 per
    pennyweight. Cost = $125.00

  2. 1 center 7x5 oval Thai blue sapphire costs $130.00. Added to
    that 20 small diamonds, total weight 1 carat at $400 per carat =
    $400 for the diamonds. Total stone costs = $530.00.

  3. Labor for your jeweler to make the ring. 5.8 hours with the
    jeweler making $25 an hour = $145.00. (The jeweler actually is
    paid $20 an hour, we have added in another $5 an hour for our
    matching Fica/Medcare expenses).

When you enter the bills for the gold, diamonds and sapphire you
enter them to Inventory Asset.

When you pay the jeweler, you’d SPLIT his paycheck. If he makes
$850.00 a week in pay, instead of writing 100% of his paycheck to
"SHOP COST OF GOODS: Jewelers Wages", you’d split the check:

Inventory Asset: $145.00

Shop Cost of Goods: Jewelers Wages $705.00 (remainder of paycheck)

Now all costs for the ring are in Inventory in both programs. It
doesn’t matter that in QuickBooks it was entered piece meal, just as
long as “Inventory” level in QuickBooks matches the inventory level
in the POS program.

In QuickBooks, hit “Control + A” and you’ll see the chart of
accounts. Near the top is Inventory Asset, an "other current asset’.
You might have a MASTER Inventory account with sub categories under
it. No matter, the main or master Inventory heading is the total of
the sub accounts and the main account balance on the right is
supposed to match your POS program.

But more importantly in the POS program you’ve entered labor and you
know the true profit. In QuickBooks you haven’t doubled your labor
expense, its segmented correctly.

David S. Geller
JewelerProfit