True Inventory Costing – Does Your Small Business Accounting Software Manage This?
We regularly find with our clients who use MYOB, Xero and QBO often come across the issue of not knowing what their true cost of their inventory is. Small accounting systems often only allow average cost – so you buy in a piece of stock a year ago, when it cost you $100 and buy the same piece in today at a cost of $250 – that stock cost would show you an average of $175. For some clients, this might be fine, but for many, they want to know what each piece of stock cost them. Plus they also want to know how old their stock is, and to sell out the old stock first. And of course, in these small accounting systems, this isn’t achievable.
Another issue for our inventory clients on small business accounting systems is that there are often a lot of other costs involved in bringing stock in, especially if you are importing. Freight, port charges, duties, fumigation – the list of other costs goes on and on. These extra costs are not captured in these accounting systems (or at least, not without a lot of extra work. Bookkeepers can spend half a day per purchase invoice to allocate costs for imports when using MYOB, Xero and QBO.
Some of our small accounting clients complain about the inability to include these on-costs into their stock values – “Our salesman looks at the cost of the stock and thinks he can sell it to clients for 30% more. He doesn’t realise that it is selling at a LOSS because he isn’t seeing the true cost of the products”
And another problem many of our small accounting clients face is when they are manufacturing – being able to factor in overheads, labour costs, material and packaging costs, spoilage etc. They don’t usually know exactly what the cost is of the products that they are making!
One of our clients we are currently, doing work for is a stock exporter who needs to raise complex commercial invoices. He was using just MYOB and struggling with everything else in spreadsheets and raising the commercial invoice manually in WORD. We have a system for him now where he can record all the information about weights of products, units per shipper, client product code, product details (such as food that contains traces of nuts), area of origin, as well as shipping information about port of departure and arrival, container number etc) and lots more. This is in the same system where he records his orders and sales and can now produce a commercial invoice in the few seconds that it takes to print out. He is saving hours of work per day.
For anyone with complexities around stock and stock costing, we have some reasonably priced stock management addons that will allow you to do so much more with your stock
- In a matter of minutes, allocate oncosts to stock and apportion according to volume, area, cost, size etc.
- Track by batch or by expiry date or serial number
- Cost by average, last cost, earliest cost, standard cost etc
- Track all the costs of your manufacture
- Capture any information about the product.
- Be able to scan stock receipts in by barcode, track where they are by location, move stock and pick stock for delivery by barcode (AND PREVENT THE WRONG STOCK CODES BEING SCANNED)
If this sounds like your business and you would like to see change please give us a call for a free half hour chat about your inventory problems. We might just have the perfect solution for you.
The 2 Peas Team
P: 1300 896 732