Feedback on resale business bookkeeping

[brianr64]

Just some quick background and then the question.  I started  a P-T resale business last year.  I did about $10K on the side.  This year I am tracking to more than double that.  I would like to start simplifying some processes which take me alot of time.

For instance, the bulk of my inventory is thrift store merch.  I log every single item line by line in Excel for COGS.  When it sells, I match the revenue and fees to that line item to get profit per item which can then be extrapolated into my monthly and y/e profit.  I am a Finance guy and like spreadsheets, but can see how continuing down this path will be too time consuming.

I have seen some you tube videos where people tracks cogs and sales idependent of each other.  For instance, they purchase 10 items at Goodwill on Dec 1.  Rather than logging 10 line items in Excel, they just make one entry for the total cost.  At the end of the month, all these entries in aggregate become COGS for the month.  Like wise for sales.  They never go to the granularity of matching item sales and costs to get to an item by item profit.  They just calculate in aggregate each month.

I like the idea of doing this, but under this method, all items purchased would be COGS when a large portion of it would realistically be inventory and not yet sold.  Just wondering how some of you folks who do not use software programs  manage your profitability tracking.

Also, I currently print and tape all shipping labels.  Not a problem when you do just 1 or 2 per day, but lately it has been 10 to 15.  I have a dymo and am inclined to start using that.  I have always printed the label with receipt, which I use to facilitate my line by line spreadsheet tracking.  If I stop calculating profit on each item, I think I will no longer need the label receipts and can then swith to the Dymo which will save me time as well.  Does anyone else use the label receipts for anything productive?

[anthemshop247]

In addition, you may want to consider bulk printing. I only use 8x11 paper which can print two labels per sheet. Then, print also a listing of the shipping details and/or SCAN form. The listing of shipping details can itemize your items sold on one sheet rather than having 10 to 15 half-sheet 8x11 paper. The SCAN form is for acceptance of the mail carrier.  

[luckythewinner]

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@brianr64 wrote:

  Rather than logging 10 line items in Excel, they just make one entry for the total cost.  At the end of the month, all these entries in aggregate become COGS for the month. 

I like the idea of doing this, but under this method, all items purchased would be COGS when a large portion of it would realistically be inventory and not yet sold.  

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So in other words, you like the idea of tax fraud.

If you are handling inventory this way, IRS publication 334 explains that you must expense the COGS when it sells, not when it is purchased. 

[femmefan1946]

Do you assign an inventory number to each item?

When we had a shop, all the better material (which would be available online, in several venues, as well as in the shop) had an inventory number that told us when it was purchased.

Where and for how much was a mixture of unimportant (because we wrote cheques for purchases and those were tallied by the bank) and impossible (because we bought many estate lots and broke them up - a $5000 estate purchase  might end up with $10,000 priced as separate lots plus one or two Big Box of Fun lots at anything from 425 to $200 each.)

But the inventory number was essential in making sure that we didn't sell an item and then forget to pull it from the other venues.

However, if you are buying distinct items for resale, and put an inventory item on each, then your spreadsheet could be set to pull all the information about that item together quickly.

[the*dog*ate*my*tablecloth]

All of my items have inventory numbers and tags. All of my items are individual although some look similar so the number helps me ensure I'm shipping the correct item.

I have an inventory spreadsheet I roll over each year. It has a column for purchase price one with the purchase price if it's still in inventory and one with the year sold. I can figure out from that my opening inventory, closing inventory, purchases for the year and COGS.

I then have a sales spreadsheet. Each quarter I pull out the item numbers sold during that quarter and mark them sold in my inventory spreadsheet. I have a high number of return customers so I can go back to 2009 for instance and see what items a returning customer bought that year. That's probably overkill for most people lol

[swladyshopper]

I own an accounting firm and provide national and local support for all online sellers and have for years.

Unless you're a huge seller with large inventory it's a waste of time to track each item int he actual accounting software.    WYSIWYG  - what you see is what you get.  99 percent of small businesses are on a cash basis accountibg method and tax filing.    Purchases are expensed and sales are booked off of the PayPal financial statements.  

[estate-raiders]

when you say "purchases are expensed"... what purchases do you mean? COGS? Everything I'm reading says COGS can only be taken the year actually SOLD... not when they were bought. Thx...

[swladyshopper]

That depends on if you are a cash basis or track inventory.
My reply stands. Unless you are a huge business with a warehouse of inventory it's a waste of time. Product in and product out.... expense the COGS (ok so Cost of goods SOLD does mean SOLD but ... whatever, it's a term no biggie) and book the income - done and done.

[equid0x]

I track everything but that is because I like to reference prior sales of the same or similar items, which venue it sold on, how long it took to sell, things like that.

It is a lot of busywork, but I can do better reporting and hone in on things that sell better and for more money.

Also, since its all implicitly inventoried with this method, if someone asks me "hey, do you have XYZ" I can do a quick search and see if I have one.

I can see this method being pretty tedious if you are buying and selling in bulk.

The IRS will let you use either method, but you'll need to pick one method and stick to it.

[the*dog*ate*my*tablecloth]

I track inventory in detail for the same reason. I have a huge inventory and could not easily physically search my unlisted inventory.

My CPA did switch me over to cash based accounting for 2019 but I’m still tracking individual items.

[siayan]

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@swladyshopper wrote:

I own an accounting firm and provide national and local support for all online sellers and have for years.

Unless you're a huge seller with large inventory it's a waste of time to track each item int he actual accounting software.    WYSIWYG  - what you see is what you get.  99 percent of small businesses are on a cash basis accountibg method and tax filing.    Purchases are expensed and sales are booked off of the PayPal financial statements.  

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THIS THIS THIS

I am retired now but if you keep everything clean it is easy and painless. PayPal only for business, preferably shipping expenses. All purchases with a check or debit from a business account. Then at the end of each quarter you can grab all the info and file quarterly's if you are large or get everything at the end of the year if you are small. Takes an hour or two  once a year. Life is short.

[edealzforthehome]

Let's look at it backwards.  I have been at it six years and sell on multiple platforms and local.  We don't have a warehouse but we do have a massive inventory.  We are currently on a cash basis and are struggling to figure out when and how to get to a line item basis because there is no way for us to go back now and find individual cost of specific items.  Also when should we pull the trigger, say Jan 1, 2020.  I believe many on here would be correct that if we had already been doing line item this wouldn't be such an unbearable and daunting task now.   My CPA could help but he isn't going to know the numbers either so this is something we will have to do or is there an easier way? Like start a two year process where we start now tracking individual items that come in and in the year that all remaining items that can't be cost identified individually have sold through make that the year we switch accounting methods.  During the two year switch over we technically will have two sets of books until all older inventory is gone.   Or go to the line item method and stay with the cash basis but at least we will be line item for internal records and growth.  Any thoughts, suggestions appreciated.