Accounting & Bookkeeping & Small Business Forum

[Guest]

NEED SOME ADVICE. I'M SETTING UP A NEW CLIENT-SHE HAS A BALLOON AND FLORIST BUSINESS. HOW SHOULD I SETUP YOUR INVENTORY? SHE PURCHASES THINGS ON A PER ORDER BASIS. THANKS

[Guest]

Conside whether you really need to set up inventory...when purchase is made..expense it in cost of goods.

[Guest]

I have a client that gets products, jewelry, creams, lotions and cosmetics as consignment and I want to set up an inventory and per the vendors. What is the easiest way to start?

[Guest]

Hi Deborah,

Since your client is receiving the items on consignment, they are not considered her inventory asset. If she "only" receives items on consignment and does not purchase the items ahead, then all of them could be considered consignment inventory. If you have a mix of both, you have to make certain that the value are kept in separate inventory accounts.

For the offset, you need to take a look at the consignment agreement for each one of the vendors. They will define the terms of payment. Some will require you to send them notification and payment within 10 days, for example, of the time you sold the item. Others may have a rep that comes out and does inventory counts and then bills you. You would keep the original offset in an "other current liabilities" account. The AP transaction would occur depending upon whether you initiate it automatically from the sale or the vendor sends a bill. Keep all of this very distinct from your current AP Aging when it is still a consignment, non-sold item.

You may want to run a search on the IRS website and your own state website on "consignment sales" in order to ensure you are reporting the way they require. I do work with a manufacturer that sells items on consignment. Both the IRS and State sites were very helpful in making sure that we are transacting everything correctly.