I just listened to a small business podcast that suggested we can use a copywriter to write blog posts for us, which is suppose to assist in saving our time. I wasn¢â‚¬â„¢t too impressed with that idea ¢â‚¬" I don¢â‚¬â„¢t think anything I let someone else write for me will sound the same, no?

Anyway the point of this blog/newsletter is to explain business bookkeeping from a non-expert perspective so if I get someone else to write it ¢â‚¬" it will kid of defeat the purpose.

So this week I want to talk about the way to manage a list of items which can be products or services within your accounting software.

As always I will use Nominal as an example but it will mostly be true for any other accounting package you may use. So what is the item list and what can you do with it:

a.       List of your offerings: items or services

An item can be an item or a service, the main difference is that items can be tracked for inventory and services can¢â‚¬â„¢t

b.      Each item or service can have a price for selling

If you want to be able to sell an item/service, i.e you want to be able to add the item to as a line item to your invoice, you need to mark the selling checkbox and enter the price for selling.

When you mark an item for selling you will also be able to use it in your time sheet, the price in this case will refer to an hourly rate.

So say you¢â‚¬â„¢re a consultant charging by the hour, you can create a new Service called ¢â‚¬Ë"hourly support¢â‚¬â„¢ and then use this service on your time sheets. Nominal will use the item when generating an invoice for the customer based on the number of hours used with this service.

c.       And/or a price for buying

In a similar way, when you want to be able to use an item on your purchases ¢â‚¬" you will need to set the item/service Buying checkbox to true and set the buying price for that item.

This will allow you to use this item as a line item on your purchases. Nominal also uses the buying price as the hourly charge for your non-salaried employees.

Under the employee details you¢â‚¬â„¢re to set the employee salary or set it as non-salaried employee. These employees salary will be calculated based on the number of hours worked (from timesheet) and the rate for each hour (from the item buying price)

d.      Items can also be tracked

When you set an item (not a service) tracking flag to on ¢â‚¬" Nominal will record the number of items coming in (through purchases) and going out (through sales). It will also alert you when you don¢â‚¬â„¢t have enough to sale from a specific item type and calculate the cost of sales related to purchased/sold items (see next section)

e.      A word about asset and cost of sale account

This is a short step by step instruction on the way Nominal handles asset and cost of sale accounts:

How to use inventory in Nominal - Step by Step:

1) Use Manage->Items->+ to create a new item
2) Set the item: 
name=New Item, 
type=Item, 
selling=true,
price=200,
buying=true, 
price=100,
tracking=true,
stock=0
3) Now we have a new item we can purchase, create a new purchase
4) Enter a new line item
5) Description = buying an inventory
Account = Other Asset (or any other asset account)
Type=item
Item=New Item
quantity=10
Leave the rest as:price=100, amount=1000, Tax Code=GST
6) Save the purchase
7) At this stage the Stock under Manage-> Items has gone to 10
8) If you go to Books->Purchase you will see the debit and credits related to this purchase.
Accounts Payable is credited GST and Asset accounts are debited
9) When you want to sell this item, create a new sale
10) Enter the following line item:
Description: selling the item
Account: Sales (or other income account)
Type=Item
Item=New Item
Quantity=5
Leave the rest as: price=200, amount=1000,Tax Code=GST
11) Save the invoice
12) At this stage the Stock under Manage-> Items has gone to 5
13) If you go to Books->Purchase you will see the debit and credits related to this Sale.