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Community Contributor *

Inventory - Food - Coffee Manufacturing

I use QBO Plus for a Coffee Roasting Company.

 

I purchase Un-roasted coffee and then Roast it and package and label and then sell.

 

How would I use Inventory to keep track of Un-Roasted coffee counts. Then also keep track of Bags and labels as part of the finished product ?


Example. Un-Roasted Coffee COST = $3. Product Bag COST = 50 Cents, Label Cost = 10 cents. Finished COST = $3.60


Would I create Inventory for the Un-Roasted Coffee. Non-Inventory for the bag and label. Then use Bundle to create the Finished Product ?

Solved
Best answer 03-14-2019

Accepted Solutions
QuickBooks Team

Re: Inventory - Food - Coffee Manufacturing

Hello there, @seion,

 

You can either sell the item separately or in bundle. The inventory COGS is affected when you sell inventory items on invoices and sales receipts.

 

When creating an invoice or sales receipt, run the Transaction Journal Report to see the Sales/Accounts Receivable and Inventory/COGS transactions. This credits the Inventory Asset account and debits the COGS account.

 

To create an invoice with the bundle item:

  1. Click the Plus (+) icon at the top.
  2. Select Invoice.
  3. Enter the customer name you want to sell the item under the Customer drop-down menu.
  4. Complete other details.
  5. Select the date under the Service Date column.
  6. Select the bundle item under the Product/Service column.
  7. Click Save and close.invoice1.PNG transactionjournal1.PNG

For additional information on how QuickBooks handle COGS, please check out this article: Understand Inventory Assets and COGS tracking.

 

Also, I've added a video tutorial to help you setup an inventory product in QBO.

 

This will answer your concerns for today.

 

Feel free to leave a comment if there's anything I can help you with the inventory tracking in QuickBooks. I'd be glad to help.

View solution in original post

6 Comments
Established Community Backer ***

Re: Inventory - Food - Coffee Manufacturing

Yes, you should create a unique inventory item for un-roasted coffee so that you can track this inventory separate from your finished good (roasted coffee). In theory, only the roasted coffee is sold to customers, so it should have it's own unique inventory item setup that is used on your customer invoices. When you purchase un-roasted coffee you should use that item on your vendor bill or expense entry, this will put the quantity into inventory. You will have to do a manual inventory adjustment to move inventory from un-roasted to roasted coffee that is for sale to your customers. The bags and labels can be setup as non-inventory, but they are also COGS (cost of goods sold)

Community Contributor *

Re: Inventory - Food - Coffee Manufacturing

Would the label and the bag and the roasted coffee be bundled and sold or would they be separate and the labels and the bags just hit the COGS account?

 

Here is what I got so far.

 

Screen Shot 2019-03-14 at 2.48.20 PM.png Screen Shot 2019-03-14 at 2.48.40 PM.png

QuickBooks Team

Re: Inventory - Food - Coffee Manufacturing

Hello there, @seion,

 

You can either sell the item separately or in bundle. The inventory COGS is affected when you sell inventory items on invoices and sales receipts.

 

When creating an invoice or sales receipt, run the Transaction Journal Report to see the Sales/Accounts Receivable and Inventory/COGS transactions. This credits the Inventory Asset account and debits the COGS account.

 

To create an invoice with the bundle item:

  1. Click the Plus (+) icon at the top.
  2. Select Invoice.
  3. Enter the customer name you want to sell the item under the Customer drop-down menu.
  4. Complete other details.
  5. Select the date under the Service Date column.
  6. Select the bundle item under the Product/Service column.
  7. Click Save and close.invoice1.PNG transactionjournal1.PNG

For additional information on how QuickBooks handle COGS, please check out this article: Understand Inventory Assets and COGS tracking.

 

Also, I've added a video tutorial to help you setup an inventory product in QBO.

 

This will answer your concerns for today.

 

Feel free to leave a comment if there's anything I can help you with the inventory tracking in QuickBooks. I'd be glad to help.

View solution in original post

Established Community Backer ***

Re: Inventory - Food - Coffee Manufacturing

In my opinion, the labels, bags and un-roasted coffee are COGS and not sold to the customer. The product you sell is the roasted coffee, and the un-roasted coffee, bags and labels are the cost of goods sold, or cost of sales for your roasted coffee. It does not make sense to include those COGS items on your customer invoices, either separately, or in a bundle. Less is more when you are presenting your invoices to your customers. You don't want to give an impression to your customer that you are charging them for "everything". It would be better to have a "right-priced" finished good on your customer invoice, meaning that you have included your costs into the price and are making a profit.

Frequent Contributor *

Re: Inventory - Food - Coffee Manufacturing

There are really 3 options to do it.

 

Before going into the options, it is important to understand that expenses (i.e. COGS) can only be recognized at the time of sale (when you get the Income). This is called the matching principle in accounting and enforced in (most likely) every accounting standard like GAAP, IFRS.

 

Simply speaking, this means that "unroasted coffee" is not an expense, but an asset. And once it is roasted, the "unroasted coffee" will be converted to "roasted coffee", from the raw materials to finished goods, which is still an asset, but another item (which could possibly include direct expenses made for roasting, i.e. unroasted coffee becomes more valuable (i.e. manufacturing is adding value to products)). And when roasted coffee is sold, the value from the asset account is debited to the expense (COGS) account.

 

So, the options:

Option 1. Not tracking inventory (by piece) and using manual journals.

  1. Recording production:
    D Finished Goods
    C Raw materials

    Or, if you track WIP...
    D Work in progress (when materials are used)
    C Raw materials (when materials are used)
    D Finished goods (when production is finished) 
    C Work in progress (when production is finished) 

  2. Once invoiced and shipped:
    D Cost of goods sold
    C Finished goods

(Or another workaround, which gets the same result, without using manual journals)

Option 2. Using Bundles.

This allows to credit the raw materials (unroasted coffee). But does not allow you to track the value of roasted coffee. I.e. bundles do not understand that you could roast the coffee and sell it at a different time, the functionality presumes that until the instant you sell the roasted coffee, you still possess the unroasted coffee. 

 

Option 3. Choose an inventory or a manufacturing app, that can do it.

In the QuickBooks app store there are inventory apps that support light assembly (simply converting raw materials into finished goods), and several apps for manufacturing (in addition, calendar and capacity scheduling, MRP, shop-floor control, FIFO), like MRPeasy, depending on depth/complexity required. They sync automatically with QBO.

Super Explorer ***

Re: Inventory - Food - Coffee Manufacturing

Hi there,  

It’s been suggested already, but perhaps the easiest way of doing this could be to list everything as an individual item and bundle them together when selling. Although, this might appear on the customer's receipt too so be warned.   

Alternatively, since QuickBooks isn’t the very best for manufacturers looking to track raw inventory and manage production, you could take a gander at the QuickBooks Appstore for a solution 

For example, Katana is an inventory management software that can integrate with your QuickBooks Online account which can bridge the gap when it comes to managing production, scheduling, handling manufacturing orders, converting raw material into finished goods, and calculating manufacturing costs, all automatically.  

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