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dawnmor
Level 2

How to properly track Inventory Assets/COGS, Vendor invoice, and Customer Deposit & Final Payment

Hi,

 

We are an apparel company. We track all of our in-line inventory in Shopify, but we also sell custom orders. We just started selling this year and I've realized we aren't tracking things correctly with regards to inventory. I'm trying to clean it up as much as possible, before we have a CPA help us with closing the year/filing taxes. I'll probably have more questions to clean up the shopify data, but for now this question is specifically for the custom orders that don't go through Shopify. 

 

Are these the correct steps to capture these custom order sales? It seems a little clunky with changing the invoice date and having to record a JE each time to move the product cost from Inventory Assets to COGS.

 

1) Customer places an order and I enter a customer invoice into QB to sell a generic inventory item called "Custom Order." (should I use a different category/item, since we aren't tracking inventory here?) 

 

2) A 50% deposit is due at the time of the order and the final 50% payment is due when the order ships to the customer. I set the invoice due date as a few dates after the invoice for the deposit due. Once the deposit is received, I enter the payment against the invoice (showing the remainder unpaid) and then change the invoice due date to our expected ship date for the final payment. (Is there a better way to track deposit due dates and final payment due dates)?

 

3). After the customer deposit is received, we place the order with the vendor. The vendor produces the custom order and the invoices us when the order ships to us (usually 2 months later). At this point, I enter the vendor invoice into QBO coded to "Inventory Assets". We usually have terms and pay the vendor in 30 days. 

 

4) When we receive the product from the vendor, we do a quality check, and them immediately ship it to the customer, which triggers their final payment. At this point, I enter a JE to transfer the Inventory Assets to COGS. When the final payment is received from the customer, I enter the payment to close out the customer invoice.

 

Thank you!

 

 

 

 

 

 

2 Comments 2
Maybelle_S
QuickBooks Team

How to properly track Inventory Assets/COGS, Vendor invoice, and Customer Deposit & Final Payment

Let's ensure this is taken care of, dawnmor. I recognize the significance of accurately monitoring your transactions.

 

Certainly, I'd be happy to provide you with an overview of handling the Cost of Goods Sold (COGS), bills, invoices, and customer deposits.

 

In QuickBooks Online (QBO), managing your business finances is streamlined and efficient. When it comes to tracking the COGS, you can easily set up and manage your products or services in the "Products and Services" section. QBO automatically connects these items to their respective income and expense accounts, helping you accurately track your direct costs.

 

Moreover, handling bills is a breeze. By creating bills for expenses owed to vendors, you can manage payment schedules and stay on top of your payables. To create invoices for your customers simply generate an invoice, add the products or services provided, and set payment terms. This feature enables you to promptly bill your customers and receive payments smoothly.

 

Furthermore, QBO simplifies the process of handling customer deposits. You can generate an invoice to record the deposit, and as your customer makes the payment, it's registered as a credit on their account. This enhances transparency and helps maintain accurate records.

 

QuickBooks Online (QBO), streamlines COGS tracking, bill management, invoice creation, and customer deposit handling, contributing to a well-organized and transparent financial system for your business.

 

Additionally, I'd suggest seeking guidance from your accountant to help you choose the specific accounts to use and the right steps to take. They can also suggest another option to properly record the transactions.

 

I've added these guides that you can check about setting up inventory and managing bills in QBO:

 

 

Let me know if you have further questions about tracking your entries, dawnmor. I'm always around to help. Take care.

dawnmor
Level 2

How to properly track Inventory Assets/COGS, Vendor invoice, and Customer Deposit & Final Payment

Hi,

 

Thank you for your response; I understand the general process but still had specific questions. 

 

I already create an invoice for our customers. But there are no terms options for a 50% due upon receipt and 50% final payment due in two months. So, instead I have to set the first due date, then receive the deposit. Then update the invoice to the second due date, in order for our reporting to show correct aging of open A/R. Is there a better way to do this?

 

Also, when I post a vendor invoice to Inventory Assets, it seems I then have to manually add a JE to move that to COGS when the item is sold. We are not interested in tracking inventory in QB, as it does not integrate fully with shopify. Is there not an automatic process for this transfer from Inventory Assets to COGS?

 

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