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Join nowHi everyone! This is my first post and I'm just helping my friend set up her small bakery business. She has a pop-up shop at the local farmers' market and I want to ensure I'm categorizing her expenses correctly. Could someone do a quick review and let me know?
ingredients for her bakery items: COGS-ingredients
packaging supplies for her bakery items: COGS-supplies
pop-up tent for farmers' market: Expense-business expense
laptop computer (under $2500): Expense-business expense
rent for booth space at farmers' market: Expense-business expense
Thanks!
Hi, @vswebster, and welcome to QB Community! I hope you'll encourage your friend to join as well :-)
@Anonymous, do you have any pointers here?
@vswebster, I do the books for our bakery and would be happy to share how ours are categorized for those type of expenses.
ingredients for her bakery items: COGS-ingredients
packaging supplies for her bakery items: COGS-supplies
pop-up tent for farmers' market: Expense-Market expenses
laptop computer (under $2500): Expense-office expenses
rent for booth space at farmers' market: Expense-Booth Rent or Market expenses
This is how I would categorize these. It just helps to keep everything a little more organized.
Hope this helps!
Thank you, @jessbru99568! Really appreciate the input and makes perfect sense.
Welcome @vswebster !
I agree basically with everything Jess said.
However, I would probably rename the COGS - supplies as COGS - Packaging.
It will be a good reminder that only packaging goes there, rather than all manner of kitchen/baking supplies.
I would also suggest breaking down the other items you listed just a bit more. "business expense", has the potential to get very crowded very quickly.
The computer i would most likely put in a literal 'computer / internet' account... especially if she is using it onsite as a sort of POS system.
Since the tent is essentially a part of her location expenses, I agree with the market expenses suggestion.
It might help to think of the expense categories in basically 6 groups:
Cost of Goods Sold (including packaging)
Labor -- this means everything: 1099 labor, payroll taxes, reasonable salary for owners, workers comp insurance, uniforms, all that suff.
Occupancy - this involves anything related to where the shop is and keeping that physical plant running, utilities, rents, storage etc ...so for things like food trucks or tailgated pop-ups, it might include some things found under automobile as well (which is typically listed under Admin)
Operating - All the stuff related to making and selling your product that doesn't quite fit above... kitchen utensils, computer expense, repairs + maintenance, your telephone + website, etc.
Administrative - stuff that has to do with running a business *generally*... advertising & promotion, bank + cc service fees, office supplies, postage, insurance, business taxes, research, licenses + permits, etc.
Then, i like to put interest and finance charges, penalties, etc. in it's own "other expense" type category. that way it is easy to see how the business is doing both with and without it... in other words, you might be just breaking even... but actually in the black if your sba loan was paid off.
In most circumstances, if you can keep your Labor + COGS + Occupancy below 75% you are doing well for the most part. More ideal is 70%. Since this is a mobile place, I would shoot for 70% assuming that the space rent on the farmer's market isn't crazy.
As an aside, since you are just setting up, you might want to think about doing reporting for her on a four week basis, rather than a monthly basis. Unfortunately, it's kind of a pain in QB... that said, it is completely worth it to be comparing periods that have the same number of saturdays and sundays in them!
good luck... and feel free to reach out with questions!
*kristen
@vswebster You are very welcome! Please let me know if you have any other questions. I'm happy to help! :)
@Anonymous what is the purpose of spliting the COGS into packaging from supplies? All manner of kitchen/baking supplies does go there except the tools and equipment used in the bakery. Sheet liners, baking pans, and packaging. All of those are COGS but the more you outline, the harder you'll make it. It only makes sense to leave one category and put it all in there. The only thing in COGS that I would recommend to keep seperate are the ingredients.
The computer and everything for it would most definitely go into the office expenses, since most likely that is what it is used for. Especially if this is a more mobile/market type of business.
I wasn't suggesting to add packaging to COGS, i was suggesting to call it packaging.
With you description, better instead actually to call it "packaging + baking supplies".
The reason i suggested that is i had the impression that this was being set up for the owner to use themselves. And it's been my experience that sometimes categories that are too generally named end up being used differently than what is intended. You're experienced with what would belong in COGS vs the kinds of supplies that would need to be elsewhere. But someone just starting out may not realize there needs to be a distinction and not all supplies are created equal. As you said, only some kinds of supplies actually belong in COGS.
By specifying the type of supplies, it's better ensured that all manner of supplies don't end up mixed together. And supplies like office, maybe supplies for signage at the locations, etc. etc. etc. find homes under other accounts that aren't COGS.
Hey @vswebster,
It looks like @Anonymous and @jessbru99568 have already offered some good advice, but I also wanted to provide you with some resources that demystify the Chart of Accounts.
Rhonda Says - Keep Your Chart of Accounts Simple
Let me know if this helps with how you're approaching your work with the bakery.
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