Inventory and cogs

I sell soundbars and we include brackets in the box so that the customer can use the bracket to hang the soundbar on the wall. I buy the brackets in 72" lengths. Its hard to track as inventory as sometimes we cut the bracket into 4 pieces, sometimes into 3 of we need longer brackets. And to allocate the brackets as an inventory item cogs would be cumbersome as we dont sell the entire 72" long bracket all at one time. We cut into pieces per order of various lengths. Can i just setup the purchase of the brackets as an expense not cogs and not track as inventory?

We dont charge extra for the mounting brackets.  I would need to charge extra for them and track if i setup as inventory to reduce the stock on hand which would again be difficult as we use them up at different speeds and we never sell all 72" on one job 

Answer

"I buy the brackets in 72" lengths. Its hard to track as inventory"

You only need to do this if You care about managing, "How much do we have left, how many more do we need and by when?"

For instance, if you buy as needed and don't keep much extra, that isn't Inventory. Stuff does not = inventory. Inventory = something I buy and restock and keep on hand in anticipation of sales and need to track and manage by quantity, and have enough invested value on hand that the IRS doesn't allow me to just call it Expense.

Money is an Asset. Putting money into Inventory (an asset) that still is on hand, means there has not been any Expense, yet.

"as sometimes we cut the bracket into 4 pieces, sometimes into 3 of we need longer brackets. And to allocate the brackets as an inventory item cogs would be cumbersome as we dont sell the entire 72" long bracket"

Here is your option:

You track it by Inches. You use it by inches. Or, you don't care about it being inventory. You can buy it as a Noninventory item, two sided, so that listing the item on Purchases = COGS and listing it on Sales = income to you.

And you can still use inches. The "units" is up to you, for what you want to do.

Obviously, then, something that is $400 linear inch and bought by the foot, might be tracked as Inventory. But something you pay $400 for a bunch of parts that are cut to length as used, custom fit, and all gone a few weeks later, and you don't worry about trying to manage it as Per Inch in Inventory, means Not using inventory for this.

"Can i just setup the purchase of the brackets as an expense not cogs"

As a two Sided Noninventory Item. COGS still is the Expense; it directly relates to what you Sell.

It isn't electricity or printer paper or supplies. It is Cost of Goods Sold; it comes right off of Gross Profit from Sales, before Ordinary Expense. COGS = direct expense. That still is Expense. It's just Special :smile:

"and not track as inventory?We dont charge extra for the mounting brackets."

I would use Two Sided Noninventory Item(s) on the Purchase. Whether you decide to track a specific order as For One specific customer or not, and as Billable or not, is a separate consideration.

"I would need to charge extra for them and track if i setup as inventory to reduce the stock on hand"

No, that also isn't true. You would use Adjust inventory and top left, Job Track it, when you Relieve something from inventory but that thing itself isn't sold. For instance, a large concrete firm will relieve rebar from stock on hand of that specific size, length, etc, to take to the job site for forms, and the warehouse manager needs it tracked as inventory for timely production management purposes, but your Project is a Fixed Contract fee of $500,000. They will not also nickle and dime your sales form over these minor supplies and parts that were included in their ability to Bid what you need done.

"which would again be difficult as we use them up at different speeds and we never sell all 72" on one job"

It's Up To You. If you need to track when you buy 72 and use 4 or 6 at a time, and Adjust inventory for waste when there is only 2.3 left; or, you Don't Need to track it, is up to you.

You have all the tools you need, but no one stated to use All of them. Even with a large roll around tool box, I hardly ever use the Torque wrench.


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