When you receive supplies directly from supply house that are going to be used on a job for a customer, is it acceptable to not itemize these supplies as "inventory" in your accounting software and to just list them as "materials" under one lump sum for that customer? i would like to hear how others do this...and your method of bookkeeping?
Bookkeeping-Inventory Question
- Thread starter jfls41
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Re: Bookkeeping-Inventory Question
The way we do it, material purchased just gets categorized as " Materials". We stay away from the " Inventory" it creates a lot of headaches for Tax Time. Our accountant told us as long as we do not have thousands of dollars worth the inventory it is not a problem. Even the things we stock on our trucks, are Materials..
The way we do it, material purchased just gets categorized as " Materials". We stay away from the " Inventory" it creates a lot of headaches for Tax Time. Our accountant told us as long as we do not have thousands of dollars worth the inventory it is not a problem. Even the things we stock on our trucks, are Materials..
goldstar
Senior Member
- Location
- New Jersey
- Occupation
- Electrical Contractor
Re: Bookkeeping-Inventory Question
If you're using Quick Books Pro and if the material you're purchasing is going directly to a specific customer, there's a category for "cost of goods sold" and you could charge it off directly to that job. If you have the type of company that purchases 50 rolls of NMC, 100 GFI receptacles, etc. and distributes them equally to each of your crews for use on various jobs you can use the "job materials" category and not charge it off to a specific job. When a crew uses any of these items they are itemized and billed to the specific customer. At year's end when you print your P&L statement it will start off with "gross revenue" (where all your customers' bills will be lumped together) less "cost of goods sold" and "job materials" (irrespective of whether all items have been used or not) and finally "gross profit". Then your "expenses" are deducted and you'll end up with "net income". What you have to be careful with when using this method is shrinkage (employee theft) because you are not keeping track of what is used and when.
On the other hand, if you have the type of company that keeps a stock of rolls of NMC, switches, receptacles, cover plates, etc. and distributes them as needed for each job, then you'll have to keep a running inventory and drive your accountant crazy at the end of the year. Personally speaking, I would rather have my supply houses keep the inventory for me rather than tying up my ready cash in inventory.
If you're using Quick Books Pro and if the material you're purchasing is going directly to a specific customer, there's a category for "cost of goods sold" and you could charge it off directly to that job. If you have the type of company that purchases 50 rolls of NMC, 100 GFI receptacles, etc. and distributes them equally to each of your crews for use on various jobs you can use the "job materials" category and not charge it off to a specific job. When a crew uses any of these items they are itemized and billed to the specific customer. At year's end when you print your P&L statement it will start off with "gross revenue" (where all your customers' bills will be lumped together) less "cost of goods sold" and "job materials" (irrespective of whether all items have been used or not) and finally "gross profit". Then your "expenses" are deducted and you'll end up with "net income". What you have to be careful with when using this method is shrinkage (employee theft) because you are not keeping track of what is used and when.
On the other hand, if you have the type of company that keeps a stock of rolls of NMC, switches, receptacles, cover plates, etc. and distributes them as needed for each job, then you'll have to keep a running inventory and drive your accountant crazy at the end of the year. Personally speaking, I would rather have my supply houses keep the inventory for me rather than tying up my ready cash in inventory.
Re: Bookkeeping-Inventory Question
Now I am confused, according to the IRS website, if you use the "Cost of Goods Sold" category to deduct from your gross revenue, you are required to take an inventory at the beginning of the year. So is there no benefit in inventoring electrical supplies for tax time as you can deduct the cost of these from your gross revenue before figuring the net profit? In MS Money Deluxe Business software I use, when I list electrical things as "non-inventory" under the category of "materials" it shows up on my profit and loss statement as Sales Income. Is that correct? or is MS Money funky software? I know someone should say I need to get an accountant, but my business isn't big enough to justify an acct and with all this software out there, I should be able to do this myself. My question is, when I go to a residence and give them a quote, do I list parts I think are needed for the job plus labor or do I just give them one lump sum for the job with the parts and labor kept only to myself? I am trying to find software geared specifically for electricians so I can take alot of the guesswork out of this and not spend all day studying IRS Publications. Maybe I should find an accounting forum online and post this question to them...
Now I am confused, according to the IRS website, if you use the "Cost of Goods Sold" category to deduct from your gross revenue, you are required to take an inventory at the beginning of the year. So is there no benefit in inventoring electrical supplies for tax time as you can deduct the cost of these from your gross revenue before figuring the net profit? In MS Money Deluxe Business software I use, when I list electrical things as "non-inventory" under the category of "materials" it shows up on my profit and loss statement as Sales Income. Is that correct? or is MS Money funky software? I know someone should say I need to get an accountant, but my business isn't big enough to justify an acct and with all this software out there, I should be able to do this myself. My question is, when I go to a residence and give them a quote, do I list parts I think are needed for the job plus labor or do I just give them one lump sum for the job with the parts and labor kept only to myself? I am trying to find software geared specifically for electricians so I can take alot of the guesswork out of this and not spend all day studying IRS Publications. Maybe I should find an accounting forum online and post this question to them...
Re: Bookkeeping-Inventory Question
To answer your other question. Give them a final price to do the job. Be fair and if they ask for a breakdown, provide them with one.
If you arrived at the price fairly, a breakdown would be no problem to provide.
[ March 11, 2005, 04:16 AM: Message edited by: bigjohn67 ]
To answer your other question. Give them a final price to do the job. Be fair and if they ask for a breakdown, provide them with one.
If you arrived at the price fairly, a breakdown would be no problem to provide.
[ March 11, 2005, 04:16 AM: Message edited by: bigjohn67 ]
goldstar
Senior Member
- Location
- New Jersey
- Occupation
- Electrical Contractor
Re: Bookkeeping-Inventory Question
41,
I know this is only an exaggeration but at the numbers we're dealing with I can assure you that the IRS isn't looking at us. They're looking for the Enron's of the world who are cheating them (and stockholders) "big time". However, if you declare that you had a $250,0000.00 loss in business and purchased a 95 foot yacht and a house in Southhampton you can be rest assured that you will be audited.
As far as quoting or invoicing for parts and materials I would be careful not to itemize. There is always the chance that your customer will come back and say something like " Why did you charge me $20.00 for a GFI receptacle ? I can go to HD and buy them for $X.XX. If that is the way you invoice I would lump all materials into catagories like devices $X.XX, backboxes $X.XX, wire $X.XX, etc.
41,
You have $0.00 inventory at the beginning of the year and $0.00 inventory at the end of the year. Unless, of course, you stock materials for use on prospective jobs.
How can this come up as income ? You purchased material at the supply house. If you charge $100.00 to do a job and the material is $25.00 that is the Cost os Sales (or cost of goods sold). Your gross profit is $75.00 less $25.00 for expenses, your net profit is $50.00.
I know this is only an exaggeration but at the numbers we're dealing with I can assure you that the IRS isn't looking at us. They're looking for the Enron's of the world who are cheating them (and stockholders) "big time". However, if you declare that you had a $250,0000.00 loss in business and purchased a 95 foot yacht and a house in Southhampton you can be rest assured that you will be audited.
As far as quoting or invoicing for parts and materials I would be careful not to itemize. There is always the chance that your customer will come back and say something like " Why did you charge me $20.00 for a GFI receptacle ? I can go to HD and buy them for $X.XX. If that is the way you invoice I would lump all materials into catagories like devices $X.XX, backboxes $X.XX, wire $X.XX, etc.
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
Re: Bookkeeping-Inventory Question
I think you should bite the bullet and buy Quickbooks. It works great. They (Intuit) have their act together. Microsoft seems to stumble with everything they get into before they get it right.
jfls,
I think you should bite the bullet and buy Quickbooks. It works great. They (Intuit) have their act together. Microsoft seems to stumble with everything they get into before they get it right.
jeff43222
Senior Member
- Location
- Minneapolis, Minnesota
Re: Bookkeeping-Inventory Question
I never itemize materials I'm going to need on a given job when I write up the quote. That information is "need to know", and the client doesn't need to know it.
If you're dealing with an unscrupulous person, they might take the itemized list somewhere else and have them do the work instead, or do it themselves. I'm certainly not in business to help people find ways to get work done without hiring me.
Also, you don't want to get into a dispute about why your price is higher than the Evil Orange Empire price. If someone wants to buy his own inferior materials, he can install them himself.
What I do when I bid is simply take what my material cost is, add in permit fees, guesstimate how much time the job will take and multiply that times an hourly rate, and sum it all up for a single upfront price.
I never itemize materials I'm going to need on a given job when I write up the quote. That information is "need to know", and the client doesn't need to know it.
If you're dealing with an unscrupulous person, they might take the itemized list somewhere else and have them do the work instead, or do it themselves. I'm certainly not in business to help people find ways to get work done without hiring me.
Also, you don't want to get into a dispute about why your price is higher than the Evil Orange Empire price. If someone wants to buy his own inferior materials, he can install them himself.
What I do when I bid is simply take what my material cost is, add in permit fees, guesstimate how much time the job will take and multiply that times an hourly rate, and sum it all up for a single upfront price.
tryinghard
Senior Member
- Location
- California
Re: Bookkeeping-Inventory Question
You pay tax on everything you buy. As a contractor you are not retailing. Therefore you do not pay inventory tax.
You pay tax on everything you buy. As a contractor you are not retailing. Therefore you do not pay inventory tax.
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