Selling Products that are on Consignment
When you sell products on consignment, you are selling products that someone else has given you to sell on their behalf. The person you gives you products to sell on their behalf is the consignor. You are the consignee, or the person who sells the consignor's products. Unlike with regular products that you sell, you do not pay the consignor for their product until the product sells. When the product sells, you get a commission for selling the product. The consignor gets the rest of the money.
If you are the consignee, you will want to track products that you have from a consignor. You will also want to track your earnings from selling the consignor's products, as well as how much money you owe the consignor. You will also want to pay the consignor.
To start selling products as a consignee, you will need to set up some accounts and items in QuickBooks.
You will need:
An Other Current Liability account . This will be the account you use to track what you owe the consignor. Name this account in a way that you will recognize it, such as Consignment Sales – Liability. Create this through your chart of accounts.
An Income account that tracks your commission. You can name it something such as Consignment--Commission.
A Service item to deduct your commission from the money you owe the consignor. You could name it Commission Deduction. Type a negative percentage in the Rate field of the New Item dialogue box that equals the commission you earn from a sale. If you get 25% commission, you will want to enter -25%. Assign the Other Current Liability account you just created to this item.
A Service item for the commission income. You can name it Commission Income. Type your percentage of commission as a positive number in the Rate field. Assign the income account that you created to track income from consignment sales.
Click the Custom Fields button on the right hand side of the New Item dialogue box and create a custom field called Consignor.
Click the Define Fields button, as pictured above.
Set up the custom field for the item, as detailed for you above.
In this field, for each Inventory Part subitem you create, you will enter the consignor's name. This will make more sense once we start creating the invoice.
Click OK again.
A parent Inventory Part item . This is for all of the consignment products that you sell. You can call it Consignment Goods on Hand. This item should be linked to the COGS account created by QuickBooks. Enter the sale price for the item. Assign the Other Current Liablity account that you created for consignment products to track what you owe to the consignee. In the Asset Account field, list the asset account used to track your inventory.
Subitems that represent each category of consignment items you will sell. This is for different categories of consignment products, not for each product. Make sure you check the Subitem Of box and make it a subitem of the parent inventory part item.
A Group item for each of the consignment subitems. The group item will move the money to the right accounts. It also tracks how many you have. In the New Item dialogue box, set the Qty cell to 1 in the first line of the Item table. The second line is the Service item for your commission. The third line is the Service item you use to deduct commission. Make sure the Print Items in Group box is unchecked.
Once you have all these things completed, you can add consignment items to your inventory.
To do this, go to Vendors>Enter Bills. Select the vendor who gave the items to you on consignment.
Type 0 in the Amount Due field since you don't pay for products until they're sold.
Under the Items tab, enter the items and quanities you received. You should select the Inventory Part item that you created, not the Group item.
Click Pay Bill at the top of the Enter Bills window.
Click Yes to record changes.
Click Save & Close
Recording Consignment Sales
Whenever you sell a product that's on consignment, the steps you will take to record the sale are similar to that of creating an invoice. It's just a little different.
To record a consignment sale, go to Lists>Templates.
You will then see the Template window.
Click to select the template that you want to use for a consignment template. If you want to use the same template that you use for invoices, click on Intuit Product Invoice, as shown below. Then click the Templates button, and click Duplicate.
You will then see the Select Template type dialogue box.
Select Invoice, then click OK.
You will see it in the Templates list with Copy of at the beginning of the name.
Now, right click on the new template you just created, and select Edit Template.
Click the Manage Templates button in the Selected Template section, as pictured above.
Rename the template something related to consignment sales in the Template Name field pictured below. In fact, you can name it Consignment Sales.
Click the Additional Customization button at the bottom of the Basic Customization window, then click the Columns tab.
Put a check in the Consignor checkbox that you will see if you created the custom field and associated it with the Item List.
Click OK to close the Additional Customization window, then click OK again to close the Basic Customization dialogue box.
To create an invoice to record a consignment sale, go to Customers>Create Invoices. Choose your consignment template from the Template dropdown menu.
The Group item you created for the consignment item you just sold should go in the first item cell. Fill in the quantity.
In each line below that Group item, click on the Consignor cell. Type the name of the Consignor.
Do this for each item sold.
Click Save & Close when you are finished.
Paying Your Consignors
Paying your consignors starts with running a report to see how much you owe a consignor.
To do this, go to Reports>Custom Reports, Transaction Detail.
You will see the Modify Report window.
Enter the time period that you want to pull up in the Dates dropdown menu.
Go to the Columns section and put a checkmark beside Consignor.
Next, click on the Filters tab.
Go to the Filter list, then select Item.
From the Item dropdown list, choose Multiple Items.
You will then see the Select Item dialogue box.
Click the Commission Deduction item as well as each consignment Inventory Part item that you currently sell.
Now you're back to the Modify Report dialogue box. Under the Filters tab, in the Filters list, select Account.
In the Account dropdown list, select the Other Current Liability account you created for consignment sales.
Go back to the Filter list on the left and click Consignor. Type the name of the consignor you want to pay.
You can now see how much you owe the consignor.
To pay the consignor, go to the Write Checks window. (Banking>Write Checks).
Fill in the amount.
Under the Expenses tab, go to the Account column and choose your liablity account for consignment sales.
If you want to print the check, click Print in the toolbar at the top of the window.
Invoicing for Backordered Items
Whenever a customer orders a product that you do not have in stock, and you have to order that product in order to fulfill that order, it's said that the product is on backorder.
When you tell a customer that you don't have a product in stock, and you will have to order it for them, they may tell you to remove that product from their order and ship only the products you do have in stock. They may also tell you to ship it when you get it in. If they have other products on their order, and those other products are in stock, the customer might tell you not to ship any of it until the backordered products are in. In other words, ship everything at once. In addition, they could also tell you to ship the in-stock products, then ship the other products once you get them in.
If the customer wants you to remove the out-of-stock products from the order, you can do that, then ship the products you do have in stock. But if the customer asks you to hold their order until the out-of-stock, backordered products arrive, they will not expect an invoice until you ship the product. Since you want to go ahead and create the invoice, but don't want the income in any of your account balances until that order ships, you set the invoice's status as pending.
To do this, go to the Create Invoices window. Go ahead and create the invoice.
After you are finished, go to the Main tab, click the Mark as Pending button.
Click Save & Close.
When the products arrive and you ship them to your customer, go to the Create Invoices window again. Click the Reports tab. Go to Sales>Pending Sale. Double click the invoice to open it. Click the Mark as Final button, then click Save & Close.
Viewing and Editing Open Invoices
If you want to see what invoices you still have open, go to Customers>Create Invoices.
Click on the Report tab, then the View Open Invoices button.
You will then see a list of open invoices.
Double click on an invoice to open it.
You can them make any changes you need to the invoice.
Setting Up for Prepayments
Prepayments come in the form of deposits, down payments, and retainers. This is money from customers that you haven't yet earned, but is given to you to secure a product or service. However, you don't want to assign that money to an income account as you would if it was paid from an invoice. Since it's money that's not yet earned, it's also money that is not income. Yet.
Instead, if you want to be able to accept prepayments from your customers, you will want to create an Other Current Liability account in your chart of accounts.
You will also need to create a Prepayment service item in your Item list.
Handling Prepayments from Customers
When a customer gives you a prepayment, you will want to record it in QuickBooks. However, you can't record it as a paid invoice because it's not money you've earned yet. Instead, what you want to do is record that you received the money, and you want to provide your customer with a receipt that confirms you are holding their money.
To do this, go to Customers>Enter Sales Receipts.
In the Customer: Job field, choose the customer who gave you the prepayment.
Fill out the Payment Method, Date, Sold To, and Check No. fields as you would for a normal sales receipt.
The difference between this and a typical sales receipt, however, becomes noticeable when we get to the table.
Under the Item column in the table, you will list the prepayment item that you created in the last section.
Fill out the rest of the columns as you would with a sales receipt, typing the amount of the deposit in the Amount column.
Click Save & Close.
The payment will be assigned to your Undeposited Funds account.
Products and services may not be the only things for which your company charges customers. You may also charge for time and mileage. For example, if you're a house painting company, you may charge for the paint used, but you may also charge hourly for the use of your employees. In addition, you may charge for the mileage on your company vehicle. For these reasons, it's important that you are able to track time and mileage. QuickBooks gives you the tools to do both.
Getting Ready to Track Time
There are two ways that you can track time in QuickBooks. You can track time by entering the time for activities. You can also fill in a weekly timesheet. You can enter the number of hours for an activity using the Time/Enter Single Activity dialogue box. Also, you can use the QuickBooks Pro Timer's stopwatch. This program comes on the QuickBooks CD.
Before you can start to track time, however; you have to tell QuickBooks that you want to be able to track time by going to Edit>Preferences.
Click Time & Expenses on the left, then click the Company Preferences tab.
Under Do You Track Time, make sure Yes is checked.
Next, enter the first day of your company's workweek.
If you want all time that you track to be billable, leave the box beside Mark All Time Entries As Billable checked.
Click OK when you're finished.
You'll also want to be sure that anyone for whom you will track time is entered into one of your lists. This includes vendors, customers, employees, etc.
Entering Time for One Activity
To enter time for a single activity, go to Employers>Enter Time>Time/Enter Single Activity.
You will then see the Time/Enter Single Activity dialogue box.
In the Date field, choose the date when the work took place.
Next, go to the Name dropdown menu and choose the name of the person who did the work. You will see vendors, employees, and names in the Other Names list in the dropdown menu.
Choose the customer and/or job in the Customer: Job dropdown.
If the time is billable to the customer, make sure the Billable checkbox has a checkmark in it.
Go to the Service Item dropdown list and choose the service that was performed for which time was tracked.
Enter the time in the Duration box. The time is measured in hours and minutes.
Click Save & Close if you're finished entering time.
Now, if we go to the Customer Center, then click Invoice Tracker above the right pane, we can click on Time & Expenses. When we do this, we see that we have five hours billed to customer Jane Doe.
Put a check beside the customer, then go to the Action column. Select Create Invoice from the dropdown menu to bill a customer for time.
You are then taken to the Create Invoices window where you can create the invoice.
Using a Weekly Worksheet
To create a timesheet, go to Employees>Enter Time>Use Weekly Timesheet.
In the Name field, choose an employee.
Click the calendar icon to enter the week you are tracking.
Next, fill out the table by entering the customer for whom the work was done, the service performed, and the hours worked each day.
If the time is billable to the customer, make sure you put a checkmark in the Billable column.
Click Save & Close when you are finished entering time in timesheets.
Generating Time Reports
To generate a report, go to Reports>Jobs, Time & Mileage.
Select the report that you want to generate. You can choose from:
Time by Job Summary . This report is useful if you bill by the job because it shows hours by customer or job summarized by Service items.
Time by Job Detail . This report will help you make sure the hours were appropriately set as billable or not billable.
Time by Name . This report shows hours worked on each customer or job by name of the person who worked.
Time by Item . This report shows hours by Service item, then by customer or job.
Track Vehicle Mileage
You may want to track your vehicle mileage for your company vehicles. However, first you have to add your vehicles to a list. To do this, go to Lists>Customer & Vendor Profile Lists>Vehicle Lists.
Click the Vehicle button, then choose New from the Vehicle dropdown menu in the bottom left corner.
Fill in a description for the vehicle, then click OK.
To track mileage, all you do is go to Company>Enter Vehicle Mileage. A dialogue box will appear. You will be asked to enter the vehicle, date, miles driven, odometer reading, and the reason for the trip.
Make sure to check the Billable box if the mileage is billable to a customer.
When you are finished, click Save & Close.
Generating Mileage Reports
To generate mileage reports, go to Reports>Jobs, Time & Mileage, then choose a report.
Listed below are the mileage reports from which you can choose:
Mileage by Vehicle Summary . This report is handy for tax documentation. It shows the total miles driven for each vehicle, as well as the mileage.
Mileage by Vehicle Detail . This report shows all the trips that make up the vehicle's mileage.
Mileage by Job Summary. This report shows total miles driven and billable mileage by customer and by job.
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