# Inventory and inbound freight with Quickbooks



## gearbranders (Oct 16, 2009)

When you track inventory in Quickbooks, how do you handle inbound freight? I've heard some say you need to divide the shipping across all the shirts in the order and then increase the shirt cost in Quickbooks accordingly. Is this how you all handle it? 

For example, if I bought 100 shirts at $2 and paid $20 for shipping I'd need to add $0.20 to the shirt price in Quickbooks. So the shirt cost would be $2.20 instead of $2.00.

I don't necessarily have a problem with changing the price, but what I don't like is losing my ability to see the shirt cost separate from shipping. Does anyone have any suggestions for dealing with this so that I can maintain the separation of my shirt cost data and my inbound freight data?


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## brice (Mar 10, 2010)

Hire an accountant.


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## gearbranders (Oct 16, 2009)

brice said:


> Hire an accountant.


Hey Brice,

Thanks for your encouraging words... I *am* hiring an accountant. Just wanted to know what others were doing. 

You may have 42 more posts than I do, but you don't have to be rude. Your post is not helpful at all. Try posting when you have something helpful to say.


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## brice (Mar 10, 2010)

Sorry you took it as rude. It was my advice. The best advice you can get on this issue is from an accountant. Not non-accountants. It's solid advice. Maybe it's a tad net, but it is advice. 

Glad to hear you have an accountant. Just use caution that the advice for financial matters you get here may not be the best advice.


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## Louie2010 (Feb 26, 2010)

I am just in the process of starting my embroidery company. However I retired a few years ago after owning a retail business for many years. IMHO, Since you are using Quickbooks for you accounting it would be best to average the freight cost with the invoice like you mentioned. I can understand you might want to know the raw prices at some point, but why mess with your accounting method just in order to have that information There is no reason you couldn't just print yourself a cost sheet with dates on it to refer to if you want to keep track of the raw cost without the shipping. Or just pull out and refer to the actual invoice if you don't want to take that step. 

Just make sure you don't get into the habit of making decisions without remembering to factor in your true cost of the item, and that is what it cost plus the freight. The bottom line is that is your cost.


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## gearbranders (Oct 16, 2009)

My question is regarding how to use software, not necessarily accounting.

Also, you can't always believe your accountant either. I'm switching accountants because I didn't like my accountant's answer to my question about use taxes for shirts I mess up. It's my understanding that if you pull a shirt out of inventory for mess ups or promos or samples, you have to pay use tax. He said "I don't think many people do that." So, just because someone hangs a shingle doesn't mean they know what they're talking about either.

Thanks for your help, if you truly meant to help me.


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## gearbranders (Oct 16, 2009)

Louie2010 said:


> Just make sure you don't get into the habit of making decisions without remembering to factor in your true cost of the item, and that is what it cost plus the freight. The bottom line is that is your cost.


Thanks Louie,

I know I need to know the true cost (which includes shipping), but I'd also like to run reports to see how much of my cost is shipping, and when I combine the two, I lose the ability to report on the two separately. Sure, I could go back and pull out invoices, but I'd like to keep the data in a digital form to run reports.


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## tfalk (Apr 3, 2008)

If I read your question correctly, you are asking if Quickbooks has a way to keep track of the price of a shirt including shipping and at the same time, be able to tell you what your shipping costs were... I don't believe it can give you both.

I have a COGS account called Freight and Shipping Costs. I created an item which posts to that account. Whenever I enter an invoice, I add that item to the bottom so my invoice and payment totals match. I can tell at any time how much I've spent getting items shipped to me. I cannot tell what the 'loaded' cost of each item is. 

I don't think you can have it both ways in this instance...


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## Louie2010 (Feb 26, 2010)

gearbranders said:


> Thanks Louie,
> 
> I know I need to know the true cost (which includes shipping), but I'd also like to run reports to see how much of my cost is shipping, and when I combine the two, I lose the ability to report on the two separately. Sure, I could go back and pull out invoices, but I'd like to keep the data in a digital form to run reports.


 
I am not an expert on Quickbooks so it might not be able to do this, but some items sold need to be assembled from multiple parts. Does Quickbooks allow you to enter in two separate parts that when combined equal one inventory item to be sold? If so you could count the shirt as one part and shipping as a second part of the final item. That might work, if Quickbooks allows you to do it.


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## gearbranders (Oct 16, 2009)

tfalk said:


> I can tell at any time how much I've spent getting items shipped to me. I cannot tell what the 'loaded' cost of each item is.
> 
> I don't think you can have it both ways in this instance...


I think that's my problem. It sounds like Quickbooks may not do what I want. It is my understanding that the IRS will want to know the landed cost of an item, so I think I'm going to need to adjust the price of the item, which is okay. But the downside is that I wouldn't know how much of my shirt price is shipping. Maybe I don't truly need to know that info, but I don't like throwing away data.

I'll discuss all this when I meet with my CPA, and I'll post an update with the advice I receive.


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## tfalk (Apr 3, 2008)

I don't think the IRS cares...

You know what you purchased a shirt for and you know what you sold it for. That is your gross profit. Then you subtract expenses like shipping costs, depreciation, etc. That becomes your net profit and that's really what they care about. Maybe that's oversimplifying things but I think it's the bottom line that they really care about, that and being able to prove how you came to the totals.


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## thutch15 (Sep 8, 2008)

gearbranders said:


> When you track inventory in Quickbooks, how do you handle inbound freight? I've heard some say you need to divide the shipping across all the shirts in the order and then increase the shirt cost in Quickbooks accordingly. Is this how you all handle it?
> 
> For example, if I bought 100 shirts at $2 and paid $20 for shipping I'd need to add $0.20 to the shirt price in Quickbooks. So the shirt cost would be $2.20 instead of $2.00.
> 
> I don't necessarily have a problem with changing the price, but what I don't like is losing my ability to see the shirt cost separate from shipping. Does anyone have any suggestions for dealing with this so that I can maintain the separation of my shirt cost data and my inbound freight data?


Inbound freight counts as COGS...so just add it into the cost of the shirt. Another poster said something about having a COGS account for inbound freight which would work...but inbound freight is normaly such a small fraction of COGS I would just suggest having 1 account.


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## thutch15 (Sep 8, 2008)

gearbranders said:


> I think that's my problem. It sounds like Quickbooks may not do what I want. It is my understanding that the IRS will want to know the landed cost of an item, so I think I'm going to need to adjust the price of the item, which is okay. But the downside is that I wouldn't know how much of my shirt price is shipping. Maybe I don't truly need to know that info, but I don't like throwing away data.
> 
> I'll discuss all this when I meet with my CPA, and I'll post an update with the advice I receive.


When you enter a PO in Quickbooks you can detail item cost and freight.

You will enter a PO for the items...just items. Then when you click on "Receive inventory" there is an expense tab that you can enter the shipping on. You would then need to setup the "shipping cost" as a COGS expense and not just an expense. 

Still I think the simple way is just to at the shipping cost into the cost of the part.


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## gearbranders (Oct 16, 2009)

Met with my CPA and she recommended just changing the cost of the item when I receive the PO by dividing the shipping costs across the units in the shipment. Quickbooks will average the cost of the item if it changes frequently because of different shipping charges.

I still don't like the idea of throwing away a segment of data, but I guess ultimately the true cost of the shirt includes inbound freight, so I am still able to compare vendors' total shirt costs in reports. However, I just won't know what makes a vendor cheaper than another, whether it's shipping or shirt cost that is driving the differences. And I guess that's not really necessary anyway. Cost is cost.

Thanks everyone for your help.


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## thutch15 (Sep 8, 2008)

gearbranders said:


> Met with my CPA and she recommended just changing the cost of the item when I receive the PO by dividing the shipping costs across the units in the shipment. Quickbooks will average the cost of the item if it changes frequently because of different shipping charges.
> 
> I still don't like the idea of throwing away a segment of data, but I guess ultimately the true cost of the shirt includes inbound freight, so I am still able to compare vendors' total shirt costs in reports. However, I just won't know what makes a vendor cheaper than another, whether it's shipping or shirt cost that is driving the differences. And I guess that's not really necessary anyway. Cost is cost.
> 
> Thanks everyone for your help.


That is good to hear...you can still keep it separate so that you can track if you would like. Just move the Inbound Freight amount up with the COGS... At the end of the year your accountant will just need to know the total anyway, but that will allow for you to track more detail.


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## jiarby (Feb 8, 2007)

> some items sold need to be assembled from multiple parts. Does Quickbooks allow you to enter in two separate parts that when combined equal one inventory item to be sold?


Yes, QB has a "Wholesale & Manufacturing" version that lets you buy & inventory materials then create assemblies as a separate product. For example... we make trophies, so we buy bases, column (in48" lengths), threaded rods, nuts, couplers, endless variety of figures, trims, lids, cups, etc... Then we create an "Assembly Item" made from each part in the product that we use on invoices. It deducts the parts from inventory that are used in the assembly. 

I can buy a 48" inch piece of column (costs $5) and then use it in an assembly by the linear inch (10.4¢/inch). 

Shipping can be a separate COGS item you add to each Purchase Order. It does not have to be part of an assembly, but I suppose it could. We include labor as an item in some assemblies. We create a labor item , say 1 hour assembly work. Then we can sell it by the minute in an assembly just like we can buy column by the case and sell it by the inch. 

Maybe you could create a Shipping Item.... and when you use it on your PO's you can break the shipping into smaller chunks. Say you buy 3 dozen shirts. Shipping is $16. Your PO would have a line item for the shirts at their REAL price... then you enter a SHIPPING line item, but set the price as 50¢ (instead of $16) and adjust the quantity until teh total is correct. (totalshipping$$/#items) This way you can see how much you paid in shipping AND what the average shipping costs were per item without it changing the inventory valuation of your shirts on hand.


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