Setting up my books correctly...

[Scottish Business Owner]

Tom is right here and it's actually a great point for smaller type businesses who have typical expenditure going to the same codes each month. You can set up a default nominal code at the supplier level so when you put an invoice or cost through it defaults to this code. It's not practical for bigger type businesses but for smaller ones will probably save you a bit of time and for a one time effort

 

[stugster]

Having the ability to set up different nominal codes for each expense is absolutely fantastic and gives me the ability to see what our money is being spent on and where.

 

[Gordon N]

So are the materials or items I purchase for a customer an expense or a cost of sale? For example I have been an ordered a bathroom suite today for a job I am doing next week, I wouldn't have bought it if I wasn't doing this job so is that a cost of sale? Or if I need to buy some silicon or timber or something that could be used on a number of jobs what is that classed as???

 

[stugster]

This is a good question.

Would it be classed as Stock, and therefore just a normal expense?

 

[Gordon N]

Which one is which though, because technically I don't carry stock?? Bathrooms and kitchens are purchased to order, and left over materials are only used on an opportunity basis and not sold on as complete items... if you see what I mean??

 

[Scottish Business Owner]

I dont think you should be getting involved in trying to work a stock system in addition to what you are trying to do. Put small materials like silicon or a few bits of timber through as an expense under something like building materials. At the end of the day these are exclusively for the business and where you put them is purely classification. They are an expense.

I'm assuming you dont actually have a nominal account called cost of sales as this tends to be a group of accounts that get you to your gross profit. Gross profit minus your expenses etc results in net profit. Sales less cost of sales equals Gross Profit.

I would say the bathroom suite should be allocated to a materials purchased code or something like that but would be part of the cost of sale line on the p&l.

 

[Gordon N]

That kind of makes sense (would be easier without a few bottles of becks!),and was put far more eloquently than I could put it! Thanks .

You will see from the chart of accounts that I sent that I was referring to a group of accounts rather than one called cost of sale. I very nearly setup a cost of sale account called 'Materials', but not nowing exactly what I was doing I started this thread instead!

 

[stugster]

And it's a good thing you did Gordon! (start this thread I mean)

I've learned a good bit about it all now myself

 

[stugster]

I'm actually moving away from Sage (I use Sage Instant Accounts for Easy PC Scotland) and will be using Microsoft Accounts from April for all the businesses. Sage was too restrictive - I could only add one business, and for £100, it wasn't the cheapest. Especially when a week after I bought it, they informed me I had an old version. Not impressed.

Watch this space though, depending on the amount of free time I have over this year, I might just develop some sexy web-based solution and might be looking for beta testers

 

[Gordon N]

Firstly I need to thank for all his help so far, I'm learning more everyday!

I am now entering my chart of accounts into MS Accounting and I have another question, in case it will help anyone else I will ask it here in the forum...

When entering new accounts one of the fields required is a 'Cash Flow Category' (don't know what other software calls it though) - there are three options available Financing/Investing/Operating. What in simple terms does this refer to, and how can you tell which one should be sected for a given account?

I am just copying the category from an install on my laptop so hopefully they will be correct, but it would be nice to know what it actually means....

 

[Scottish Business Owner]

Hi Gordon,

I know we covered this off last night on msn but for the benefit of people who may also come across this issue.

First of all I think it's asking for this category as MS accounting has the ability to produce a cashflow and needs these categories to put the cash in the right areas. As a quick reference I have listed what I think roughly these categories mean.

Investing - From a cashflow perspective this will mean the purchase of fixed assets, office equipment etc as these are investments in your business.

Financing - You probably wont use this much but this will be things like retained profits etc. This will include things that you use to finance your business.

Operating - Likely to be the most popular category and most will probably fall under this. This is cash used to operate the business so anything from stationery to materials such as nail or screws.

Hopefully this explanation has been useful