Inventory Methods

Saasu uses the Perpetual Inventory system like most popular accounting software systems.

Because inventory methodologies have tax implications, you will need a clear understanding from your advisors regarding what method is best for you before proceeding. The following list will give you some examples of which checkboxes to use when setting up inventory items:

Services Billing

Tick: Sell

You can set up inventory items for services you provide for customers so they can be billed easily.

  1. Select Items > Items and click the Add icon to create a new inventory item.
  2. Enter an item code and an item description.
  3. Tick Sell this item.
  4. Enter the selling price – This is the amount you charge per hour/day.
  5. Select the appropriate income account.
  6. Select the appropriate tax code.
  7. Click Save and Close.

When you are entering an invoice for a customer, select the Item Invoice layout. This enables you to select the above inventory item you saved from the Inventory Items list. Simply enter the number of hours you spent as the Quantity and the total amount your customer owes will be calculated automatically. For each line item you add in the invoice you could have a description (eg the tasks you completed during those hours).

Time Billing

Tick: Sell

Use this when charging hourly rates but not treating these as inventory.

Retailers

Tick: Inventory, Buy, Sell

  • Purchase stock with item invoices without tracking stock levels.
  • Used to buy widgets (physical) and services (non-physical).
  • Sell stock with item invoices without tracking stock levels.
  • Used to sell widgets (physical) and services (non-physical).

Subscriptions and Memberships

Tick: Sell

Use for ONE of these scenarios:

  • When charging for a subscription.
  • Rate for monthly services.
  • Recurring services such as monthly cleaning or web hosting.

Manufacturers/Assemblers

Tick: Inventory, Buy, Sell

  • When building combo items not yet complete and available for sale.
  • Buy raw materials and build combo items from these.
  • Buy assembled or manufactured goods and sell them as is or after building them into combo items.

Workflow Example for Items

These are some simple diagrammatic workflow explanations for how things work in Saasu when trading inventory items.

P = Purchase, S = Sale, O = Order and » = change transaction type.

Buy stock and hold on balance sheet until customers order it:

  1. PO – Order stock from your supplier.
  2. PO » P – Stock arrives.
  3. SO – Order arrives from customer.
  4. SO » S – Stock shipped to customer.

Customer orders first and then you purchase stock from suppliers:

  1. SO – Order arrives from customer.
  2. PO – Order stock from your supplier.
  3. PO » P – Stock arrives.
  4. SO » S – Stock shipped to customer.

Changing Inventory Item Methods

There are several inventory methods available. You can choose the one that suits you best according to whether you plan to track inventory item stock levels.

You may have started using the inventory system in a particular way only to later receive advice or learn that another way is better for your business. Simply changing the setting under Inventory Items won’t create this change if you have already created transactions using these Items. This is because historical transactions are affected. If Saasu simply allowed the change it could create differences to what you have already reported to advisers, tax authorities, etc.

*** Your chosen inventory method has tax implications ***

Before choosing or making changes to your inventory accounting methodology be sure to check with your advisor and consider the impact on management reports, tax remittances, and the like as a result of changing historical transactions. As a general rule, changing historical information in accounts may lead to differences between what you report to advisors and tax authorities versus what is in your accounting system.

Here’s two common situations you might be trying to change and how to best handle it.

Inventory, Buy, Sell —> Buy, Sell

You have been tracking stock using the perpetual inventory system using an Asset:Stock category or similar. That is, your inventory items are set up with Inventoryticked.When the Inventory Item has been used in transactions:

  1. Duplicate your inventory items and save them with new item codes. Re-assign purchase and sales transaction items to these new inventory item codes. Note that you need to work from the most current transaction backwards to the oldest transactions as the inventory system won’t let your inventory levels go negative.
  2. Start a new inventory item and Item Journal all the inventory held under the Inventory method over to the new code(s).
  3. Delete all and then re-enter all transactions attached to the inventory items. This approach isn’t recommended when you have lots of historical data.
  4. Set old inventory items that will no longer be used as Inactive.

When the inventory item has NOT been used in any transactions:

  1. Find the inventory item in the Items list by selecting Items > Items from the main menu.
  2. Click on edit icon to access the Edit Inventory Item screen.
  3. Untick Inventory.
  4. Click Save.

Buy, Sell —> Inventory, Buy, Sell

You have been buying and selling inventory items but not tracking the amount on hand in an Asset:Stockcategory or similar. You decide to keep track of inventory items. If the inventory item has been used in transactions:

  1. Duplicate the old inventory item.
  2. Create a new item code (eg something similar to the old code for this item).
  3. Tick Inventory.
  4. Select an Asset Account.
  5. Click Save.
  6. Set old inventory items that will no longer be used to Inactive.

If the inventory item has NOT been used in any transactions:

  1. Find the inventory item from the items list by selecting Items > Items from the main menu.
  2. Click the edit icon to access the Edit Inventory Item screen.
  3. Tick Inventoryand select an Asset Account.
  4. Click Save.