for manufacturers - Computer Accounting Solutions Pty Ltd

for manufacturers - Computer Accounting Solutions Pty Ltd
insight
for manufacturers
An industry-specific guide
for your MYOB software
contents
Introduction
3
Case study
23
Choosing your MYOB software
4
Creating assemblies and auto-builds
24
Understanding the essentials
5
Creating sub sub assemblies
24
Showing groups of items on sales invoices
24
Costing finished items
25
Creating your accounts list
5
Reviewing your accounts list
5
Checking your preferences
6
Setting up opening balances
6
Analysing stock levels
Getting ready to go
6
Tracking stock in more than one location
26
Printing production job sheets
28
Communicating with customers
7
Managing your inventory
26
26
Inventory adjustments and transfers
29
Creating sales
7
Dealing with cash sales
7
Adjusting for missing or damaged stock
29
Including additional information on your sales
7
Adjusting the unit costs of inventory items
29
Changing the layout of your printed sale
8
Providing different payment options for
your customers
Creating credit notes when inventory
returns to zero
30
9
Entering sales orders
9
Journaling stocktake totals when you
don’t use inventory
30
Processing sales orders and finalising sales
9
Incorporating the cost of labour into
item costs
31
Incorporating freight into item costs
31
Recording backorders
10
Case Study
11
Dealing with expenses
12
Calculating average and last cost
32
Recording expenses
12
Setting up multiple selling prices
32
Recording a supplier invoice
13
Updating prices
33
Placing supplier orders
13
Analysing profit on each stock line
33
Paying suppliers electronically
14
Analysing how much you owe
14
Pricing
32
Analysing your profitability
34
Analysing profitability by accounts
34
15
Analysing profitability by jobs or cost centres
34
Dealing with credit cards
15
Analysing profitability by category or location
35
Organising petty cash (if you have a
petty cash tin)
16
Recording other types of expenses
Organising petty cash (if you have
a wallet full of receipts)
16
Case Study
17
Setting up inventory
18
Creating a new item
18
Setting up item buying details
19
Setting up item selling details
19
Setting up raw materials
20
Setting up items that you sell but don’t buy
20
Setting up one-off custom items
21
Creating product groups and categories
21
Selecting items by name or by number
22
© MYOB Technology Pty Ltd
Understanding GST
36
Recording GST
36
Deciding what GST codes you need
36
Deciding what codes to use when
37
In creating this document, MYOB gratefully acknowledges
use of material from Making the Most of MYOB business
software, 6th edition, by Veechi Curtis, published by
Woodslane Pty Ltd, 2004.
insight
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2
Introduction
An efficient and robust accounting system is vitally important
for manufacturers. Cost margins, stock control and product
development are central to business success, as margins
are often small and changes in customer demand frequent.
Even the smallest manufacturer usually encounters relatively
complex situations, such as costing finished goods, calculating
overheads and selling at different price levels.
Fortunately, MYOB software offers a range of practical
and versatile products for most small to medium-sized
manufacturers, streamlining stock control, financial reporting
and tax management so that complex tasks become as simple
as possible. In this guide, you’ll find lots of ideas and tips
on the best way to set up MYOB software, all written with
manufacturing specifically in mind.
If you are a wholesaler as well as a manufacturer, you’ll find
additional information in MYOB Software for Wholesalers. If
you import or export goods overseas, then refer also to MYOB
Software for Exporters and Importers.
© MYOB Technology Pty Ltd
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Choosing your MYOB software
For very small manufacturers, such as craftspeople, artists and
cottage industries, it may be enough to simply record your
receipts and expenses. In this case, MYOB BusinessBasics (for
Windows) or MYOB FirstEdge (for Macs) will probably be your
best bet.
If you have want to keep track of items you buy and sell, then
MYOB Accounting provides an all-round solution perfect for
many small businesses. However, if you have employees, then
MYOB Accounting Plus is the way to go as it includes full payroll
management.
If you need to have more than one person working in your
accounting system at a time (perhaps one person invoicing and
another doing the books), then MYOB Premier (for Windows)
or MYOB AccountEdge (for Macs) provide the most suitable
solution, as both these products provide multi-user capability
(both these products include payroll management as standard).
Whichever product you choose, if you want to upgrade to
another product that’s further up the family tree, you can do
so at any time. You don’t need to buy the new software from
scratch; you simply pay an upgrade price.
For more information about these MYOB products, simply visit
www.myob.com.au .
© MYOB Technology Pty Ltd
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4
Understanding the essentials
The following five steps are a brief guide to getting started, highlighting important information specific to manufacturers.
Creating your accounts list
When you create the company file for your business, the New Company File Assistant
asks you to Build Your Accounts List, giving you the option of starting with a
standard list. The best choice is to select Other as your Industry Classification, and
Manufacturing Business as your type of business. This template provides a sample list
of accounts and makes a good starting point. Don’t worry if you can’t find an accounts
list that is perfect - you can add, change or delete as many accounts as you like.
Reviewing your accounts list
Before entering your opening balances, you need to adapt your accounts list so that it
suits the unique needs of your business.
Your accounts list is a list of categories to which you allocate all transactions. There are
eight major account categories (or, for MYOB BusinessBasics and MYOB FirstEdge, there
are six categories).
Account Category
What it means
Assets
Things you own, or that people owe you. Includes bank accounts, outstanding customer
accounts and new equipment.
Asset account numbers start with 1.
Liabilities
What you owe to other people. Includes loans, taxes payable, and outstanding supplier
accounts.
Liability account numbers start with 2.
Equity
This is the profit or loss your business has made since its inception. Examples of equity
accounts include retained profits, partners’ drawings, or capital contributions.
Equity account numbers start with 3.
Income
Money in! Everything you invoice to your customers.
Income account numbers start with 4.
Cost of sales
Cost of sales are the goods you buy for resale plus any direct costs, such as freight or
commissions.
Cost of sales account numbers start with 5.
Expenses
Overheads. The day-to-day running costs of your business. Includes wages, electricity,
repairs, telephone, and so on.
Expense account numbers start with 6.
Other Income
Extraordinary income that is not part of normal operations. Could include compensation
income, capital gains or interest income.
Other Income account numbers start with 8.
This account category is not available in MYOB BusinessBasics or MYOB FirstEdge.
Other Expenses
Extraordinary expenses that are not part of normal operations. Could include lawsuit
expenses, capital losses, or fire damage costs.
Other Expenses account numbers start with 9.
This account category is not available in MYOB BusinessBasics or MYOB FirstEdge.
© MYOB Technology Pty Ltd
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5
Understanding the essentials
Checking your preferences
You can customise your MYOB software so that it works for your business the way you
want it to. You can do everything from changing the appearance of your windows,
to automatically requesting a backup prompt each time you quit the program. It all
happens via the Preferences window.
To review your preferences, go to the Setup menu, choose Preferences and explore the
System, Windows, Reports & Forms, Banking, Sales, Purchases and Security tabs.
Remember—your choice of preferences does not commit you to this for ever and ever,
for you can change your preferences at any time.
Setting up opening balances
To enter opening account balances, go to the Setup menu, choose Balances, and then
choose Account Opening Balances.
To enter opening balances for outstanding customer accounts, go to the Setup menu,
choose Balances and then choose Customer Opening Balances.
To enter opening balances for outstanding supplier accounts, go to the Setup menu,
choose Balances and then choose Supplier Opening Balances.
To get up and running, you only need to enter opening balances for a few accounts.
Bare essentials will probably include your bank account and any customer accounts
outstanding. Your opening account figures won’t balance, but this out of balance
amount simply goes to the Historical Balancing account. You or your accountant can fix
this later.
Getting ready to go
Before you start entering transactions, work out how you intend to back up your
company file. If your file is going to contain very few transactions, you may be able to fit
your backup onto floppy disk. Otherwise, you’ll need to have a CD burner or a zip drive.
You might have been lucky so far, but nobody can guarantee continued immunity to
power surges, theft, fire or hard disk failure. If you don’t organise a system now, you’ll
probably forget about it until it’s too late—and then you’ll be sorry.
© MYOB Technology Pty Ltd
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6
Communicating with customers
The most elementary part of communicating with your customers has to be your sales
invoices. Not only do your invoices need to be clear and easy to understand, but they
need to look good too, creating a positive impression every time. Fortunately, MYOB
software makes creating and printing invoices as simple as pie.
Creating sales
To create your first customer invoice, go to the Sales command centre and click Enter
Sales. Next, click Layout to choose the most appropriate invoice format. There are three
main invoice layouts: Service, Item and Professional.
The best invoice format for manufacturers is usually an Item invoice, a typical one of
which is shown below. Don’t worry if this invoice layout includes unnecessary columns,
such as the Backorder column or the Job column, as you can customise your printed
invoice so that these don’t print.
A standard item sale
Dealing with cash sales
If you give invoices to
all your customers, but
don’t want to bother
setting up a new card
for one-off customers
and cash sales, the
easiest solution is to
create a new customer
called ‘Cash Sales’.
Of course, if you’re a small manufacturer (such as a craftsperson or artist), you may not
want to issue invoices for any of your sales. Instead, it might make more sense simply
to record the total of daily takings, or the amount you bank each week. In this kind of
situation, you don’t need to use the Sales command centre at all (and you can ignore
most of the headings in this part of the guide). Instead, go to the Banking command
centre, click Bank Register and select Receive Money as your transaction type. Record
one transaction for your total daily or weekly takings.
Including additional information on your sales
Manufacturers often confront complex situations that are unique to their business and
for this reason, require special formats or information on their sales. You’ll find that
MYOB software has a standard invoice format that is surprisingly flexible; all you need
is a little forethought and creativity. The following examples give you an idea of how
versatile this format can be (these examples do not apply to MYOB BusinessBasics or
MYOB FirstEdge).
•
© MYOB Technology Pty Ltd
You may need to print your customer’s item code, as well as your own item code,
on every sale. Simply enter the customer’s item code in the Custom List field (found
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7
Communicating with customers
under the Item Details tab of every item) and then customise your invoice layout so
that this information prints on every sale.
•
You may need to print additional item information, such as colour, size or model
type. Again, you can take advantage of Custom Fields and Custom Lists (found
under the Item Details tab of every item) and you can customise your invoice layout
so that this information prints on every sale.
•
You may use salespeople to make your sales. Simply complete the Salesperson field
at the time you create the sale to print their name on the customer invoice. (Even
better, later you will be able to generate commission reports from your Sales reports
menu.)
•
You may offer different prices to different customers, depending on their location
or how much they buy from you. MYOB Premier and MYOB AccountEdge offer
the facility for up to six different levels of pricing for a single item, with five quantity
breaks for each level.
Changing the layout of your printed sale
With all MYOB software, you can customise your invoices or receipts so that they look
exactly as you want them to look. You can change the fonts, add your own logo, draw
boxes, add comments and much more. All you have to do is go to the Sales command
centre, click Print Invoices and then click Customise (refer to MYOB help for more
details on customisation commands).
Below is one possible way in which an invoice could be customised.
You can customise
your invoice to look
exactly as you want it
to look
© MYOB Technology Pty Ltd
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8
Communicating with customers
Providing different payment options for your customers
MYOB Software has a relationship with the Commonwealth Bank, meaning that by
subscribing to a special service called MYOB M-Powered® invoices, you can offer your
customers the choice of paying invoices by BPAY®, Postbillpay (at all Australia Post
outlets) or by credit card over the phone.
The main advantage of this service is that by providing more ways for your customers to
pay you (especially if you invoice in advance for security deposits), you’ll be paid quicker,
not to mention the fact that receiving electronic payments is less time-consuming than
receiving cheques. Also, by offering these facilities you will make your business look that
much ‘bigger’ and more professional.
For more information about MYOB M-Powered invoices, and to read the Product
Disclosure Statement, visit www.myob.com.au/m-powered/ .
Entering sales orders
When customers place orders with you, the best approach is to enter these orders
straightaway, so that you can see at a glance the value of all outstanding customer
orders as well as the total quantity on order for any individual item. Note that orders are
not available in MYOB BusinessBasics and MYOB FirstEdge.
Recording sales orders is easy. Simply go to the Sales command centre, click Enter Sales
as if you were about to record a normal customer sale, and in the top left corner change
the drop box from Invoice to Order.
You’ll find that orders affect neither your financial figures nor your receivables reports.
When you’re ready to invoice the goods, you can convert orders to sales simply by
opening up the initial order (you’ll find it under the Order tab in your Sales Register
or your To Do List), changing any amounts or quantities if necessary, and clicking the
Invoice button.
Processing sales orders and finalising sales
Many manufacturers find it works best to finalise sales (by changing the status from
Order to Invoice) on the morning after the sales leave the warehouse. Here’s one way of
working that you might find practical:
1. When a customer places an order, click Enter Sales in the Sales command centre
and enter the order details, selecting Order as the status.
2. If you need to see what items are currently on order, go to the Analysis menu in the
Command Centre, click Inventory, and look in the On Order column.
3. When the goods are ready to go out to the customer (which could be several days
or weeks after the initial placing of the order), the order is called up, quantities and
amounts reviewed, and the date changed to the current date. This order (which
has been customised to print as a Tax Invoice) is then printed, along with a delivery
docket, and sent to the warehouse for packing.
© MYOB Technology Pty Ltd
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Communicating with customers
4. The warehouse refers to the order when packing the goods. If any goods are out of
stock or can’t be sent that day for some reason, the packer marks changes on the
Tax Invoice and the delivery docket. The delivery dockets go out with the goods, the
invoices return to the office.
5. The next morning in the office, you review the invoices. Invoices without any
changes are ready to send to the customers as they stand. Invoices with changes are
called up in the system, quantities or items changed as required, and then re-printed.
6. Finally, go to the To Do List, click the Orders tab, and mark all the orders that have
just been finalised. Click Record as Actual to finalise these orders, changing them
into sales.
Look up all
outstanding customer
orders in your To Do
List
Recording backorders
If you can’t fulfil every
item on a customer’s
order, you may choose
to send some goods now and place the remainder on backorder. To do this, go to
the Enter Sales window as normal. Enter the quantities you intend to send now in
the Ship column and the quantities you plan to place on backorder in the Backorder
column. Once you click Record, MYOB automatically creates a new sales order for the
backordered items.
You can set up your preferences so that original invoice numbers are retained on
backorders, making the fulfilment of orders easier to track. By adding an additional digit
to the invoice number when it comes up on the backorder (e.g. changing the Invoice
# from 9130 to 9130-1), you provide every sale with a unique number, yet group all
the invoices relating to a single sale together. To select this preference, go to the Setup
menu, choose Preferences, click the Sales tab and then mark the Retain Original
Invoice Number on Backorders checkbox.
If you want to inform the customer in writing that items have been placed on backorder
and will be delivered as soon as possible, you can generate a letter automatically
by going to their card, clicking the Letter button and selecting the template called
BACKORDR.DOT. Click Use Template and Word will create a standard backorder letter.
© MYOB Technology Pty Ltd
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10
Case Study
Business name:
Lily Lane Potters
Business overview:
Lily Lane Potters is owned by Sally, a potter working
from home selling crockery at local markets.
Sally is an example of a very small manufacturer and not surprisingly, she has set up her
MYOB software in the simplest of ways. Sally uses MYOB BusinessBasics to track income
and expenses.
Once a month, Sally sits down with her business bank statement. She looks at every
deposit and records the total value of each deposit in the Receive Money window.
(Sally doesn’t worry about recording a sale for every transaction made.) She then goes
through her cheque butts and records expenses in the Spend Money window. Last,
she tips the petty cash receipts out of her wallet and records these in the Spend Money
window also.
In just a couple of hours every month, Sally keeps her tax affairs up-to-date and
produces a Profit & Loss statement. She has been very encouraged to see how her
income is slowly increasing, month by month, and how well her business is going.
© MYOB Technology Pty Ltd
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Dealing with expenses
The simplest way to record expenses, suitable for many small manufacturers who don’t
want to track inventory, is to go to the Banking command centre and click Spend
Money (or, for MYOB BusinessBasics and MYOB FirstEdge, go to the Bank Register
and select Spend Money as the transaction type). Read more about this method in the
Recording expenses section below.
An alternative way to record expenses is to enter all supplier invoices in the Purchases
command centre when you receive them. Later, these invoices are paid using
the Supplier Payments window. (Note that purchases aren’t available in MYOB
BusinessBasics or MYOB FirstEdge.) This method works well if you:
•
Need to track inventory
•
Have a substantial amount of accounts to be paid each month and you want to keep
tabs on how much you owe
•
Report for GST on an accrual basis (as opposed to a cash basis), as you can claim the
GST on bills you’ve received, but haven’t yet paid.
•
Want to keep tabs on when early payment discounts fall due.
Read more about entering supplier invoices in the Purchases command centre in the
Recording a supplier invoice section on page 13.
Recording expenses
To record an expense:
1. Go to the Banking command centre and click Spend Money. (Or, if you’re using
MYOB BusinessBasics or MYOB FirstEdge, go to the Bank Register and select the
Spend Money transaction type.)
2. Click the Pay from Account radio button in the top-left and select your bank
account, or, if you plan to make this payment online, click Group with Electronic
Payments.
3. For cheques, enter the cheque number in the Cheque No. field. For other
transactions, such as credit card debits or electronic payments, simply ignore the
Cheque No. field.
4. Enter the date and amount, and in the Card field, enter the name of the person you
are paying. If you’ve never paid this person before, you’ll see a list of cards, asking
you to select one of them. Either double-click on a name to select it from the list or
click New to create a new card.
5. Write a brief description in the Memo field, if desired.
6. In the Acct# column, specify which account this expense should go to.
7. Check that the Amount is correct. Usually, this amount includes GST, assuming
you’ve ticked the Tax Inclusive checkbox on the top-right.
8. Fill in the Job column if you want to track expenses by particular projects or cost
centres. Otherwise, leave this column blank.
9. If you want to include additional information about this transaction, do so in the
additional Memo column that appears next to the Job column.
10. Fill in your Tax code, double-check the tax total (this calculates automatically), then
click Record.
© MYOB Technology Pty Ltd
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Dealing with expenses
Recording a supplier invoice
Manufacturers tend to use one of two layouts when recording purchases: either an
Item layout or a Service layout. Item layouts work best if you want to track the costs and
quantities of the materials you purchase; service layouts work best in all other situations.
Here’s how to record a purchase:
From the Purchases command centre, click Enter Purchases.
Click the Layout button and select either Item or Service as your layout.
Fill in the supplier name and if required, enter the purchase order number.
Check the Date and enter the supplier’s invoice number in the Supplier Inv# field.
For item invoices, enter the Quantity, Item Number and check the Price. Enter each
line one at a time, making sure the final total tallies.
6. For service invoices, choose your allocation account in the Acct# field. Don’t worry
about detailed descriptions, as they’re usually not necessary. A general description
such as ‘Advertising in this June’s Gazette’ does just fine.
7. Don’t forget to complete the Job column if you’re tracking job performance and
progress.
8. Make sure the GST total matches with your supplier invoice, and then click Record.
1.
2.
3.
4.
5.
Recording supplier
invoices
Placing supplier orders
It’s easy to enter purchase orders, ready to print, fax or email direct to your suppliers.
This way you can see at a glance what items are on order and when they are due to
arrive.
To create a supplier order, go to the Purchases command centre, click Enter Purchases
and select the supplier. In the top left corner, make sure that the purchase status is Order
(not Bill). Complete the order as normal and click Print, or click the Send To button and
select Fax or E-mail.
You’ll find that orders affect neither your financial figures nor your payable reports.
When you receive the goods, you can convert orders to purchases simply by opening
up the initial order (you’ll find it under the Order tab in the Purchases Register or the
To Do List), changing any amounts or quantities if necessary, and clicking the Purchase
button.
© MYOB Technology Pty Ltd
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Dealing with expenses
Paying suppliers electronically
MYOB M-Powered® payments enable you to make electronic payments to your suppliers
directly from your MYOB software. Once you subscribe to this service, you can use
your MYOB software to record payments in your company file and then transmit these
payments electronically using a secure link. The M-Powered Services Centre monitors
the progress of all payments and, at your request, emails or faxes remittance advices
direct to your suppliers.
If you pay more than five suppliers per week, M-Powered payments are well worth the
fees. If you were to put a value on your own time (or on your bookkeeper’s time) and
calculate how long it takes you to pay a supplier (including writing a cheque, printing a
remittance advice, writing their address on an envelope, entering the payment into your
MYOB company file, and so on) as well as the costs (the envelope, the stamp, the petrol
to the post office, etc.), then chances are that paying a supplier is much more expensive
than you think.
M-Powered payments offer other benefits too, although these are somewhat less
tangible. You can schedule payments to be made at future dates, ensuring that suppliers
are paid on time, even when you’re away from the business. Payments are more secure,
as you pay directly from your account into your supplier’s account (whereas cheques are
more prone to fraud or getting lost in the mail). Finally, an M-Powered Services Centre
keeps track of all online payments, including when payments are sent, when they’re
processed, if they fail due to insufficient finds, and so on.
To subscribe to M-Powered payments, all you have to do is click the M-Powered
Services Centre icon that appears on the bottom-right of every command centre. (Note
that M-Powered payments are available in MYOB Accounting, MYOB Accounting Plus
and MYOB Premier).
For more information about M-Powered payments, including how to subscribe, the
current pricing structures, or to read the Product Disclosure Statement, visit
www.myob.com.au/m-powered.
Analysing how much you owe
To see how much you owe to your suppliers, go to the Analysis menu in the Command
Centre and click Payables. You’ll see a summarised Analyse Payables report, aged as at
the current date.
Click the zoom arrows to go straight to a detailed breakdown of any supplier’s totals, or
click Print to print the report.
© MYOB Technology Pty Ltd
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Recording other types of expenses
MYOB software realises that most businesses don’t just pay for expenses by cheque and electronic transfer, but by cash and
credit cards as well. Luckily, it’s easy to record these kinds of transactions.
Dealing with credit cards
The easiest way to deal with credit cards is to think of them as if they were a bank
account. Create a new liability account in your Accounts List and make it a Detail Credit
Card Account (Postable).
For expenses where you don’t receive a supplier account (such as fuel, interest,
memberships or internet access), do the following:
1. Go to the Banking command centre and click Spend Money. If you‘re using MYOB
BusinessBasics or MYOB FirstEdge click Bank Register and select the Spend Money
transaction type.
2. Select your credit card account as your bank account in the top left.
3. Record each transaction on the credit card in the same way as you would record
cheques, the only difference being that you ignore the Cheque No field completely.
(You end up with one transaction per line on your credit card.)
Entering credit card
transactions (note the
account in the top-left
corner)
For payments on your credit card where you have already recorded the supplier account,
do the following:
1. Go to the Purchases command centre and click Pay Bills.
2. Select your credit card account as your bank account in the top left.
3. Record the payment in the same way as you would any other supplier payment,
ignoring the cheque number.
By the way, don’t forget to account for GST when recording credit card transactions. If
you know an item definitely attracts GST (such as fuel payments or telephone expense),
simply mark the Tax Inclusive checkbox in the top of the Spend Money window and
the GST component calculates automatically.
© MYOB Technology Pty Ltd
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Recording other types of expenses
Organising petty cash (if you have a petty cash tin)
The method described here works best if you have an office with a petty cash tin, and
more than one person takes money out of the tin. However, if you don’t have a petty
cash tin but end up paying lots of little cash expenses directly from your own pocket, see
the method listed in Organising petty cash (if you have a wallet full of receipts).
1. Start off with a float, say $200. Write a cash cheque for this float, and allocate this
cheque to an asset account called ‘Petty Cash’. If you don’t have an account by this
name already, create one now, remembering to select Bank as the Account Type.
2. Whenever staff take money out of the tin, get them to give you a receipt in
exchange. Store these receipts in the tin.
3. Now, add up the receipts and work out which expense categories they belong to.
Then go to the Spend Money window but this time change the bank account at the
top to read Petty Cash.
4. Complete the payment, allocating it across several Allocation Accounts and several
Amounts. Click Record when you’re done.
5. When funds in the tin get low, write out a cash cheque to top the tin back up to its
original float value. For example, if you have a $200 float but there’s only $4.50 left
in the tin, write out a cash cheque for $195.50. Allocate this cheque to Petty Cash.
Recording petty cash
transactions when you
use a petty cash tin
Organising petty cash (if you have a wallet full of receipts)
If you don’t have a petty cash tin, but end up paying lots of cash expenses directly from
your own pocket, you’ll find the following method works best.
1. Pile these receipts into their various categories and then, with a calculator, add up
the value of each pile of receipts. You might end up with $40 worth of receipts for
stationery, $50 for postage, $15 for travel and so on.
2. Next, go to the Spend Money window and as your bank account, select Petty Cash
in the top left corner.
3. As the Amount, enter the total value of all these receipts added together.
4. Split the transaction across the appropriate expense accounts, writing individual
memos on each line, if desired.
© MYOB Technology Pty Ltd
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Case Study
Business Name:
Finn’s Fine Furniture
Overview:
Finn’s manufactures custom furniture from
salvaged timbers.
Justin Finn has been making custom furniture for many years in the backwoods of NSW.
However, the whole nature of his business changed when he launched his website a
couple of years ago, as he started to receive commissions from all around Australia. At
first, this growth caused difficulties, as Justin had to employ staff for the first time, and he
encountered cashflow constraints and problems meeting order deadlines.
In order to put his business on a more professional footing, Justin purchased MYOB
Accounting. Justin records the purchase of raw materials, setting up each large piece of
salvaged or milled timber as an item in the Inventory command centre. At first, Justin
was surprised to see the high dollar value held in raw materials and how many large
pieces of valuable timber sat unused for years at a time. Forced to start trading more
profitably, Justin has rationalised his timber holdings and if a piece of timber sits in the
warehouse for too long, he invents a project to put it to use.
Justin has also started to record sales in the Sales command centre. He never used
to worry about maintaining customer details, as he saw every job as a one-off event.
However, now that MYOB software maintains a client database for him, he keeps in
contact with clients regarding special offers or exhibitions. The response has been a vast
increase in repeat orders.
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Setting up inventory
Probably the most important decision you’ll make when setting up your MYOB software is how to track inventory. There are
many different ways of working; the right way depends on your business and circumstances.
•
No inventory tracking at all. Very small manufacturers making lots of one-off items probably won’t want to use
inventory features at all. Such businesses would include potters, jewellery makers, sculptors or sellers of home-sewn
clothing.
•
Inventory tracking for finished items only. Some manufacturers find it makes sense to track the quantities and costs
of finished items, but not to track the components from which these items are made. Such businesses could include
manufacturers of gourmet food lines, furniture-makers or any manufacturer who makes a diverse range of items within
which the components vary from item to item.
•
Inventory tracking for component items as well as finished items. Some manufacturers find it makes sense to track
inventory from the purchase of raw materials right through to the transformation of raw materials into finished items. This
method works well if you manufacture a small range of products using the same components every time.
The next few sections deal with setting up your items list for items that you buy (should you wish to track these) and for items
that you sell. For information about creating an item that is made up of other component items, see the Creating assemblies
and auto-builds section on page 24.
Creating a new item
To create a new item, go to the Inventory command centre, click Items List, click New
and then follow the simple steps below.
1. Enter an Item Number followed by a Name. (The item number doesn’t have to be a
number; you may find it makes more sense to use letters instead.)
2. Tick the relevant checkboxes to indicate whether you buy, sell or inventory this item.
(If you’re not sure what to select, refer to the sections Setting up raw materials and
Setting up items that you sell but don’t buy on page 20.
3. Complete the income, cost of sales and asset accounts fields.
4. Go to the Selling Details tab (see Setting up item selling details on page 19 for more
details). (You won’t need to set up selling details for raw materials.)
5. Go to the Buying Details tab (see Setting up item buying details on page 19 for
more details). (If this is an item that you manufacture, rather than buy, you won’t
need to set up buying details.)
6. Click OK to record this new item and return to the Items List.
Creating a new item
(don’t forget to
complete the Buying
Details and Selling
Details tabs also)
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Setting up inventory
By the way, if you already have your inventory listing in another program, such as a
database, spreadsheet or even as a word processing document, then you don’t need
to re-type everything. It’s almost always possible to get this information into a format
where you can automatically import it into your Items List using the Import and Export
data commands found in the File menu.
Setting up item buying details
When you create a new item, click the Buying Details tab to set up information about
suppliers and restocking quantities.
Here’s what you need to know:
•
The only essential field to complete is the Tax Code When Bought.
•
Don’t worry that you can’t enter a figure in the Last Purchase Price when you first
create a new item. As soon as you record your first purchase for this time, this price
will be updated.
•
The Buying Unit of Measure is a descriptive term, such as Each, Pair, Case, and so
on.
•
The Number of Items per Buying Unit is the number of items that will add to your
on-hand inventory for each unit sold. Always express your buying unit as a multiple
of the smallest unit that the item can be sold in.
•
The minimum stock level acceptable is your Minimum Level for Restocking Alert.
•
Your Primary Supplier for Reorders should be the main supplier for that item. It
doesn’t matter if you sometimes buy from someone else; you can always edit the
purchase order that your MYOB software automatically generates.
•
If it’s useful for your reference or for purchase orders, enter your supplier’s code for
this item in the Supplier Item Number field.
•
As the Default Reorder Quantity, enter the smallest multiple you would ever
order for that item. (For example, if you buy water filters in batches of 50, and your
minimum stock level is 25, when your stock level falls to 23, your MYOB software will
generate a pending purchase order for 50 filters, not for two filters.) Once restocking
details are in place, your MYOB software automatically generates purchase orders for
stock items that fall below minimum stock levels.
Setting up item selling details
To record selling prices and unit details:
1. Double-click the item from your Items List and click the Selling Details tab.
2. Mark the Tax Code When Sold checkbox.
3. The Base Selling Price should be the base price that you sell this item for, including
GST if the Tax Inclusive checkbox is marked.
4. The Selling Unit of Measure should be a descriptive term, such as Each, Pair, Case,
and so on.
5. The Number of Items per Selling Unit is the number of items that will be
subtracted from inventory for each unit sold. For example, if you sell shoes in
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Setting up inventory
pairs, the Number of Items per Selling Unit would be 1, and the Selling Unit of
Measure would be ‘Pair’.
Setting up raw materials
If you want to set up raw materials as items, you can set them up in one of two ways:
•
As items that you buy only. If you have decided to choose no inventory tracking
at all, or inventory tracking for finished items only (see Setting up inventory on page
18), then you have already decided that you don’t want to track the quantities of raw
materials. However, you can still set up raw materials as items in your Items List, by
marking the I Buy This Item checkbox only. By working in this manner, you can still
use MYOB software to generate purchase orders and keep track of item costs.
•
As items that you use as components for manufacturing other items. In this
scenario, you set up raw materials as items in your Items List, by marking the I Buy
This Item and I Inventory This Item (but not I Sell This Item) checkboxes.
Setting up items that you sell but don’t buy
The very nature of manufacturing is that you sell items that you don’t buy, but that you
have made. You can set up the items that you sell in any one of three ways:
© MYOB Technology Pty Ltd
•
As items that you sell only. If you have decided to choose no inventory tracking
at all (see Setting up inventory on page 18) then you have already decided that you
don’t want to track raw materials and the manufacturing process. However, you
can still set up the goods that you sell as items in your Items List, by clicking the I
Sell This Item checkbox only. By working in this manner, you can still use MYOB
software to generate invoices and keep track of sales history.
•
As items that you buy ‘from yourself’ and then sell. If you have decided to
choose inventory tracking for finished items only, then you face the complicated
scenario of wanting to have quantity tracking for items that you don’t actually buy!
When creating items in your Items List, mark the I Sell This Item, I Buy This Item
and I Inventory This Item checkboxes. Then, create a supplier card in your own
name, and every time you manufacture goods, record their creation by creating a
‘purchase’ from yourself. Keep the Price as $0.00 and this purchase won’t appear as
an amount owing, but the quantities of finished items will be correct.
•
As items that you auto-build from raw materials. If you have decided to choose
inventory tracking for component items as well as finished items, then mark the I
Sell This Item, I Buy This Item and I Inventory This Item checkboxes when you set
up the items you sell. Then, click the Auto-Build tab on each item and specify the
components. See the section Creating assemblies and auto-builds on page 24 for
more information.
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Setting up inventory
Setting up one-off custom items
The easiest way to record sales of custom-made goods is to create a new item with an
Item # called “Custom”. Leave the Name and Selling Price fields blank.
Each time you sell one-off goods you can select “Custom” in the Item # column of the
sales invoice. The Description field will always come up blank, and here you can type in
a unique description and then tab across to fill in the Price.
Note that if an entire invoice consists of a one-off custom product, and if you require a
lengthy description for this, then you might be better using a Service type invoice rather
than an Item type invoice.
Creating product groups and categories
You can further group each item using custom lists, found under the Item Details tab.
You can categorise items in any way you like -- anything from colour to size, from model
to grade.
In order to take advantage of custom lists, follow these three steps:
1 Go to the Lists menu, choose Custom List & Field Names, and then choose the
Item tab. Specify what labels you require for your custom lists, e.g. colour, size or
type.
2 Still in your Lists menu, go to Custom Lists and then Items. Add new entries for
each category. For example, if the category were colour, you might add entries for
Blue, Red and Yellow.
3 Now return to your Items List and for each item, click the Item Details tab. For each
custom list category, select the relevant entry. The screenshot below shows how this
might appear.
Adding custom
information to
inventory items opens
up whole new worlds
of possibilities
To print this custom information on your invoices, take one more step. Go to the
Sales command centre, click Print Invoices, select Item as your Form Layout and click
Customise. Scroll beyond the right-hand margin of the invoice until you see boxes
labelled [Item Custom List 1], [Item Custom List 2], and so on. Double-click on the list
you want to print and mark the Field is Active checkbox. Then drag the field over to the
left so that it appears in the main body of your invoice.
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By the way, if a particular report doesn’t show the custom list information you require,
select the report, click Customise and then select the Reports Field tab. You’ll almost
certainly find this custom information listed as an optional report column.
Selecting items by name or by number
If you prefer, you can select items by their name rather than by their number. Go to the
Setup menu, choose Preferences and then click the Windows tab. Mark the Select
Items by Item Name, Not Item Number checkbox. This complete, you can now select
an item simply by typing the first letters of the Item Name.
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Case study
Business Name:
Eco Lifestyles
Business Overview:
Eco Lifestyles import recycled paper from overseas
from which they manufacture a range of stationery.
Eco Lifestyles use MYOB Premier to manage all aspects of their business, including sales,
purchases, payroll, banking and inventory.
Raw materials are set up as items in inventory and all finished items are set up as
assemblies, so that the components are automatically drawn out of raw materials when
items are manufactured. This way, Eco Lifestyles monitors the quantities on hand of
both raw materials and finished goods, and keeps a close eye on final costs. (Final costs
include all materials, but don’t include wastage, overheads or labour.)
Eco Lifestyles sell to three large Australian distributors and to a distributor in Singapore
and Hong Kong. At any one time, the production manager can see the value of
outstanding orders against the quantity on hand, along with promised delivery dates.
The financial controller has found the way MYOB Premier integrates information ideal,
because she can call up a Profit & Loss every day, every week or every month. By
working with financial ratios and analysing their business performance, Eco Lifestyles has
been able to make some hard decisions regarding profit margins and overseas pricing,
slowly turning their business around so it’s on a more solid footing.
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Creating assemblies and auto-builds
The auto-build feature is fantastic if you want to create an item that is made up of other items. For example, you may sell a
dining table suite that always consists of a single table plus six chairs, or you might ‘manufacture’ a drum kit that consists of a
snare drum, a hi-hat, a bass drum and a stand.
Imagine you were going to create a first-aid kit that consisted of two bandages, a packet of band-aids and some scissors.
Here’s what you would do:
1. Start by setting up a new item for each individual component, so that you have an item for bandages, an item for bandaids, and so on.
2. Create a new item called ‘First-aid Kit’, making sure you mark the I Inventory This Item checkbox.
3. Click the Auto-Build tab.
4. Click Edit List and type the Item Number and Quantity for all the items that make up the kit of this finished item. Click
OK and you’re done.
Creating sub sub assemblies
Occasionally, you might need to create an assembly within an assembly. For example,
you could have a Water Cooler package that includes a filter unit, and a filter repair kit.
The filter repair kit could include a tool set, and 5 spare filters. The tool set could include
a spanner and two screwdrivers. And so on...
Although MYOB software allows sub sub assemblies, you won’t find extensive reporting
in this area. The core report is the Auto-Build report, which tells you what components
are required to make up all finished goods. However, using our above example, this
report would tell the user that a Water Cooler package includes a filter unit and a filter
repair kit, but would not then indicate what components make up the filter repair kit.
If you are uncertain whether MYOB software can meet your needs in this regard, or
whether you might be better with Materials Requisition Planning software, your best bet
is to talk to an MYOB Certified Consultant to assess your best course of action.
Showing groups of items on sales invoices
Sometimes, manufacturers sell kits of items but want to list each component on the sales
invoices. For example, you might sell D-I-Y rocking chair kits, which always include 12
timber pieces, screws, sandpaper, varnish and flower stencils. Although you’re selling
a finished kit, you want to print quantities and description of each kit component
separately on every sale so that your customer can see what they’re receiving.
Although the Auto-Build feature assembles kits from individual items, when you come
to sell a kit, it will only print the Item Name as the description, rather than printing all
the components. However, the work around (available in MYOB Premier and MYOB
AccountEdge) is to list the components in the additional Item Description field under
the Item Details tab. Then simply customise your invoice layout to include both the
Item Name and the additional Item Description.
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Creating assemblies and auto-builds
Costing finished items
When you create assemblies using components, it’s good practice to check that the final
cost price makes sense (if not, then you may have made a mistake when setting up the
auto-build information!). To check final costs, first create at least one unit of the finished
item. (Go to the Inventory command centre, click Auto-Build Inventory, locate the item
you wish to create, specify a quantity in the Qty to Build column, and then click Build
Items.)
Next, go to the Inventory command centre, click Set Item Prices, and select Avg Cost.
This will show you the cost of creating the finished item, based on the average cost of all
its components. Alternatively, you can go to the Inventory tab of the Index to Reports
window and select the Auto-Build report to view average costs of all manufactured
products.
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Managing your inventory
If you are like most manufacturers, then the value of your inventory represents your largest single asset. Successful control of
inventory costs and quantities defines the difference between business success and failure.
Analysing stock levels
To see what stock you have on hand, simply go to the Analysis menu in the Command
Centre and select Inventory. You’ll see a report similar to the one shown below. The On
Hand column shows the quantity you currently have in stock, the Committed column
shows the quantity outstanding on current customer sales orders, the On Order column
shows the quantity you currently have on order with suppliers and the Available column
shows what you would have left should all orders (both customers and suppliers) be
fulfilled.
See how much stock
you have on hand,
what’s on order and
what’s available
Tracking stock in more than one location
If you have stock in a number of locations and want to track what stock you have where,
you can set up some very clever systems that gives you full stock reporting in each
location. You might want to adapt the finer detail to your particular circumstances, but
here’s one possible framework to get your started:
1. Go to the Lists menu, choose Custom List & Field Names, and then choose Items.
As the Name of Custom List #1, type ‘Location’.
2. Go to the Setup menu, choose Preferences, and then click the System tab. Mark
the Turn on Category Tracking checkbox.
3. Go to the Lists menu and choose Categories. Create a new category for each
location where you want to track stock.
4. Go to your Items List and adapt all Item Numbers so that the last two letters
indicate the location (you can see how this might work in the screenshot below).
Leave the Item Name the same, regardless of the location.
5. Still in your Items List, go to the Item Details tab and select the appropriate location
for each item in the custom lists.
6. In the Count Inventory menu, enter stock counts for all items in each location.
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Managing your inventory
Adapting Item
Numbers so that they
reflect the location
With this setup complete, you can now proceed to run stock for a number of locations.
Here are a couple of examples of how it works:
•
When invoicing, pick the correct stock code according to the location (for example, if
you’re selling goods from the Brisbane location, you select the item with the Brisbane
code as part of its Item Number).
•
If you transfer stock from one location to another, go to the Inventory command
centre, click Transfer Inventory and record a negative quantity for the Item
Number that relates to the departure location, and a positive quantity for the Item
Number that belongs to the receiving location.
•
By always completing the Category field at the bottom of each transaction to
indicate what location this transaction took place in, you can generate Profit & Loss
reports and Balance Sheets for each location.
•
To print stock reports that are itemised according to location, simply click Customise
when generating the report and select the relevant location. You can see how this
might look in the screenshot below.
You can print reports
that group stock by
location
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Managing your inventory
Printing production job sheets
The easiest way to create a job sheet is to create a sales order when jobs are scheduled
for production. You can then create a special invoice layout customisation so that the
order prints with the information that production require.
To create a sales order, go to the Sales window in the same way as you normally would,
but select Order as the status in the top left corner. (Later, once production is complete,
you can change this sale from an order to an invoice.)
Next, go to the Sales command centre and click Print Invoices, select Item as the Form
Layout, and click Customise. Customise the sales order to include whatever types of
information you require and once complete, click Save As and save this form with a
meaningful name such as ‘Job Sheet’.
If you need to generate production schedules in a spreadsheet or database format, you
can export details of outstanding orders. To do this, go to the File menu, choose Export
Data, Sales, and then Item Sales. Select Orders as the Status. Note that the Promised
Date field on your Item invoice can be used as the due date for the order, and this
information can be exported to your production schedule.
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Inventory adjustments and transfers
However perfect your bookkeeping and administration, from time to time you’ll have to adjust quantities on hand or
inventory unit costs. The following procedures explain just what to do.
Adjusting for missing or damaged stock
Go to the Inventory command centre, click Count Inventory, locate the item for which
the quantity is wrong and type the correct quantity in the Counted column. The
Difference column will reflect the quantity you want to adjust.
Click Adjust Inventory and you’ll be asked for a Default Adjustment Account. In
most situations, the best way to allow for small stock variations is to create a cost of
sales account (5-) called ‘Stock Adjustments’, but if you’re not sure about this, ask your
accountant for their opinion.
Click Continue to get to the Inventory Adjustment window. All you have to do next is
check the Date and write a Memo, always recording a clear, concise description if you
can. Enter job or category information, if required, and click Record.
Adjusting the unit costs of inventory items
This scenario is the trickiest of all, and only arises if you know that the average cost of an
item is wrong, but that the quantity is correct. Here’s what to do:
1 Go to the Inventory command centre and click Adjust Inventory. Enter the Date
along with a concise explanation in the Memo.
2 Work out the total adjustment you need to make. For example, if you want to raise
the unit cost from $6 to $10 and you have 20 items in stock, you need to make a
positive adjustment for $80 ($4 difference x 20). Enter $80 in the Amount column,
and 0 in the Quantity column.
3 Enter job or category information, if required, and click Record.
Adjusting the unit cost
without affecting the
quantity
For all adjustments,
you need to select
something in the
Account column. ‘Cost
of goods sold’, ‘writedown of obsolescent
stock’ or ‘stock adjustment account’ are all likely candidates. Just be careful never to use
your inventory account here, as this will throw your inventory out of balance.
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Inventory adjustments and transfers
Creating credit notes when inventory returns to zero
Sometimes, when you try to put a credit note through for inventory items, you will get
a message saying that ‘The purchase of this item would value your inventory at less than
$0.00’.
This message appears because if you want to put a credit note through that will reduce
stock levels of that particular item down to zero, the credit note must equal the value
that you already have on that stock item. However, prices are always changing, so it is
highly probable that the unit cost that comes up in your credit note doesn’t equal your
existing average unit cost.
Here’s what to do to fix the problem:
1 Go to the Inventory command centre, click Set Item Prices and then click Avg Cost.
Note the Average Cost for the item you are crediting, down to the last decimal point
(if the price is $22.50234, then note this down exactly).
2 Return to your credit note, and use this Average Cost as the Price.
3 Note the Total Amount of this credit note and calculate the difference between this
and the total on the credit note you have received. Then click Record.
4 You will need to put through an adjustment for the difference. To do this, create a
new purchase, click Layout and select Miscellaneous.
5 Use a cost of sales account as the Allocation Account, and write the credit note
number in the Memo field. Remember to put a minus figure in the Amount column
if you are doing a further credit adjustment.
Journaling stocktake totals when you don’t use inventory
Just because you don’t use MYOB’s inventory module, doesn’t necessarily mean that you
don’t have inventory (maybe you have an independent Point of Sale system, or you’ve
decided not to track inventory on an ongoing basis). However, you may want to show
the value of stock movements on a regular basis, so that your Profit & Loss remains
accurate. Here’s what to do:
1. First, check out the layout of your Accounts List. It is simplest to have only one asset
account called Inventory or Stock on Hand, and one cost of sales account called
Purchases. (This is preferable to the traditional ‘Trading Profit & Loss’ format, which
includes Opening Stock, Closing Stock and Purchases in the Profit & Loss.)
2. Next, perform your manual stocktake and calculate the value of your stock on hand.
3. Go to the Accounts command centre and click Record Journal Entry. Give the
journal the date of the stocktake and write a detailed Memo. Calculate the difference
between your opening stock at the beginning of the period and your closing stock
at the end of the period. If the value of your inventory has increased, debit Stock
on Hand and credit Purchases. If the value of your inventory has decreased, debit
Purchases and credit Stock on Hand.
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Inventory adjustments and transfers
4. Check that this journal is correct by printing a Balance Sheet for the month in which
the stocktake was performed. If the value of your Inventory account equals the value
of your manual stocktake, then you know you got the journal right!
You can still adjust
for stocktake values,
even if you don’t use
MYOB’s inventory
features
Incorporating the cost of labour
into item costs
The labour question is a
little fraught with peril,
as by necessity your transactions become complicated. How you account for time spent
building items, whether you plan to record standard times or actual times, and whether
you choose to include on-costs in your labour price, are just some of the issues you’ll
have to deal with. You’re probably best to consult with your accountant or an MYOB
Certified Consultant before embarking on any system that is too complex.
However, here’s one possible framework for including labour in your item costs. You can
try this method and then adapt it to your particular circumstances:
1 Set up a new item called Labour. Click on I Inventory This Item, and link the Asset
Account for this item to your Production Wages expense account.
2 Do an Inventory Adjustment to credit this item with 100 or so units, choosing as
your Unit Cost the hourly rate, including on-costs such as super.
3 Adjust the Auto-Build information for all items that have a set labour component,
showing time taken (in hours) in the Quantity column.
4 When you build items, do an Auto-Build transaction as per normal. MYOB will reallocate the cost of labour, shifting it out of your Production Wages expense account
and into the value of inventory.
By the way, to check ‘behind-the-scenes’ information on any transaction (particularly
useful when dealing with complicated inventory adjustments), simply press Ctrl-R (the
recap command) while displaying the transaction. You’ll see details of all the debits and
credits involved.
Incorporating freight into item costs
There are a couple of different ways to incorporate freight or shipping costs into your
unit costs, if desired. See the MYOB Software for Wholesalers guide for more details.
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Pricing
Keeping an eye on costs is essential and you want to make updating prices as easy and as efficient a process as possible. Here’s
how:
Calculating average and last cost
If you go to the Set Item Prices menu in the Inventory command centre, you’ll notice
that you can choose to view items either by Average Cost or by Last Cost.
Average Cost is calculated by dividing the current inventory value by the number
of units in inventory. It’s as simple as that! In accordance with Australian accounting
standards, MYOB software uses Average Cost to calculate the total value of your
inventory.
Last Cost is the equivalent of your supplier’s list price, and does not include supplier
discounts, freight or early payment discounts.
Remember! Be careful when relying on Average Cost or Last Cost information when
setting prices. Average Cost includes supplier discounts, but doesn’t include GST. Last
Cost includes GST, but doesn’t include supplier discounts. Neither cost includes freight
or early payment discounts.
Setting up multiple selling prices
Only MYOB Premier and MYOB AccountEdge allow for multiple selling prices per item.
Click the Selling Details tab of any item and you’ll notice that you can have up to six
pricing levels for each item. By default, these levels are labelled A through F, but you
can label your pricing levels in whatever way makes the most sense for your business.
For example, you might have Retail, Wholesale, Trade 1, Trade 2, Staff and Special as
your price levels. That way, you can keep separate selling prices for different types of
customers.
It’s a good idea to change the price level labels so that they are more meaningful for
your business. Go to the Lists menu,
choose Custom Lists & Field Names,
and then click the Price Level tab.
Setting up price levels and quantity
breaks in MYOB Premier and
AccountEdge
If you offer discounts for certain
quantities, you can set up quantity
breaks using the Quantity Over field.
For example, if you want to create pricing levels for sales of this item in quantities of 25
or more, enter 25 in this field. If you intend to offer further discounts for sales of this item
in quantities of 50 or more, enter 50 in the next field.
The last stage of setting up multiple selling prices is to specify what price level each
customer belongs to. Go to the Card File command centre, click Cards and edit your
customers one by one. Go to the Selling Details tab and select the appropriate Price
Level.
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Pricing
Updating prices
To update selling prices, go to the Inventory command centre and click Set Item Prices.
If you only wish to change a few prices, mark each item you wish to update by clicking
against them, then click the Shortcuts button. To set new prices for the entire list, just
click Shortcuts.
Work through this dialogue box from the bottom up, starting with the Basis for
Calculation. Choose whether you wish to refer to Average Cost or to Last Cost, and
whether you want to calculate profit based on Margin, Markup or Gross Profit. State
whether you want to round prices Up or Down, or to the nearest specified unit.
The differences between Percent Margin, Percent Markup and Gross Profit can be
confusing. Use Percent Margin if you think of profit as a percentage of the final selling
price. Use Percent Markup if you think of profit as a percentage of the buying price. Use
Gross Profit if you think of profit as a fixed dollar amount per item.
Analysing profit on each stock line
To see how much profit you’re making on each individual stock line, do the following:
1 Go to the Analysis menu and select Sales.
2 Click Filters and select All Items.
3 Select your desired date range, and click OK.
4 Click the Profit button to analyse the profit contributed from each stock line, or click
Margin to see this as a percentage. Click the Avg Cost button to see total sales of
each line, along with the number of units sold.
5 Click the graph buttons (Sales and Profit) to see this information in pictorial format,
similar to the screenshot below.
You can analyse sales
in many different ways
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Analysing your profitability
One of the fantastic things about MYOB software is that every transaction can be coded in several different ways. For
example, in the Spend Money transaction below, the Card shows the name of the supplier; the Acct# field shows the type of
expense, the Job column shows the cost centre and the Category shows the location.
You can use accounts, jobs and categories to analyse
business profitability
When you first set up your system, it’s worth taking some
time to figure out how you might take advantage of the job
and category features. By analysing how much money you’re
making (or losing!) on everything you do, you can fine-tune
your business to maximise your chances of success.
Analysing profitability by accounts
The first (and possibly the easiest) way to analyse where you make your money is to set
up your Accounts List so that it reflects the many activities of your business. For example,
if you sell three kinds of products your income accounts might include Income Product
A, Income Product B, and Income Product C. Alternatively, if you deal with different
types of customers, your income accounts might include Income Customer Type A,
Income Customer Type B and Income Customer Type C. (Note that it is always good
to try and divide your income into several different accounts, rather than lumping it all
together as one.)
Analysing profitability by jobs or cost centres
The second way to analyse where you make your money is to divide your business into
different cost centres by creating a job for each one. You can then generate a Profit &
Loss report for each cost centre, as well as a Profit & Loss report for your business as a
whole. Alternatively you can use MYOB Accounting, MYOB Accounting Plus, MYOB
Premier and MYOB AccountEdge’s categories feature for more advanced cost centre
management.
Here are some real-life examples of how manufacturers use job numbers to help them
manage their business:
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An established manufacturer sold direct to Australia, France and Canada. By giving
each country its own job number, he could see the income and expenses generated
from each country.
•
A vineyard manufactured both organic wine and organic grape juice. By giving each
product a job code and allocating job codes to income and expenses, the vineyard
could see how much profit (not just how much income) each product generated.
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Analysing your profitability
•
A manufacturer was eligible for an AusTrade export grant that refunded 50% of all
marketing expenses that related to exports. By creating a job number for AusTrade,
and coding all eligible marketing expenses, he could print a job report that detailed
all expenses at the drop of a hat, ready for his annual grant submission to AusTrade.
Jobs can be used
creatively to
analyse all types of
information
Analysing profitability by category or location
If you operate from more than one location, you can use categories to analyse the
profitability of each branch. For example, you might have one warehouse in Sydney and
another in Melbourne. If you code every transaction with a category that indicates which
branch it came from, you can assess the profitability of each branch independently of
the other.
To use categories, you need to turn on category tracking. Go to the Setup menu, choose
Preferences, and then click the System tab. Mark the Turn on Category Tracking
checkbox. If you want to be forced to enter a category for every transaction, select the
Categories are Required option, rather than the Categories are Not Required option.
By the way, if you’re unsure of whether to use jobs or categories to analyse profitability,
bear in mind that you can split a single transaction across several jobs, but you can’t
select more than one category for a single transaction.
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Understanding GST
MYOB software makes accounting for GST about as easy as something so complex could be. So long as you record all your
transactions and allocate the right tax code to each one, there’s not a great deal that can go wrong. The main thing to
remember is to allocate the right tax code when recording transactions. This done, everything else should fall into place.
Recording GST
Whenever you record a transaction, you can choose whether to enter the amount as taxinclusive or tax-exclusive by toggling the Tax Inclusive checkbox in the top right of every
window. (When recording payments or receipts in MYOB BusinessBasics and MYOB
FirstEdge, you may have to click the Split button in order to view this option.)
Usually, you’ll find it easiest to mark the Tax Inclusive checkbox and enter all amounts
including tax. You’ll find that the GST calculates automatically and you don’t have to go
looking up every receipt to double-check the tax total.
You can make life easy for yourself by going to your Accounts List and, one by one,
double-clicking each account and checking the linked Tax Code. This way, the correct
tax codes appear automatically when you record sales, purchases or Spend Money
transactions.
Deciding what GST codes you need
Most manufacturers find that they only need six tax codes: CAP; FRE; GST; ITS; N-T and
QUE. Importers may also need the additional tax code IMP and exporters need the
additional tax code EXP (for more information about these codes, check out the MYOB
Software for Importers and Exporters guide).
To review your codes, go to the Lists menu and choose Tax Codes. Comparing your list
with the list shown below, delete any codes you don’t need (they’ll only serve to cause
confusion) and add any codes that are missing. For all tax codes, the Linked Account for
Tax Collected should be GST Collected from Sales and the Linked Account for Tax Paid
should be GST Paid on
Purchases. Once you’re
finished, your tax code
list should look similar
to the one below:
Your tax code list
should look something
like this
What do the different
codes mean? Here’s an
explanation:
CAP (GST on capital acquisitions)
If you buy new tools, equipment or vehicles that cost more than $1,000 before GST
(assuming you’re part of the Simplified Tax System) or if you buy any new tools,
equipment or vehicles at all (if you’re not part of the Simplified Tax System), you need
to report these purchases separately on your Business Activity Statement. To do this,
you need a separate tax code called CAP. If you’re not whether or not you’re part of the
Simplified Tax System, ask your accountant.
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Understanding GST
FRE (GST-free goods and services)
Even if you don’t sell any GST-free goods or services, you’re bound to end up purchasing
GST-free supplies such as bank charges, donations or government charges. If you
employ any subcontractors who have an ABN but aren’t registered for GST, use FRE as
the tax code for their payments.
GST (Goods and Services Tax)
GST is the tax code that you’ll use for most sales and purchases.
ITS (input taxed sale)
Use this code for interest and dividend income and rental income from residential
property investments.
N-T (not reportable)
N-T stands for not reportable and is the code you use for everything that falls outside the
GST net, such as wages; superannuation; loan repayments; bank transfers and personal
spending.
QUE (query)
Use the query code whenever you’re not sure what code to use. That way, when you get
to the end of the quarter, you can print a report for all transactions coded QUE and ask
your accountant or MYOB Certified Consultant to give you a hand choosing the correct
codings.
Deciding what codes to use when
One of the tricky things when first recording income and expenses is to figure about
what tax code to use when. Here are tips to help you out, written especially with
manufacturers in mind:
Income
•
•
•
•
•
All taxable items should have GST as the tax code.
All non-taxable items (food, medical supplies, educational materials, etc) should have
FRE as the tax code.
All exports should have EXP as the code.
All interest income should have ITS as the tax code.
If you receive money from a personal source and it isn’t really income (for example,
a family loan, a gift, a tax refund or a transfer between bank accounts), select N-T as
the tax code.
Expenses
•
•
•
•
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All purchases of taxable items should have GST as the tax code.
All purchases of non-taxable items should have FRE as the tax code.
Most expenses should have GST as the tax code, including things such as
advertising, electricity, postage and telephone.
If you’re registered for the Simplified Tax System, if you buy new tools or equipment
that cost over $1,000, select CAP as the tax code (CAP stands for ‘GST on capital
acquisitions’).
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Understanding GST
•
•
•
•
•
•
•
•
If you’re not registered for the Simplified Tax System, select CAP as the tax code for
all new tools or equipment, regardless of cost.
Donations should have FRE as the tax code, as should almost all bank charges and
interest expense. However, watch out, as merchant fees should have GST as the tax
code.
Hire purchase and lease payments depend on what you’re paying off, when you
bought it and how your accountant intends to treat it. Ask your accountant.
Insurance is tricky, because almost every insurance policy is a mixture of taxable and
tax-free (stamp duty doesn’t have GST on it). Enter QUE as the tax code for insurance
expense, then double-check the exact amount of GST on every insurance payment
when you record it.
Milk, tea, coffee and some first aid supplies should have FRE as the tax code.
Residential rents should have ITS as the tax code, commercial rent should have GST
as the tax code.
Domestic travel should have GST as the tax code, overseas travel should have FRE as
the tax code.
Government charges are almost all GST-free, and include licence renewals, motor
vehicle registration, council rates, water rates, land tax and stamp duty
Private expenses
•
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Private expenses should have N-T as the tax code, as should wages and
superannuation.
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Budgeting for tax
One of the harder aspects of running your own small business is keeping track of how much tax you owe, and making sure
that you have sufficient funds available when tax bills fall due.
Fortunately, MYOB has developed the M-Powered® MoneyController service which helps you save for your tax bills.
Created in partnership with Macquarie Bank, M-Powered MoneyController can help you better manage your cashflow, by
assisting to provide for your business’s tax obligations and investing any surplus cash you may have:
•
Analyse your current tax and payroll obligations.
•
Securely transfer funds from your everyday business account to a high-interest
MoneyController Provision Account straight from your MYOB software.
•
Make ATO payments from your Provision Account with Macquarie Bank.
•
Analyse your business’s investment capacity.
•
Transfer surplus cash into a high-interest MoneyController Investment Account with
Macquarie Bank.
To find out more about M-Powered MoneyController and to read the Product Disclosure
Statement, simply visit www.myob.com.au/m-powered/ .
Alternatively, you can use the MYOB software’s financial reports to help you budget for
tax, avoiding any nasty surprises. The best way to avoid getting in a pickle with GST and
employee tax is to open a savings account that links to your business cheque account, so
that you can transfer money between accounts easily by phone or over the internet.
This done, try to keep your accounts right up-to-date and then at the end of every week,
do the following:
1. Print your GST [Summary - Accrual] or GST [Summary - Cash] report (depending
on whether you report on an accrual or a cash basis). The difference between Tax
Collected and Tax Paid is the amount of GST you owe the tax office.
2. Next, if you have any employees, print a Payroll Register Summary report and note
down the totals for tax and superannuation.
3. Add together the GST, tax and superannuation and transfer the total of these three
amounts into your savings account.
4. Finally (and this is the tricky bit!), don’t touch your savings account except for when
it’s time to pay your Business Activity Statement or superannuation.
Print a GST Summary
report regularly to
help you budget for
tax
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