 zero accounting software 2023 inventory tracking options get ready to become an accounting hero with zero two thousand twenty three so we are going to construct a home page going into the new company file we set up an entire presentation that gives great content on our website broken out by a company file we further broken out by the beginning balances from an accounting system we possibly had a whole fashion making it much more easy to find what you need and can be done on a foundational page necessary to make the data in forms as easy as possible pdf files over to the items that we are going to be adding these are the beginning balances so once again click the link below we want a 483 month membership so with just a journal all the content on it the added needs for each of these accounts as we do the data input so now we are looking at the inventory assets so this is the number four inventory which if we added just as a journal entry wouldn't give us the backup information which is the subsidiary ledgers breaking out that information by inventory item and cost of those inventory items in the prior presentation we looked at the service items which are used to populate the sales receipts and the invoices but they don't have the added complexity of the inventory items in a future presentation we will start to add the inventory items same process but adding a level of complexity because now we have the purchases to deal with as well as the tracking of the inventory and the beginning balance of the items needing to tie out to this here before we do that however we first want to think about inventory in general because a lot of times people have misconceptions in terms of how they are going to be tracking inventory within an online system like a zero system and you might think that you have to use a certain kind of method the default method a perpetual inventory method but that is not necessarily the case it kind of depends on what you are doing so the general idea if we go on over to zero options for tracking the inventory would be one a full inventory method in which case you are going to be using the inventory tracking within zero that is going to be what we call a perpetual inventory tracking method so every time you purchase something as well as every time you sell something it will be tracking not only the dollar amount but also the inventory so that is when you have invoices the bills and you receive money like a cash register type of situation you can also however use a periodic inventory system in which case you are going to say hey look I am going to track inventory outside of the accounting system possibly in an Excel worksheet or some other inventory tracking program and then within the zero accounting system I am not going to turn on the perpetual inventory but simply record sales with the invoices and the received payment in a similar fashion as I would if they were service items and then I will make an inventory adjustment periodically from my external inventory tracking method another app or Excel or some other kind of spreadsheet program so those are the general options now the other thing to keep in mind with inventories a lot of people these days have the online stores like Shopify or they sell stuff on Amazon or eBay or something like that again you have inventory needs in that case but often times you are not going to want to often times track the inventory within zero because you have inventory tracking to some degree in terms of units in the other software and often times it becomes a tedious type of thing when you have a lot of different items sometimes is the case with these kind of stores so what you want to do is try to determine how you are going to be tracking inventory and pull that in periodically we might go into more detail on those particular type of situations on some different methods at a future course or section but just keep in mind you have different kind of integrations you might want to put in play with those items now your other option if you want more advanced inventory tracking because the inventory tracking within zero is somewhat limited so if you have a whole lot of different inventory items for example or different locations that you need to track inventory for and complex inventory tracking numbers then you might need a whole separate inventory tracking application which can basically be a supplement or possibly integrated within the zero system so now you have another software which is helping you to kind of manage the inventory that can integrate within the zero system so for example if I hit the drop down here and I go down to the app store just so you can check that out then you can go into you can see down here some cloud based inventory management software and what not now if you are going to have an integration you want to make sure you do your research to figure out what the best integrations are as you are pulling this information into the system where is the inventory going to be tracked is it going to be in another system how are you going to track it within the actual zero are you going to use a perpetual system or a periodic system and then as you know like with Shopify and other online stores there is often integrations involved there but again you want to be quite careful because the question on those types of situations is often do you want to pull in all the sales information do you want to pull in all the inventory situation and track it within zero on a perpetual inventory tracking method and have all the different customers and what not in place which is often overwhelming the system and again zero might not have really the inventory tracking needs you need for more complex inventory and it is still complex if you try to pull in transaction by transaction more likely you are going to be using some kind of periodic inventory system and you are going to be using software possibly to group and batch the sales so that it can come from the sales location which is happening on the cloud into your system into your system in a grouped format instead of trying to recreate all the data which is actually on the other location so with the Shopify's and those external stores you can zero can work quite well as a software to help you to compile and create your financial statements but you are typically going to want some kind of integration often times and again you want to put some thought into exactly what that integration is going to look like otherwise you end up with basically a mess same with the inventory in general any kind of inventory you are tracking you want to think about how exactly do you want to do that do you want to turn on perpetual inventory tracking in case you have to basically go into your products and services and put each of those inventory items into your system here or again you might track them externally in a software and in Excel and then basically when you purchase inventory you increase inventory and then periodically based on the physical count of inventory you have and your Excel worksheet or your external inventory you can figure the dollar amount of inventory using the inventory method or calculation beginning inventory plus purchases minus ending inventory gives you the cost of goods sold and you can do periodic adjustments on a monthly basis or possibly simply on a yearly basis if you are in the United States to help you out with your tax preparation for income tax preparation now let's just take a quick look at a flow chart this is actually a QuickBooks desktop flow chart but we are just looking at the flow the process is the same for most accounting systems we just want to think about how the inventory is going to flow through the system so inventory is one of those things that actually is going to touch on the vendors or the purchasing area the sales or the expense cycle money out cycle and the customers cycle or the revenue or sales cycle or money in ultimately cycle so obviously we are going to be purchasing inventory up top which we might do starting with a purchase order maybe or maybe not starting with a purchase order depending on the situation or we can have a bill or write a check purchasing the inventory as we purchase the inventory we normally put it on the books as an asset instead of expensing it that's the confusing thing about inventory because we want to be recording the expense related to inventory when we sell it not when we purchase it but when we purchase the inventory which is usually easier which is something we can but the purchase side is still on a cash based system in that when I buy the inventory that triggers the transaction that's going to record an increase to the inventory which is an asset account instead of an expense account now if I have a perpetual inventory tracking system within zero on it will also create a sub ledger by inventory item as well then when we sell the inventory with an invoice or a cash register a money in kind of transaction then the sales transaction gets more complex because if I'm using a perpetual inventory system I'm recording the sales price and the payment that we're going to be receiving cash for example in a similar way as if you're checking out at a grocery store you see that side but the system knows the other side which would be a reduction to the inventory and a recording of the expense related to that inventory called cost of goods sold which it will record on the financials as well as the sub ledger decreasing the inventory at that point in time so you can see that's a much more complex transaction even though the data input on the invoice would be easy if you set up properly within the system which gets a little bit complex to get all the items set up in the system now if you have an external system within excel what would happen is when you sell the inventory you would simply not record the decrease in inventory not record the related cost of goods sold treat it just like a service item and then periodically at the end of the week or month for example or possibly a year you take a look at your inventory physical count that you're tracking and make the appropriate adjusting entry reducing inventory recording the cost of goods sold based on the physical count that you made that's why it's a periodic inventory system so also note that when you're dealing with inventory you're going to have to deal with flow assumptions usually because unless you have a very very custom inventory system meaning you make custom things so you know exactly which thing you sold usually if you look at like a Shopify store or something you're buying a bunch of stuff that's all the same and then you're selling quantity trying to sell higher quantities of the same thing so in that case as you buy the quantity of the stuff and mark it up and then sell it or make it and sell it or whatever all the end units are the same but the cost of those units could change over time most likely going up due to inflation so then when you sell the inventory units you have the question of a conversion question just like going from a metric system to the US system you know like feet to meters or something you have to figure out well I have the units of inventory I have to convert those to the cost or dollar amount of inventory and they cost different amounts over time due to usually increasing prices in part because of inflation so the flow assumptions are first in first out and weighted average of the common flow assumptions you also have last in first out but that's not really one that's used in practice other than for taxes often times so we're going to use basically a perpetual inventory system here in our practice problem tracking it within zero but note that you want to think through what the best inventory system is for you put the time in to do that in your practice or in your client's business also if you are a practitioner a bookkeeper you want to think about what clients you want to specialize in do you want to specialize in clients that have a particular type of inventory like Shopify people or Amazon and get into get really good at those integrations do you want to be a specialist in tracking inventory within the system or specialist in periodic inventory tracking and that can help you kind of target who your best client tell would be are you the type of bookkeeper that wants to try to automate everything or make something as easy as possible and what size of client do you want if you get into more complex inventory needs for larger companies you can start to get professional or get a specialization in integrating more complex inventory applications that meet the needs of more complex inventory situations