Inventory Record

[Bruno]

My business is 80 % framing. For the other 20% I purchase material and frame art for the gallery. How is everybody tracking the material cost for the art hanging in the gallery. I am Canadian and this needs to be done for tax purposes. I have been doing this manually. Does anybody know of a software for just tracking these costs, or a simple way of tracking new costs and when a picture is sold from the wall? Your input is greatly appreciated.
Thanks,
Bruno

 

[Ted]

Hey Bruno,

I was never quite sure if I was doing it right, but for years I did it this way and never got into trouble.

Anything that I purchased for the gallery, ie. prints, framed pieces, gift items, I would record in my expenses data base as "gallery expenses". Anything that I purchased for framing, ie. moulding, mats, glass, etc., I would record as "framing expenses". When I accessed the data base I could easily seperate the two. Sales were always recorded in a seperate data base the same way so I could see how expenses related to sales in each catagory. The problem came in when I would use scrap material (already paid for) to frame a piece for the gallery. Since I already paid for them, I never seperated the costs for materials already in the shop. Both gallery and framing expenses were combined for income tax under "cost of providing goods sold".

Inventory is another matter. I would record items in the gallery at their retail rate and place a estimate value on scrap material in the shop (usually very much below actual value)...I mean how do you do it acurately. Since my fiscal year is the calender year, I would do my best to keep my inventory as low as possible by December 31. It usually wasn't a problem because of the Christmas season.

I don't use a specific framing computer program for my business, so I don't know if there are programs out there that can help. I also believe that we can over complicate these things.

Good luck...hope this is of some help.

Ted

 

[Bruno]

Hi Ted, thanks for your reply. Are you saying that you expense the gallery expenses for the year eaven when the picture is not sold by the end of the year? I have been doing this all along this way, it is to hard to keep track of the material cost for the gallery pictures and not to include these in your expenses for the year, when some of them appear on the same vendor invoice as for customer material. Our good friends at Revenue Canada think different about this, they want all expenses and income matched. Little do they know about running a small framing shop. It does not make very much money anyway. Anyway I am getting hit with the material inventory and I was just wondering how other similar shops handle this. I think Revenue Canada will be putting a lot of smaller businesses out of business with this kind of motto. Let me know if you think of anything else.
Bruno

 

[Ted]

Bruno,

Your income tax form asks for your gross sales (easy enough) then your inventory at the end of the ficsal period. Next they ask you for the TOTAL amount paid for "cost of goods sold". This is a combined total for everything that you purchased for the gallery. That's everything, including, frames, prints, glass, gifts, mats. I can't see where they're asking you to break these costs down. If you spent it on a service or an item that you are going to sell, it goes in this catagory. Other expenses such as vehicles, rent, bank charges, etc. are listed later.

The secret here is to keep you inventory as LOW as possible at the end of the fiscal period. You're right. I was wrong about the cost of the inventory. It is based on NET and not retail. So, as I said, you have to guess. There's really no other way I can see. So guess LOW!

Ted