In his blog post “Dealing with Scrap in QuickBooks Manufacturing,” Charlie Russell offered five creative solutions to the problem of leftover parts and materials after a manufacturing project is complete.
When manufacturers create a product from a bill of materials, they often find they didn’t need to use as much material as they had expected. The problem is that it’s difficult for them to account for that unused portion in QuickBooks, as Charlie noted in his blog post.That’s why I would like to suggest three ways to make it easier to deal with scrap. They are found in Fishbowl Inventory’s manufacturing option. Fishbowl integrates with QuickBooks, so any changes a user makes to his or her inventory levels in Fishbowl automatically generate corresponding changes to that user’s finances in QuickBooks.
These three options are similar to what Charlie proposed. The difference is that they’re easier to do in Fishbowl Inventory than in QuickBooks, and they automatically update QuickBooks, eliminating that headache.
1. Roll it into the final cost. Materials that were used or damaged in the creation of a product, but aren’t actually part of the end product, can be added to the final cost of that product fairly simply in Fishbowl. All you have to do is put the number of parts that were used or damaged into Fishbowl and it automatically updates the QuickBooks file to show the added cost in the final product.
An added benefit of this option is that it gives you an accurate count of parts in your inventory and a true cost of what it took to build your finished good. This way, you won’t run into unexpected shortages and delays in your manufacturing process, and you know exactly what the final product cost to make.
2. Scrap it. This is similar to the “Adjust Scrap to Expense” option Charlie suggested. But it’s much simpler in Fishbowl. All you have to do is open the Inventory module, choose or scan the part that is to be scrapped and click the Scrap Inventory button. QuickBooks will then be updated with an expense for that part in the account that you chose for scrapped inventory.
3. Put it back into usable inventory. This is similar to the “Adjust Scrap to Asset” option. Of course, if you have extra parts after finishing a job, before you start thinking about inventory adjustments you might want to go back and make sure you actually built your products correctly and that they’re not going to fall apart because they’re missing a few nuts and bolts.
Assuming that’s not the case, it’s a simple process to add extra parts back into your inventory system. Just scan the parts and put them back into the location they were in before you took them out for the manufacturing job. Needless to say, doing this automatically updates your accounting records in QuickBooks.
QuickBooks 2011 has plenty of new tools to make the task of accounting easier. However, if you’re struggling to keep up with scrap parts, you might want to try using Fishbowl Inventory to fill in QuickBooks’ gaps.