Hello, I have a new upholstery l client whose POS system automatically enters a 50% COGS (for labor) when a sale is made. Every month, they enter any bills that have come in from the labor they outsource and reverse out all the automatic COGS the POS system records. Therefore, at the end of the month, the POS automatic entries are useless. They would like to match the actual labor costs with the month the sale was made, but the labor bills sometimes come in 2-3 months later. They do have estimates of what those bills will be, but things can always come up, so the exact amount is not known. Right now, my client wants to backdate bills to the month of the sale. I have explained that this is incorrect, and it still makes their monthly financials (which they are trying to use to make business decisions) useless as they will still not be correct at the time of month end. My background is in not-for-profit, and I'm sure this is a common occurrence in the retail industry. Can anyone shed light on how this should be done?
USA Retail, Matching sales with actual vendor invoices
- Thread starter rkopka
- Start date
You need to introduce them to accrual accounting. First, they need to stop the system from making the auto 50% COGS entry. Second since they can estimate the labor bill, then they need to accrue the expense for that bill when a sale is made. Later when the actual bill comes in they can reverse the accrual and record the actual bill.