It is common practice for a retail store to display consignment inventory for a vendor that they have not purchased. This inventory is called Consignment Inventory. The agreement is established so that when the items are sold, the retail store will turn around and pay the vendor.
This makes accounting very complicated but will discuss the basic steps needed to take place in various versions of QuickBooks.
One of the biggest challenges is to have the inventory ready to “ring up” for your customer and know how much you owe your vendor when their inventory is sold.
Here are some common scenarios that have a need to track consignment sales:
- Horse Tack Shop – they sell saddles
- Used Car lot – they sell cars
- Antique Shop – they sell furniture
- 2nd hand shop – they sell clothes
Here is the challenge:
What do you need to know to set this up? You need to know what your cost and selling price will be.
- Set up the item as NON-INVENTORY. Create the item with both the description to show up on the invoice/sales receipt with the amount that it will sell. Include the Vendor that will be paid with the amount due if it sells. Mark whether it is taxable or not. The income account is Consignment Sales. The Expense Account is Consignment Purchases.
- Set up the Vendor. Create a purchase order listing the Vendor for the items that you are consigning for them. Set up a class labeled similarly and assign it to the purchase order.
- Sell the Consignment item as you ring up a regular sale but select the NON-INVENTORY item code for the item sold. Be sure to add the class you created in Step 2 to the invoice or sales receipt.
- Using the Purchase order, create the bill for the Vendor for the same item sold, and pay the bill according to the terms established. Be sure the class copies over to the bill.
- Track and generate a report that shows consignment sales you have made and how much you have paid out to consignors. Create a Profit and Loss by Class report, Filter by Consignment Income and Consignment Payouts and save it. The report groups sales, payouts, and ending income by each of the consignors, as well as the total income by all. Non-consignment sales are grouped under the Not Specified class
Which version of QuickBooks will work for Consignment tracking?
- QBO – QBO Plus or Advanced
- QB POS – Pro or Multistore
- QBDT – ANY
These are the basic steps that you can use to track Consignment Sales and payouts using any of the above versions of QuickBooks. If you receive consignment inventory in, as your own and create all the bills associated with this inventory then you will need to do adjustments for tax purposes since you do not actually own the inventory.
Tricky setup in QuickBooks can be a challenge but when you get the outline of what you are trying to do, and follow the general guidelines tailored for your method, you will be able to manage Consignment with ease.
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