Got retail clients? According to The Wall Street Journal UPS expects to handle four million returns in the first full week of 2015. This is up 15% from two years ago as online sales continue to grow.
Best Buy estimates that returns and replacements represent about 10% of revenue or about $400 Million for them.
So how can you use this information to help your retail clients? Tell them you read a blog written by a nerd who reads The Wall St Journal. This is why you are able to give your retail clients this heads up. Next talk to them about how to keep the money in the store.
First, they should encourage their customers to come in and buy something else rather than simply return the merchandise. How can they do that? A sale or some other promotion. Make it fun – call it a “Post-Holiday Returns Promotion.”
Next let’s take a look at how returns are handled in QuickBooks. As the bookkeeping or accounting professional who services retail clients, you want to be able to analyze the return volume.
The problem with how QuickBooks handles returns is that you have to enter a credit memo and use the inventory part that was used in the sale. Why is this a problem? This is a problem because this will simply reduce the sale, revers the COGS, and put the item’s cost back in inventory. Now your returns are buried in your net sales.
There is a solution for your retail clients. It involves setting up a group of items and using that on the credit memo. You’ll need a few items.
- The inventory part that was sold and then returned.
- An Item Called Merchandise (this is a service item mapped to your merchandise sales income account)
- An item called “Sales Returns and Allowances (this is a service item mapped to your sales returns and allowances income account)
Create a new group containing the above three items in it. In theory you will need a group like this for each item that you sell.
Now watch the video to see how this all comes together and please post your comments and questions.
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