What ‘point of sale’ and accounting systems have people used if you are operating as a business? I don’t need to be able to swipe cards or any retail register functions like that, but I do need to be able to send invoices that include labor and parts, receive digital payments for those invoices, and keep track of expenses, profit, and sales tax. I’ve been looking to change for a couple years but my current tier of quickbooks just went up to $90 a month so I’m feeling motivated. There are two tiers of lower cost below that but neither allow the user to track inventory or cost of goods sold.
I have QuickBooks now and I’m caught in a spot where i feel like I pay for a tier that includes a bunch of features I don’t use, but the few things I feel like I need require the whole dumb bundle- I pay for their inventory functions but that forces me to buy their payroll &timecard tools. I want to be able to create invoices that include inventoried items, not just labor or single custom items, but I am a one human shop l and I don’t use any of their payroll/cashflow/extra fancy stuff. If I try to track sales tax and all that stuff on paper I will end up in trouble, so I need some kind of computer biz backing me up, but I’m curious if folks have found an option that works better for our unique sector of the bicycle industry.
When I sell a complete bicycle, I usually set it up as a itemized invoice, with each component listed, as well as the frameset and racks. This way the customer has a detailed itemized record for insurance and so they can see what they paid for. I could imagine advantages to simply selling the one item, the complete bicycle itself. For frame repairs, customers are sometimes purchasing a component or two, so I use inventory functions there as well.
Any insight into what others use would be greatly appreciated.
Wave for accounting and POS (free except credit card processing fees)
Sortly for inventory management (kinda pricey for what it is, but it’s easy to use)
I’ve also recently started to pay a book keeper to fix my inevitable accounting mistakes. He was willing to use Wave even though he’s used to Quickbooks.
Side note, if you call Intuit, you can supposedly still purchase the desktop version of Quickbooks so you don’t have to pay monthly fees. I still prefer Wave since it’s free and does everything I need.
The goal is to have almost no excess raw materials so inventory management is simpler. This has gotten much easier now that we don’t have to hoard stuff anymore. I’ve read some books on lean manufacturing and try to incorporate what I can make sense of.
I only keep track of the raw materials in Sortly. Components for a specific build are categorized as COGS right off the bat, since the components aren’t sitting on the shelves for long.
The trick is remembering to create a journal entry to move the value of the raw materials for a build to COGS when I receive the final payment. It’s easy to forget how many little braze-ons I used on a bike when each bike is custom. Once a quarter I should do physical inventory to correct any inventory discrepancies, but it’s realistically once a year It’s easy to get lazy with this stuff when you just want to build bikes.
If I sell a complete build, I don’t itemize the components on the invoice. The customer has viewing access to a Google spreadsheet, where we hash out the build and pricing. Not sure if that’s bad, but nobody has complained yet.
Those are just random business thoughts that popped up as I was writing. Doing the business part of running a business is surprisingly fun to talk about I wish we talked about it more on this forum.
Check out Zoho inventory. The free version covers everything most frame builders would need, even includes a shopify integration if you go that route. You can also issue invoices, and create bundles so the customer sees 1 item but behind the scenes it can grabs all the components used. The interface is a bit clunky, but you get what you pay for, and functionally it can do everything you need it to.
Also check out Xero and Freshbooks. Those two along with Quickbooks and Wave are the most used accounting softwares for small businesses. Not sure of the pricing on them.
This is all great. And beyond the software, it is just as interesting to hear how components vs raw materials get treated by different builders. I’m hoping to do a bit of a reset for inventory methods and software 2024 so I’m super into hearing how others do it, and any other thoughts yall have on this stuff.
That COGS movement of raw materials from one area of inventory to another makes sense- I’ve always just turned it in to COGS right away but I am seeing now that cost doesn’t get properly linked to the individual bike sale, thereby inflating my ‘profit’ on every frame. This fact just landed on me like a ton of bricks! My main goal here is not not get in trouble tax wise and also not to accidentally make it look like I’m making more money than I am. The bundling ability seems like ti could be very handy for being sure to actually include all the costs associated in each of these bikes.
Still haven’t figured out a POS system but for accounting I’ve been using Xero and couldn’t be happier with it. If you only have a small amount of invertory items then it handles that decently too so might be the only system you need as a small shop.
It’s been awhile since my last accounting lesson on the forum, here’s a rundown on accounting methods.
Businesses have two options for accounting methods: Cash Basis and Accrual.
Cash Basis
This method is straight forward, you just follow the cash. You record revenue when cash is received, you record expenses when cash is spent.
Pros: Easy to understand and comparatively easy to manage.
Cons: Limits the amount of useful analysis you can get from your financial statements.
Accrual
This method is more complex. Revenue and expenses are recorded when they occur, not when the money moves. Example, revenue is recorded when you issue an invoice, even if that invoice won’t be paid for a month or two. Same thing for expenses, if you have Net30 terms with McMaster or someone like that, you record the expense when you order the goods (technically when you receive the goods), even if you don’t pay the bill for 30 days.
Pros: Significantly improved reporting and analytics, especially if you’re trying to compare monthly performance.
Cons: Can be confusing and is a bit harder to manage.
Software
If you use accounting software like QuickBooks, you can actually do both methods at the same time, switching between them is as easy as hitting a toggle button.
Taxes (USA)
You should talk to a CPA, but pretty much everyone on here, big and small, will file their taxes using a cash basis. This is where the ability to switch between methods comes in handy. For example, at the company I work at we do very detailed accrual accounting because that gives us the strongest reporting and analytics (and is required by investors/banks), but we file taxes on a cash basis.
Inventory
If you’re using cash basis, your inventory can be managed separately in whatever system works for you. When using cash basis, inventory is tracked just to know how much stuff you have and what you might need to order, but it isn’t a component of your financial statements. When you purchase raw materials/components, the entire amount is recorded to Cost of Goods Sold (COGS). COGS could actually be renamed “Purchases”. A tax accountant might make a year end adjustment to account for the inventory you have on hand and remove that amount from your annual COGS.
Using accrual accounting, when you purchases raw material/components it gets recorded to an inventory account. Inventory is an asset on your balance sheet, it doesn’t show up on your income statement (Profit & Loss statement, P&L). When that inventory is consumed and sold, it moves from the inventory account on your balance sheet to the COGS account on the P&L. This is where “Cost of Goods Sold” gets it’s name, it’s the costs directly associated with what was sold, no more no less.
If you’re using the accrual method, your inventory management system should be native or linked to your accounting software. If it’s not, you’ll need to make manual journal entries to get everything recorded correctly, which is a big pain.
This is a good article to learn more and see comparative examples of cash vs accrual for inventory tracking.
My Recommendation
Use cash basis. Unless you’re a high volume production shop, the benefits of using accrual accounting do not out weigh the cost/effort needed to use accrual accounting. Use whatever system works for you for inventory management, it doesn’t need to sync with your accounting records. Just make sure you can properly value the inventory you have on hand at year end. If you want to understand your margins for price setting or just general knowledge, make proforma statements in a spreadsheet like mentioned in these posts. It’s like using the accrual method for a one-time analysis.
For accounting, I use 1 bank account and all the monie$ go in and out of that one account. I download the transactions and can sort them for tax purposes at the end of the year. Very much keepin’ in simple.
I use Quickbooks the $30 plan for sending invoices. It’s fairly slick. (Again, all the $oney in and out go through my one bank account).
I don’t know what your needs are for inventory, but I use Wordpress and the ATUM Stock Management plugin (there’s a free version). Native Wordpress… rather Woocommerce has built in inventory. You could run a Wordpress/woocommerce website just for yourself, or put your products online and have people pay for things that way. (Again, all the monie$ in and out go to my one bank account).
I hope that helps!
I do one bank account as well. If i waited till the end of the year to sort through transactions I think I’d have a hard time getting it all squared up, but maybe not. I pay for the $90 monthly QuickBooks tier currently just to be able to sell components but I think I am seeing that I could move away from every item being itemized and still cover myself with the cash basis, which is what I’ve been doing, but poorly, already I guess. Seems Like i need to try downgrading my QB subscription and mess around with how items are categorized to be able to get them on the invoices. I stock fairly low inventory levels, so if I move away from tracking any inventory via quickbooks, and track inventory in another app free app, I’d save a fair bit of cash. Again, all the stuff being shared is very helpful, not sure where you learn this stuff otherwise.
Cool! I should’ve also prefaced my methodology above that I’m incorporated as an LLC and elect to do taxes using personal forms (1040 etc).
How I do things… if I buy $500 of parts from Shimano, that gets tracked as a $500 purchase (for tax purposes) and I don’t break down each component.
Then I sell some of those parts to riderXYZ for $300 and the rest of the parts to riderABC for $400… those sales get captured as income (aka positive in the bank account).
I’d guess that organizing things nicely on a shelf may be suffcient “inventory”. Or a table in Excel could do the trick too. You’re not likely doing enough volume to make all the time entering each component into Quickbooks and then entering each item on the an invoice later worth all the mess.
When someone buys a complete bike from me, I’ll itemize the frame as a line item, the components as one line item and then any extras or shipping charges. I definitely don’t itemize each component+price on the invoice (that’s done in the design approval documents I make).
Anyway… I don’t mean to write a book on this stuff, it’s just really easy to make it more complicated than it might have to be. I hope this helps.
Hey Alex! Navigating the world of business software can be tricky, especially when you’re looking for a tailored fit. Have you considered Wave? It’s a free accounting tool that might suit your needs without the hefty price tag. If you ever find yourself needing more customized solutions or thinking about streamlining your processes, Cleveroad is an inventory management software development company worth exploring for your unique requirements. Best of luck with finding the perfect fit for your bicycle business!
I’ve read some books on lean manufacturing and try to incorporate what I can make sense of.
It’s easy to get lazy with this stuff when you just want to build bikes.
I wish we talked about it more on this forum.