[GNC] GNC] Question about Assemblies

[Adrien Monteleone]

On 3/22/22 8:46 AM, davidvernonlong at gmail.com wrote:
> On your points, of course GnuCash can track costs of inventory in its G/L, but when it comes to recording inventory levels to manage a manufacturing business, quantities are really needed ,either in the system , or in an external system.

As some have noted, you can possibly use one of the investment type 
accounts to fudge quantity tracking, though it of course isn't designed 
for this and doesn't work like other software in this regard. It also 
takes a little bit of mental gymnastics to grok it.

Then you would need to link the 2 systems, either automatically or 
manually. If manually then ,to move raw materials after manufacture to 
finished product, calculations would have to be done outside GnuCash to 
multiply  quantity and unit cost of each item consumed to provide total 
cost , and then manual postings to GnuCah General Ledger for total cost 
(Cr raw materials/ Dr finished goods) and the same for sales to move 
from finished inventory to cost of sales (Cr finished goods/Dr Cost of 
goods sold).

Depending on the inventory and assembly 'recipe' complexity, this can be 
done in a spreadsheet. GnuCash can import transactions, so this 
spreadsheet can create an 'import sheet' version of the final data as 
transactions to be imported - no need for manual entry.

> To make it more complicated this has to be done on as FIFO or average cost basis, depending on the jurisdiction, as particular items will be purchased many times for inventory and taken out of inventory for consumption, at different times and different quantities. An accounting system with inventory management does this for you. To do this semi manually in Excel and then use the result to make a journal to GnuCash could  be a lot of work depending on the number of transactions.

Yes, *if* it includes inventory management though GnuCash does not. But 
that doesn't mean it can't handle the accounting of inventory.

Stand-alone inventory management software will generate the necessary 
transactions according to the above considerations to import to any 
accounting package as will point of sale software.

Sometimes, all three functions (as well as Payroll, and other features) 
are shoehorned into one piece of software. Those either cost a small 
fortune, if not a hefty subscription, and/or turn out to be not so great 
at one or more of those 'modules'.

> 
> When you say "Similarly, when you make a Customer Invoice, you can pull from an Asset instead of Income", this would not be correct. The sale must still be an income account, (Cr Income/ Dr Receivables)and you would need a further  entry, the one I describe above, to calculate the cost of the inventory reduction and record cost of sales as an expense.

Correct. You're describing a Point of Sale (POS) system, another entity 
entirely. Some may have integrated G/L accounting, but not all, and the 
better systems simply offer the relevant transactions for export/import 
to real accounting software.

GnuCash's Business Features are somewhat flexible in the use cases they 
can serve, but they don't shine as a retail/manufacturing POS and are 
geared more toward 'service' type industries.

> On the maintenance of recipes , all major accounting/ERP systems designed for manufacturing have bill of materials, sometimes called recipes or formulations in process industries. Just replace no of items with litres, kg or whatever. However, GnuCash makes no pretence to be an ERP system in a manufacturing environment, and is great at what it does.
> 
> I do see though that SAGE has a Bill of Materials System:
> " Bill of Materials
> Monitor, control, and cost your manufacturing processes for businesses involved in light manufacturing assembly, helping to simplify complex process and analysis. Includes using multiple BOMs with different options for sub-assembly builds, stock, or multiple units of measure."

What you have described above is really separate software:

-General Ledger Accounting

GnuCash is this.

Other related software would handle separately:

-Payables & Receivables
-Payroll
-Investments
-Loans & Notes
-Budgeting

GnuCash includes these in some form, but maybe not full-fledged.

Then there are packages like:

-Customer Relationship Management (CRM)
-Managerial Analysis
-E-commerce
etc.

GnuCash doesn't include those at all.

And those are just the generic types. Consider that a service business 
might want to track service calls/tickets, time spent on the job, time 
spent in travel, expenses for travel and incidentals, etc. Now, we 
wouldn't think GnuCash should include all of that industry-specific 
related functionality, right?

This is analogous to the retail/manufacturing specific functions:

Purchases & Acquisitions
Inventory Management
Manufacturing & Production
Point of Sale

All separate., though interrelated, functions, that sometimes are in the 
same software package, sometimes not, and not included in GnuCash.

-----

Sage, like Intuit, saw market opportunities for interoperable software 
to handle additional functions. They may or may not be rolled into the 
same binary executable. They may well be simply tied together 'under the 
hood' but they appear as one package.

GnuCash is extensible. Perhaps someone will write inventory management 
and tie it in seamlessly one day.

Until then, the accounting part can still be handled in GnuCash.

GnuCash wasn't designed for:

Membership Clubs
Property Rentals
etc.

But as you well know, people are using it 'close enough' for their needs 
to do so. The same can be done with a small 'maker' operation or even 
product sales.


Regards,
Adrien