eCommerce sellers, large and small, now have the ability to track inventory with Seller Ledger. Until now, customers could only write off inventory as “cost of goods sold” when purchased. But no longer!
Why track inventory in Seller Ledger?
There are a number of reasons to track inventory:
- For most eCommerce sellers, the IRS requires that you do so.
- It better aligns costs with your sale.
- If done properly at the item level, it can help automate accurate stock levels (avoid stockouts,) as well as tell you how much money you make on individual orders and items.
So what does Seller Ledger offer in terms of eCommerce inventory tracking?
There are now 2 main ways to track inventory in Seller Ledger: what we call “balance-level” and “item-level” tracking.
Option 1: Balance level tracking (a.k.a. “periodic inventory”)
For those sellers who don’t want to track every item of inventory, the IRS uses a simple formula to help you calculate “cost of goods sold”:
Cost of Goods Sold = Beginning balance + Purchases – Ending balance
We’ve modeled our new inventory view after this simple formula:
Using this approach is pretty straightforward – you only have to do a few things:
- Count/estimate the cost of all of your unsold inventory once per year (or quarter, or month – you choose)
- Track purchased goods/materials for resale throughout the year
- Do some simple math (or let Seller Ledger do it for you)
Read a more detailed explanation of exactly how this works in practice.
Option 2: Item level tracking (a.k.a. “continuous inventory”)
Do you already keep a spreadsheet of all of your inventory, including how much you paid for each item? When an item sells, do you have to go back and update it? Have you tried to figure out how much money you make on each sale? If you can answer “yes” to any of these questions, then this option is for you.
While a bit more effort is required, the steps are quite simple:
- When you purchase goods for resale, categorize them as Inventory purchases
- Within each purchase, enter each item, including a unique SKU value, and the item’s cost. This process works very similar to splitting transactions.
- Alternatively, you can start from your list of sold items (the order history we’ve already imported for you) and just tell us which purchase transaction included the item sold.
If you provide Seller Ledger with this level of detail, we do a few things for you automatically when an item sells (matching first based on SKU first, then by name):
- We reduce the stock level for that item in your inventory
- We calculate and generate the cost of goods for that item
- We show you your gross profit for that order
Learn more about how to use “item level” inventory tracking.
Do I have to track inventory in Seller Ledger?
You do not. If you would prefer to just categorize inventory purchases as “cost of goods sold,” you are free to do so. But, you might want to make sure you understand the risks with that approach. We’ll be writing another post about that option soon.
How do I try this out?
Just discovering Seller Ledger? Start a 30 day free trial right now – no credit card required.
For existing customers, just log into Seller Ledger, and you will see two new changes to the website. First, on the left of your Dashboard, we have added and made visible a new “Inventory” asset account. Second, there is a new top-level navigation link for Inventory. For those who previously categorized inventory purchases as “cost of goods sold,” you can elect to switch to properly tracking inventory. We explain more about how that works here.
Is there an additional charge for tracking inventory in Seller Ledger?
No – this feature is available to all customers at no additional charge. Unlike other accounting/bookkeeping platforms, we think even the smallest sellers should be able to see how much money they make on each item and keep on top of their inventory stock levels.
Please tell us what you think
This is a pretty big release, and represents weeks of work and planning. It’s also something we never got to tackle with Outright/GoDaddy Bookkeeping. As such, we’d love to hear from you as you try this new functionality – the good, the bad and the ugly.
Thanks from the Seller Ledger Team