Podcast WSW - Advanced Inventory Features - FIFO & Landed Cost
===
[00:00:00] [00:00:30]
[00:00:38] Introduction and Guest Introduction
---
[00:00:38] Dan DeLong: Welcome to another Workshop Wednesday brought to you by the School of Bookkeeping dot com. Helping you be the best bookkeeper that you can be, because Workshop Wednesdays is all about casual conversations for serious workflows. And again, you'll notice that Rachel has some explaining to do. No, Rachel couldn't be here [00:01:00] today.
Instead of us tag teaming on Shawn, it's just going to be me and Shawn talking here, but Shawn, go ahead and introduce yourself for those that don't want to call or remember who you are and why you're here.
[00:01:13] Shawn Coultice: Yeah. Thanks for having me again, Dan. My name is Shawn Coultice I'm the head of channel partnerships at Katana fit in the manufacturing and inventory space for Over 15 years helping implement and get solutions set up.
And, [00:01:30] and somewhat of a product expert around Katana.
[00:01:33] Overview of Inventory Management Solutions
---
[00:01:33] Shawn Coultice: And so hopefully we can chat a little bit about some of the aspects of its solution today and how it compares to QuickBooks enterprise and what the differences are.
[00:01:44] Dan DeLong: So this is a, this is part of our ongoing series of comparing a QuickBooks enterprise, the advanced inventory functions of the desktop product for for someone or some business that might be [00:02:00] considering this, Migration to the cloud.
And whether or not those workflows will translate well to, to the, to a cloud based inventory management solution. And so that's why I really appreciate Shawn joining us here to so that we can really have that side by side comparison. So we've talked about In prior prior sessions or prior workshops, the multiple inventory locations, [00:02:30] knowing where your inventory is at any given time.
And then last time we talked about the traceability aspect of lot numbers and, serial numbers with, expiration dates. And today, we're going to be talking about.
[00:02:46] Challenges in Cost Calculation
---
[00:02:46] Dan DeLong: Costs costing and in the various different, methods that, that in, in general, as far as accounting is concerned [00:03:00] about the calculation of, those costs.
And I think the biggest, I'm trying to think of the, term or the biggest challenge, I think that a lot of businesses and accounting professionals alike have with regards to, cost calculation is the cost of goods sold when that happens. That was, it was often a [00:03:30] misunderstanding is the nicest way to to talk about,
[00:03:35] Shawn Coultice: are you saying that people have it wrong, Dan?
[00:03:40] Dan DeLong: Not necessarily that they have it wrong. They just have a, misunderstanding of, when things occur, right? With dealing with with their inventory, right? Most, fundamental term or is the cost of goods sold or the [00:04:00] cogs, that that is recognized and when that is recognized.
And and I think the easiest way that a lot of people had That challenge is, they're going out and they're buying products to sell. They want to recognize that expense. And, in, in, in they'll, associate that purchase to cost of goods sold at that time, which [00:04:30] tends to.
Make things a little wonky. I think that's the technical term for it. When, you're looking at that on, your profit and loss, right? So if you go out and you buy, thousands of dollars worth of merchandise with, which to sell, and you recognize all of that as a cost of goods sold at that time, your profit and loss is now upside down.
Like it's going to take a long [00:05:00] period of time to even get to that break even point where the revenue is going to overtake that cost of goods sold. And I think a lot of, people in that are using a general ledger accounting software or tracking their inventory management will potentially put all that front loaded stuff up front and then wonder.
It makes it really challenging for someone to, to [00:05:30] see when am I going to, break even because I've front loaded my cost of goods sold by, by doing that at that, moment. As we had talked about with Rachel and yourself and various other discussions that we've had, that's a.
That's, more of a, not tracking inventory, at all, where you're just accounting for that, where, as opposed to a periodic or [00:06:00] perpetual inventory model where you're tracking the comings and goings of your, inventory levels at any given time is going to. Be a better solution for that cost of goods sold calculation and the way that I would explain it to folks is that cost of goods sold is cost of goods when it's sold, not because it's going to be sold and in that, that that [00:06:30] tended to.
Make things a little bit more understandable for those that were just putting all that those, inventory purchases into cost of goods sold at the time that they purchased them. So that is like the framework. So here, you're. You're tracking your inventory comings and goings in a perpetual state, and then it comes down to how am I going to account for those costs of [00:07:00] goods when I sell them?
And there's a variety of, methods. to tracking that. And I found this article that I'm going to share here real quickly. It's actually on the firm of the future or the QuickBooks blog from two years ago, which is still holds true today, right?
[00:07:21] Methods of Cost Calculation
---
[00:07:21] Dan DeLong: So there's inventory the article, title is inventory valuation for costing methods.
And, [00:07:30] there actually are four methods of costing. Cost calculation and they all have pros and cons to that. So we're going to, we're going to talk a little bit about that here and I'll share this share this article so that you can, review it at another time. But there are four main methods of cost calculation, First in, first out, which is which is a term that I, [00:08:00] I remember hearing during my first job, when I was 15 years old at Burger King, right?
Because, and this really talks to why you do these things, because especially when you're dealing with food or something that's going to expire, you want the first in the first, some, something that came in first or something that's prepared first to be the first that is, so you don't want [00:08:30] a a day old whopper.
Unless you like stomach illness, I guess that would be, you wouldn't want to, you wouldn't want to have that. Be the last thing that you or the first thing that you eat when it's the last thing that was prepared. So first in first out is a cost calculation that is utilized.
And they have this really nice thing. Is it, right for my [00:09:00] business? And they talk about those, types of industries where food beverages, cosmetics, pharmaceuticals, FIFO is, the right inventory valuation method. And then the opposite of that is
[00:09:15] Shawn Coultice: on that day. Just a quick note.
I just think it's interesting that you're costing methodology. Is driven by an operational requirement, right? And saying that it's nothing to do with the value of the actual products and there's [00:09:30] no financial sort of implication other than, I think it had mentioned that your taxes might be a little bit higher, but you're you're doing it to meet industry compliance from, like a tracking and traceability perspective which, I think kind are two separate things.
If the functionality is available. So just an interesting point to yeah,
[00:09:57] Dan DeLong: exactly. And the, one of the things [00:10:00] is I was perusing this article is that there is a difference between cost calculation as far as what shows up on my profit and loss. And inventory evaluation and this article is riddled with, blurring those lines.
And this is when I wish Rachel would have been joining us because she might have added that, accountant, mindset of, [00:10:30] where that line actually is drawn because there's. There is a program functionality that's tied to. These methods and they that may or may not be what the accountant wants to see on either their financial report for running an inventory evaluation report or looking at what the.
What do I have on hand versus what is the, in [00:11:00] the expense of such thing, right? The whole purpose of doing a perpetual inventory of managing the, comings and goings of your, inventory stock level is to
Have a little bit more of a real time aspect of as sales purchases happen and the sales happen. What is what is the effect on the bottom line? And being able to have a [00:11:30] better window or insight into how things are going and being able to make business decisions based on those reports.
[00:11:38] Katana's Approach to Cost Calculation
---
[00:11:38] Dan DeLong: Now, Shawn, is that what where, Katana can help with these types of things?
[00:11:45] Shawn Coultice: Yeah, absolutely. So when you look at, so I across my career, I've worked with companies that, that typically operate in two environments. Most of the clients or customers I've worked with are [00:12:00] manufacturers. And so they'll, often use standard costing, and that's usually going to be for larger enterprise organizations that want to track variances, but have a standardized costs because it helps them forecast and plan out more effectively.
And then they work off their variances and then you have average costing. And that's where SMB midsize businesses typically would want to operate if they're manufacturing or buying and selling and that's [00:12:30] allows you to. Average out the cost of products that you currently have in stock so that you understand your profitability.
It's a much more accurate visual into your profitability on a sale by sale basis. So you really understand overall how my business is doing. And then individually it can help it. You have that detail level understanding of how profitable you might be. And [00:13:00] then it's a separate system in Katana to track that FIFO.
So for example, our batch tracking capability, operates in FIFO. But, it can also operate in expiration date prioritization. I would rather, even if something is in first, I'd rather, so we have two products, one expiration date is before the other. I would prioritize the distribution based on the one that is closer to the expiration date, rather than.
What was [00:13:30] in first or not in first. So the functionality is built to meet that compliance standard, but also optimize how you're distributing that inventory. So you reduce spoilage. And so those are the things that are taken into consideration and Katana to support the operational side of the business, meeting that compliance standard.
[00:13:48] Dan DeLong: And as we'll uncover in the QuickBooks side of things, this will help with making of those business decisions so that and, you've seen it at the, grocery [00:14:00] store manager special, it's typically a method that they use when something is getting dangerously close to that expiration date, because they don't want to have that sitting on that On the shelf.
Certainly they don't want to sell an expired, package of meat. And they certainly don't want to throw it away unsold. So there's all sorts of things that that will help guide [00:14:30] them on that. On that aspect, but life O is is the opposite of FIFO. It's last in first out.
And these these, this is typically right for a business where they're purchasing low volumes of inventory, but at a higher value. But all of these things are going to have an impact on the. The profit and loss, whereas you know what they're saying about FIFO, it doesn't accurately show the cost [00:15:00] because there is some lag, especially if you're if your costs are increasing, because typically that's what's happening in the, world.
These cases that costs are going up. And so it will take some time before. The lower cost items actually are sold to show that accurate level of, of, the inventory being sold FIFO has the opposite problem where. I'm sorry, LIFO has [00:15:30] the opposite problem where as if, those costs are going up those, higher cost items are going to be recognized as the cost of goods sold entry as opposed to the FIFO.
So you have the opposite problem. Your costs are heavy because it's last in first out. And, and then we have this in the middle option of this weighted average cost valuation, where [00:16:00] it takes. The average of those, types of things and spreads them out over, over time. So that is it's like the happy medium of trying to find the right cost calculation method and, QuickBooks desktop has always been weighted average and and Katana works funk in essence the same way.
But as you alluded to, there might be other ways [00:16:30] to accurately. Fix those costs in Katana?
[00:16:35] Shawn Coultice: The costs in Katana are, it's a moving average cost, and what that means is Every new piece of inventory I add into my my inventory will, you'll be against my weighted average of the cost that's already in stock and recalculate that, that moving average cost.
As I consume and take inventory out, [00:17:00] it will always apply. that moving average cost to that inventory. And so what that does is it helps avoid significant, changes in your cost. As you might have, especially in a manufacturing environment, maybe you had a machine breakdown and your operational cost was a lot higher on an individual project or, run.
But you have a bunch in stock that's ran at the regular [00:17:30] rate. You wouldn't have all that cost. associated to that in a FIFO environment or LIFO to one individual sales order, it's going to be averaged out over the total amount that's in stock. And so it helps level out your cost.
And, in my opinion, you have a bit more of an accurate idea of profitability. Across the organization.
[00:17:54] Dan DeLong: Yeah, that's a good, that's a good point.
[00:17:59] QuickBooks Cost Calculation Options
---
[00:17:59] Dan DeLong: The, pros [00:18:00] and cons of, these first in, first out, or last in, first out, or smoothed out, by using this this weighted average method now QuickBooks online, if you're using QuickBooks online as your inventory management.
Solution, which we've talked about ad nauseum that that's only going to be like the reseller, type of situation where I buy stuff and I sell that very same stuff. It will. Only use [00:18:30] first in first out. So you only have that, option, with QuickBooks online, which then leads to if I'm transitioning from desktop pro, which was weighted average to QuickBooks online, which is now FIFO.
I got to tell somebody about that. And that that's typically the government, right? And then there's some compliance issues and things like that, because now that [00:19:00] that we're talking about this, it's okay, first in, first out is going to recognize, the, slow is going to be a little slower and in recognizing higher costs on the cost of goods sold, where.
Weighted average, weighted, I'm getting choked up about all this.
Which is weighted average is going to have this be, a little bit [00:19:30] higher on those on those costs, right? That's going, you can't just change that midstream, especially mid year. You got it. Work with your accounting professional to make sure that you're, in compliance of all of those things.
And then the last, I really didn't realize that there was a fourth option until I read this article. But this is specific inventory valuation method. Basically you're calculating costs on a per [00:20:00] item basis which is going to be extremely rare, but this is really for only, Limited types of goods, which is suited for valuing rare high value goods, which in which the differentiation is necessary.
So I'm thinking like cars, art, jewelry those types of things where they have a high value associated with it. And From one to the other is going to be a specific [00:20:30] you want to track that particular cost of that particular item, through its life cycle of purchase, manufacturing, receiving, and and sales.
Those are the cost calculation methods and certainly read about that as we've shared the article here. But how does this all equate to QuickBooks and or Katana, right? So in, [00:21:00] in QuickBooks desktop, you have the choice of first in first out or weighted average when you're using enterprise.
So I'm going to just choose go into the preferences here. And just illustrate where that actually is. There's a FIFO tab here in the advanced inventory, settings. This actually is fairly unique in that it's, just a check box, which sounds harmless enough. [00:21:30] You can just check check this off and then you can put the date of calculation.
And then what QuickBooks will do is it will re recost allocate all of your inventory items. from that date from going from weighted average to FIFO or back again, right? So this is not a check mark to be taken lightly. Especially if you have a lot of transactional information for [00:22:00] all of these transactions coming in and shipping and receiving and and selling.
[00:22:07] FIFO and Inventory Aging Reports in QuickBooks
---
[00:22:07] Dan DeLong: These things, it's going to take some time for QuickBooks to do this recap, recalculation method, but one of the things that, that FIFO that this FIFO unlocks by turning it on is, An inventory aging report, right? By running this this report, you can go [00:22:30] inventory and inventory aging summary.
Apparently there's nothing aging here. It's a sample company. This will list every every inventory item, the average days in stock that it has, and just like a valuation, I'm sorry, just like an AR aging where it's Got a date range of 1 to 30, 30 to [00:23:00] 31 to 60 and so on and so forth. You can see the value of your inventory and how long it's been sitting on the shelf so that you can start to make decisions based off of that.
If you're using weighted average, this report doesn't even exist. So you have to have FIFO turned on inside of QuickBooks enterprise in order to even have. functionality in this report. So you're not going to glean these insights if you don't have first in, first out [00:23:30] turned off. So there is there is that.
And then you were mentioning Shawn in in Katana, we'll just turn on your screen there in Katana. These these things are all weighted average as far as The, cost calculation, but you have this traceability aspect that can use specific costs for various [00:24:00] manufacturing runs and itemized sales.
[00:24:03] Shawn Coultice: The costs themselves are still always going to be weighted, but the batch that is applied to the order. will be, recommended to be taken out of stock based on the expiration date. So essentially you're following that, that FIFO methodology from a operational [00:24:30] perspective, right? So your FIFO first in first out.
From making or receiving goods to making sure you're not having old stock being pushed to the back of the shelf, essentially. It's always going to be grabbing that the oldest stuff and shipping that out.
[00:24:47] Batch Tracking and Costing Methodology
---
[00:24:47] Shawn Coultice: So you're, constantly turning over your inventory appropriately. So Katana is going to help that when you turn on batch tracking.
But from a costing methodology perspective, it's still going to be using moving [00:25:00] average costs to calculate the cost of that good. So for that individual skew or, product when you have that in stock, the system is going to you maybe have five batches in stock, it will pick the batch that is oldest, and it will apply a cost which is averaged across all five of those batches.
[00:25:23] Dan DeLong: Got it.
[00:25:25] Managing Expiration Dates and Inventory Decisions
---
[00:25:25] Dan DeLong: So as it won't necessarily associate the cost of that particular [00:25:30] batch when you sell it, it it helps make those decisions based off of upcoming expiration or dates associated with that. So you don't fall into that. Oh, I have to create a manager special or deeply discount deeply discount this item.
Or. spoil it throw it away because it has actually expired. So in regard of the cost, it's always going to be weighted average. [00:26:00] As far as the cost of that sale that, that occurred, it's just, helping the business owner make better decisions of which, which ones should actually be part of this, of the sales.
All right.
[00:26:15] Shawn Coultice: You got it. Exactly. So if you were to look in for example, when I turn on in my settings here I turn on in traceability, I think it's called, integrations, [00:26:30] clear,
maybe barcoding
anyways, I can't remember exactly, but when you turn on, you'll have
[00:26:42] Dan DeLong: to watch, you'll have to watch the previous workshop where we talked about, Traceability of where that actually is.
[00:26:49] Shawn Coultice: Yeah. But, once you have that turned on, I'm sure it's in here somewhere. And I'm just not, my eyes are probably not seeing it, but sorry.
So, if I were to go down into my [00:27:00] stock screen and I look at my batches, okay. So I have these batches set up in the system and I have this expiration date and created dates. Okay. So these dates are going to be referenced when you go and pick your milk, it's going to go and pick the milk that first it's going to look at the expiration date.
What is the closest expiration date for the batch that you're picking? And then the next is going to look, if that is blank, you don't have an expiration date. It's going to look at the [00:27:30] created date and it's going to find the the product that is oldest. So where that batch was created in the system from either a purchase order or manufacturing order, it's going to find the oldest one for you to go and pick and fulfill that order.
[00:27:46] Dan DeLong: Got it.
[00:27:47] Introduction to Landed Costs
---
[00:27:47] Dan DeLong: So the other aspect of the, cost calculation or is dealing with landed costs. Can you talk a little bit about what. What that is, let's define [00:28:00] that first before we go into the, minutia of of what the, what these programs offer as far as that option.
[00:28:09] Shawn Coultice: Yeah. And I think I'll just open up a PO to help explain that.
So here's a purchase order. Okay. For our paint supplier here, I've got brown paint and black paint that I'm purchasing. I've got just over 71 liters here and one liter here, and I've got a unit price across each one of these. But I had some additional costs in pulling [00:28:30] in, and actually receiving in that product that aren't relative necessarily to the individual line items that I'm buying.
It's a separate cost, but I need that cost included. In my line items to have an accurate cost of goods sold and an accurate moving average cost in Katana. And so what we're going to do or what the system does is you have a distribution method. So I'm going to distribute this by value. So it's [00:29:00] looking at the dollar value, of, the goods per unit.
And it's dividing that up and applying this a hundred dollars across those units. And so based on that information, I go from a unit price of 8 per liter to 9 and 38 cents per liter. And we're mixing metric and Imperial with the US dollar and Canadian measurements. But but anyways, [00:29:30] I'm pretty sure you guys don't buy paint in liters in Canada.
We do. So anyways, so you have 8 here, but it actually is going to be. Put into my inventory. At 9 and 38 cents. Same with this black paint, which was 7 cents is now 7 and 16 cents. And so that's the The actual cost that goes into my inventory is my purchase price plus any additional costs [00:30:00] equals my landed cost.
[00:30:02] Applying Landed Costs in Katana
---
[00:30:02] Dan DeLong: Now with with Katana in setting up the landed costs, is that just a check Mark? Is there, what kind of preferences does that does that entail when, you're actually calculating the, landed costs? Is there, any options of how to spread that, across, or is it just built [00:30:30] in where it's going to take the two different items, split that cost based off proportionately off those two different items and the number of quantities, that are, in there.
[00:30:44] Shawn Coultice: Yeah, so you do have the ability to select like non distributed and then you can manually apply it. Across the two or whatever items you have, if there are multiple items on the PO, most businesses are going to do it by value just [00:31:00] because at the end of the day, it's it's usually the most accurate.
So let's say you're shipping a container and you're receiving that container and the, items that are more valuable will. They should take up more of the cost to ship that thing. But you can think of maybe if I'm shipping marshmallows, which are cheap, but take up a lot of room in a container.
And then I've got gold, which is going to take up a small amount of time within the container, but it's expensive. Maybe that's a situation. If you're [00:31:30] shipping marshmallows and gold, you wouldn't want to do it by value because the marshmallows take up a lot more of that container and that's why you had to pay more for shipping.
[00:31:38] Dan DeLong: But what if you're selling golden marshmallows?
[00:31:42] Shawn Coultice: Golden marshmallows. We might be onto something, but for the most part I think by value, there's a couple of different methods that, that, and we did look at adding them, but we felt like. When we were working with the product team and our customers we've got 1500 [00:32:00] customers and we talked to not all of them, but a lot of them about adding in this feature.
And, one of the things that we realized is you need to make it easy so that people can be compliant. So if you go and start messing around with people, having to do it manually, or there's a couple other methods to doing it the compliance goes down. And then you're not using it and you're actual not receiving your, [00:32:30] products with the appropriate landed costs.
And then therefore you think you're more profitable than you are. But on an order by order basis. And so that's where by value just seems to be the easiest way to have it applied automatically.
[00:32:44] Comparing Katana and QuickBooks
---
[00:32:44] Dan DeLong: And to what I'm gathering from what you're showing me here is that, is going to be calculated on the transaction on the bill or the receiving, based [00:33:00] as you need it.
That's one of the things that I'm seeing that is glaringly different between how this is handled in, inside of QuickBooks Enterprise versus versus Katana. Is that, pretty much the, That's exactly
[00:33:17] Shawn Coultice: true. Yeah. So if I was to go and create like a new PO here, okay. So I've got my PO and let's say I'm going to buy some more paint, right?
From a paint supplier. And I've got, it's already telling me along the bottom here, [00:33:30] I've got some items that I could go and buy from this paint supplier because you're short on them. Oh, let's go and let's go and have those to my order. In this case, it's Brown paint and beige paint. Now I don't, maybe I'm buying this from the guy next door and there's no additional costs.
I don't need to go and apply additional landed costs to this. But if there were, I would just hit this additional cost button and then I can go and apply those. And so that would then, when I receive it in be allocated to my [00:34:00] inventory, value in Katana, but actually in QuickBooks, when we send that over, if it's associated with the bill and that supplier, That would just go over as an expense because it's not something that, you're valuing in your inventory from a financial perspective.
So it goes into Katana and will be associated to your cost of goods sold, but it already gets expensed actually on your PO.
[00:34:27] Dan DeLong: Got it. So let's [00:34:30] let's switch these around here so I can name. Yes, I can do that. That's good. So here's here's QuickBooks. We go into the advanced inventory settings again.
Again, it seems harmless enough the landed cost tab. You would just really be setting up that landed cost. First you got to sign in. And then once you do that, you have, [00:35:00] you can use an existing account, right? So you're, going to be choosing basically a holding account for all of those.
Those costs that you're going to be allocating and then doing it later. So that's, a big difference between what you're showing in, in, in Katana versus what we have as far as in, in QuickBooks enterprise, but you're going to be specifying an account and you're going to be specifying the account type, which is typically [00:35:30] another current asset to, to put all of these these costs that you're going to be allocating into a holding bin and they recommend.
Other current asset due to feedback, people wanted to put it in a cost of goods sold account. So this is where you have that. This is what I want to see. And this is what my accountant says I should put it in. Are two different things. And then once you've specified and walk through this, [00:36:00] process, then all of the bills that are associated with those with that item, Or with that account we'll put that into that holding bin.
And then the next thing that you're going to be doing is, I don't know if I turned it on or not. Oh yeah. So you do have a feature or a function from the inventory menu to calculate landed costs, and you're going to be doing that [00:36:30] after after the fact. So rather than doing it on the bill itself, where you have, those other expenditures it's going to go into that holding bin at that time.
And then later you're going to go in and, calculate the, landed cost of those items and spread those fees. And you have the choice of to do it proportionally based off of the the items [00:37:00] that were received or the Value in, in, your, example there of spreading that cost how you want to spread that cost across those bills and those items.
But the main point is that those items aren't going to be, that, that cost isn't going to be calculated until you've gone through this process of Of calculating the landed cost [00:37:30] and spreading that out. So to your point, that may not happen until they realize, oh, this wasn't calculated properly.
And then they have to go back and do that, which will then alter alter other financial reports based off of that, that cost calculation. Is that what what Katana has realized is that. Yeah, if they're not doing it and they have to [00:38:00] do it later they fall out of practice, right?
[00:38:04] Shawn Coultice: Exactly.
One of the things that was pretty common is there were other solutions that we looked at in the market. And there was just a lot of complaints around the complexity of actually utilizing the landed costed feature. And so one of the things that, and with anything in Katana, we want to highlight is ease of use.
And so the ability to apply the landed costs associated to a certain purchase order, have [00:38:30] that divided up over the value of your inventory just seems appropriate. And then we can, we'll continue to build out on that.
[00:38:40] Advanced Landed Cost Scenarios
---
[00:38:40] Shawn Coultice: One of the things that we're looking at doing is the ability to create a purchase order because sometimes you would for example, you might have a bill come in that should be applied to multiple purchase orders, right?
So you have a container load that [00:39:00] contains maybe a dozen purchase orders from China. And now you want to take, a that container load cost duties, whatever you've, incurred put that into a PO and then land that cost across all 12 of those purchase orders. So that would be an example of something that we're, working on building out in Katana.
We'll come out next year, but that's a more advanced [00:39:30] landed cost situation. 90 percent of use cases can be handled. Directly within Katana, with the feature that we released and it just makes it a lot easier to be compliant
[00:39:43] Dan DeLong: now with I just want to make sure I'm clear and understanding the Katana functionality that, as soon as you put a, another cost on a purchase order receiving document, it automatically [00:40:00] will, give you that choice of calculating the landed cost at that time.
[00:40:05] Shawn Coultice: Yeah, exactly. When you put in that P yes, so it, by default we'll say, by value essentially. So it essentially cause you're assuming, I guess the assumption was someone's adding a landed cost to a purchase order, they probably want to land that cost across the line items that are on that purchase order.
And so it does that automatically, but if for whatever reason [00:40:30] you didn't want that additional cost actually associated to the individual line items. You can turn that by value off and then it won't be applied to the individual line items, but you will have that additional landed costs still sitting on the PO.
[00:40:45] Dan DeLong: Gotcha. And what you were just talking about is that if they're, if it's not at the time of when they purchase it, like it comes through later, like a, a shipping, a shipping bill comes in as [00:41:00] not part of the, that, that, that. use cases is being worked on. We could,
[00:41:08] Shawn Coultice: sorry, I didn't mean to cut you off, but we can do that today.
Like you could, if it's relative to that individual PO, I can go in and add that amount of costs to, excuse me, that individual purchase order. That's no problem. It's the situation where you're trying to land that crop, that cost across multiple purchase orders. That's where [00:41:30] it gets a little bit trickier because you can see we're, operating on the individual purchase order level where I'm putting in that landing cost.
So that is a little bit of a limitation today. Really only applicable from what use cases we've seen is when you're you're ordering container loads from China, which have multiple POs associated to them and you've got one shipping cost.
[00:41:53] Dan DeLong: Okay.
[00:41:54] Conclusion and Upcoming Topics
---
[00:41:54] Dan DeLong: I appreciate you you joining here, joining us here and.
Taking a high [00:42:00] level deep dive into some of these, some of this functionality. So next week we're, going to be, all of us are going to be off because we're going to be at a, into a connect and seeing each other in person, which will be, which would be really cool. So We'll skip over next week while we replay during that time period, for those of you not attending Intuit Connect next week.
And then after that, we'll, talk in a little bit about [00:42:30] building assemblies and, those types of things with Shawn. So hopefully you join us join us next time on the workshop Wednesday and we appreciate you joining us. Any closing thoughts Shawn?
[00:42:42] Shawn Coultice: No, I think the costing methodologies between the two systems.
One thing that I think is just It's worthwhile mentioning, Dan, QuickBooks Online operates, like you said, in, FIFO. Katana integrates with QuickBooks Online and operates in moving average [00:43:00] cost. So one of the common questions we get is what costing methodology are you using then? So I just, I know you wanted to wrap it up, but quick question, quick note, because Katana operates is moving average costs and we're pushing over that cost value of inventory to QuickBooks online that enables you to operate in moving average costs or weighted average costs.
So in that scenario, that's what happens,
[00:43:24] Dan DeLong: right? Because you're not even tracking the comings and goings of your inventory. Items [00:43:30] in, in QuickBooks Online at all, you're doing that all in Katana and that is just telling QuickBooks the financial impact of the, of those comings and goings from Katana into, QuickBooks, right?
[00:43:43] Shawn Coultice: You got it. Exactly. Thank you, Dan. I didn't mean to,
[00:43:46] Dan DeLong: No, that's a, that's an important important distinction to, to point out is that if QuickBooks online is only going to do it this way that's, certainly a valid point. We want to make sure that [00:44:00] this is covered because they are talking in two different languages.
All we'll see you next time on the workshop Wednesday and we hope everybody has a great day.
[00:44:30] [00:45:00]
