By Stephanie Elsen
Imagine your warehouse full of products. Sometimes you sell the products on your shelves as they are, and other times you put several of your items together to make another item. When you do this, how do you enter that information into your accounting software? It seems like a small question. But your answer can make a big difference to your company, for a variety of reasons. The term ‘assembly’ refers to an item that is sold from inventory and built from other items. The assembly process creates the finished product from various other items (components) from your inventory.
First, be sure you have components and assemblies set up as items in your inventory. Once you have both items set up in your software, you can begin using and building assemblies. Move forward with production as necessary, and when you go to enter the information into your accounting software, simply enter the finished item or assembly into the system and it pulls all the components out of inventory. The assemblies function helps you stay profitable, efficient and accurate! Here’s how.
Know costs and increase profits.
Since you have entered your component items along with their costs, you will be able to know the cost of your finished item. Knowing your cost is the first step in controlling your cost and becoming more profitable. Some accounting systems also allow for the inclusion of labor and overhead expenses, which can help you understand complete product cost. If any of the components within your finished item seem out of line, you will be able to see it and adjust accordingly. This can help you become more profitable.
Streamline order management.
Imagine the time you will save by entering only the finished item into your accounts receivable or order entry of your accounting software, rather than entering every single component that makes up the finished item. You will save time and become more accurate in the entry of data. Some assemblies functions allow for the ability to run a production plan, and a ‘shortage report’, so you know ahead of time which components need to be ordered before production begins.
When using assemblies, a bill of materials report can keep you and your staff organized. It can include necessary information, such as the items that will be needed for the production plan, which unit of measure they are needed in, how many of that item are currently on-hand and how many are required. This way it is easier to pull the correct items from the warehouse, and to know which ones are available.
Using the assemblies function within your inventory and accounting software can help you increase profits and stay organized. Many companies still handle these function by hand which can be tedious, tiring and inaccurate. Production plans are written by hand, and there is no way of telling which components are needed and which are available.