Overview

Consignment sale accounting involves tracking inventory and sales when goods are held by a retailer (consignee) on behalf of a supplier (consignor) until sold to a customer. The consignor retains ownership of the goods until sold, and the consignee records revenue only when a sale is made to a customer.  The selling is not transferring ownership of the item.  Instead you are selling the item for the seller, and in exchange, sellers are generally paid a commission on the sale.


Considerations


Accounting Differences:

  • No Initial Inventory Entry: The retailer (consignee) does not record the consigned goods as inventory on their balance sheet. 
  • Sales Recognition: The retailer recognizes revenue when they sell the goods to a customer. 
  • Commission/Fee: The retailer records commission or fees earned as revenue when the sale occurs. 
  • Remittance: The retailer remits payment to the consignor for the agreed-upon sale price, minus any agreed-upon fees or commission.


Keeping Track of Consigned Items - A consignment transaction usually involves accepting an item into your possession for sale on behalf of the owner of the item.  Consignment items and sales need to be tracked separately by seller (or consignor).  In MicroBiz, you can use the Vendor field to keep track of consignors.  This allows you to use a variety of vendor reports to track inventory and sales of consigned items.



Auto Generated SKUs for Consigned Items - If you exclusively sell one of a kind products sourced from consignors (such as antiques) you may consider using the Auto SKU generator functions in MicroBiz.  This is an 'all or nothing' setting.  If turned on, each new product will be created with an auto-generated SKU.  While you can always edit/overwrite the auto generated SKU, we recommend that you use this feature only if a majority of your products do not come with SKUs or IDs. 




SKU Numbering Scheme: If you do not use the auto SKU generator, be sure to use a SKU for a trade in or used item that is different than the SKU used to order a brand new item from your supplier.  You can make up a SKU, add a 'U' (for used) or create some sort of a numbering scheme (perhaps based on the date  - YYYYMMDD-1, YYYYMMDD-2, etc). 



Creating a Consigned Item


From Manage Products grid, use the New Item button to create a new product record for the consigned item.




Required fields are name, product type, SKU and price.  


Name: Enter the name that you will want to appear on the receipt.


Price: For the price field, enter the sales price as provided the consignor (seller) as the 'Price'.  


Cost: There are a few ways to handle the cost field:

  • Cost = Zero.  If you are going to manage commissions and COGS outside of MicroBiz, then enter a cost of zero.  Your gross profit will be overstated in MicroBiz, so this will need to be adjusted outside of MicroBoz. 
  • Cost = Price.  If you are going to bill and collect commissions outside of MicroBiz, then you can set the cost field equal to the price field.  That way you will not recognize any gross profit on the sale.  The negative of this cost strategy is that your margins could be negative if you discount the item without adjusting the cost.



Assign Vendor to Consigned Product:You will use the Vendor field in MicroBiz to keep track of inventory and sales by Consignor.  You can create new vendors at Catalog>Vendors.  Or you can create a new vendor on the fly in the Vendor field in the product record.



Reporting


You can use various reports to track sales and inventory by vendor



Transaction Report


Sales by Transaction

Sales by Transaction Line 


Sales Reports


Sales by Item

Sales by Category

Sales by Vendor

Sales by Salesperson


Inventory Reports


Inventory by Item

Inventory by Category

Inventory by Vendor