Purchasing & the Three-Way Match: Effortless Purchasing, Clean Records, Seamless Reordering

0:12 Brittany Brown

Just to remind you, there was an additional webinar that happened before and there will be another one that comes after. And because of the benefits of a three-part webinar, we get to get deeper into things than we otherwise would have.

And so if you did not have a chance to see the first webinar, I invite you to go back and find it, and make sure that you've set aside the time for the third one. We'll be going into a little bit of detail of when that will be at the end of this webinar. But if you're registered for one, just so you know, you're registered for all.

0:47 Brittany Brown

So let's get into the webinar today. This is about purchasing and the three-way match. We're going to be talking about how to make your purchasing more effortless, how to maintain better and clean records, and how to really get into some seamless ordering.

0:55 Brittany Brown

One of the things that I'm a big fan of about Finale, that we're not necessarily going to have time to touch on in this particular webinar, is the way that Finale also helps purchasing from the perspective of forecasting. So basically they have a way that they track the velocity of what's happening with the sales, and when you put in the details about your reorder points and stuff like that, it'll give you an idea of when you should be reordering. But if the velocity of your sales changes, meaning the rate at which those sales are happening changes, it will actually notify you that you probably need to consider reordering on a different cadence than what you were planning on before.

1:29 Brittany Brown

So let's introduce our speakers for today.

Karlie Lester is our Inventory Solution Supervisor here at LedgerGurus, one of the sharpest inventory people I have ever known. I'm Brittany Brown, the CEO of LedgerGurus.

1:41 Brittany Brown

And today we're also going to be introducing to this particular webinar series John McCoy, who is a Customer Relationship Manager at Finale and also an absolute whiz with reporting behind the scenes. So he's been wonderfully helpful to us and our clients in helping create some custom reports.

One of the things that Tamara in particular has said about him is, if there's data to be had in some sort of way and it seems impossible, hand it to John and he will find a way.

2:08 Brittany Brown

And then also we're going to have Tamara Miller, the Director of Sales and Strategic Accounts here at Finale Inventory.

So as you can see, we have a great lineup today. We're really excited to have you guys here with us. We put a lot of time and effort into trying to plan something that would be informational and motivational and educational really.

2:27 Brittany Brown

So let's move on to who you are. Now that you know a little bit about who we are, we'd love to know a little bit about who you are. We're going to have a poll question that comes up for just a moment. Please engage in this relatively quickly, because we don't want to take all the time to go through this. We just want to understand a little bit about what's going on.

2:47 Brittany Brown

So the question is, what pitfalls have you experienced with purchasing? And this will apply whether you are purchasing in a system like Finale, or whether you are trying to do all of this by hand, just working directly with your vendors. Anybody who has any inventory needs whatsoever obviously has to engage in this purchasing process of some kind.

3:09 Brittany Brown

For me, I have a product business as well. The issue that we have the most, that I'm sure you guys relate with as well, is forecasting. Forecasting tends to just be a huge issue. We just don't have a crystal ball. And so we can make our best guesses about things, but at the end of the day we just don't know. And so the more help you can get around forecasting, whether it's understanding previous trends, whether it's understanding where the market's going.

3:38 Brittany Brown

Thank you for engaging with the poll question. We really appreciate that. Kelley, I don't know if we get to see results of that poll, or if we just, here we go. Great, thank you.

3:47 Brittany Brown

So, disorganisation and miscommunication. Yes, I completely agree with this. Mismatched information, lack of approvals, lack of spending controls. Yeah, I think we all feel the pain on this. So thanks for letting us see that.

4:03 Brittany Brown

So just a little bit about LedgerGurus before we get going. LedgerGurus is an ecommerce focused accounting firm. We really go deep on the things that you would expect an accounting firm around ecommerce to go deep on. We go really deep on inventory. We go really deep on channel reporting. We go really deep on sales tax.

Our goal is to help our clients be more successful because they worked with us. It's part of our mission statement. And we're really trying to help our clients become more effective, more efficient, more profit-driven organisations.

4:33 Brittany Brown

So a little bit about Finale. I'm going to turn it over to Tamara to talk about Finale.

4:38 Tamara Miller

Thanks so much, Brittany. So Finale Inventory is an operational tool, and we were designed to help our clients eliminate inventory chaos.

We've actually helped thousands of businesses take control of their stock and really have the ability to streamline their operations, so that they have that ability to scale and grow. We primarily work with ecommerce businesses, and we try to give them the power to grow without inventory and operations slowing them down. With tons of automation, real-time visibility, which happens to also include free hands-on training and support.

Back over to you.

5:17 Brittany Brown

Yeah, so let's talk a little bit about the agenda, what we're going to be seeing today.

So we're going to be talking about purchasing frustration, the purchasing cycle, manual matching pitfalls, what a three-way match is.

5:30 Brittany Brown

So I remember when I first started getting into inventory, I actually probably heard this term for the first time from Scott Scharf, who I just noticed is on our webinar today, and called out my Dr Pepper situation. I will have you know I've been off Dr Pepper for a month. It has been, against my better judgment. I'm not feeling well right now, and what I wouldn't give for Dr Pepper right now. I would literally kill for it.

5:54 Brittany Brown

So Scott is the one who first introduced this idea of a three-way match to me, and I had no idea. So if this is a new concept for you guys, I'm not going to steal the thunder right now by going into it, but it's an incredibly important concept when it comes to both inventory management as well as protecting your assets. The benefits of what a three-way match is, and how having a tool like Finale helps to facilitate this in a much more meaningful way.

6:22 Brittany Brown

So let's jump off and get going on this webinar. I believe I'm passing it over to Karlie to introduce these concepts for us around purchasing frustration.

6:22 Purchasing frustrations

Karlie Lester

Yes. So we have a lot of clients come to LedgerGurus, and their main pain point usually is around inventory. And a lot of times that is around purchasing, because that's how we get our inventory in the first place.

6:44 Karlie Lester

And so they'll ask us stuff like, I just don't know what to order, and I don't know how much to order. I don't know what's on order. Where am I ordering? Did I get the right thing? Have I received it all? When am I going to receive it all? So they ask us all these questions.

6:58 Karlie Lester

As we talked about in our first webinar, inventory accounting is based on operations. So the stronger their processes and operations are, the better, more accurate, more reliable we can do the financials.

7:12 Karlie Lester

So when they come to us and they're talking inventory and they have these frustrations, we pause right there and we say, hey, let's talk about your purchasing process, your operational processes. And we stop there before we even go into the accounting, to make sure they have those processes in place, and guide them in maybe how they can develop those processes, so we can even go into the accounting portion.

7:43 Karlie Lester

So that is where we are as far as remembering the operations. Good operations create good and accurate, reliable financials. So we do stop with our clients first and talk about the purchasing processes.

7:49 Karlie Lester

And I think I'm pushing it off to Tamara to tell us what that process should look like, that standard purchasing process.

8:00 The standard purchasing process

Tamara Miller

Thanks so much, Karlie. And yeah, I think that we all share in that same common goal. Whenever we have clients who come to us, we actually always start with the beginning of their supply chain process, because everything else rolls downhill.

8:18 Tamara Miller

And so the goal of the purchasing process is really simple. You just want to make sure that you know exactly what you've ordered against what you've received, so that you can pay the right amount for it. And it's also about keeping your business operations clean and efficient.

So the purchase order actually starts the beginning of that purchasing process, and it outlines exactly what you're ordering from your supplier.

8:42 Tamara Miller

Now, one of the things that I myself commonly will tell a business is that I know that it can be really tempting at times to just simply send a quick email and say, hey, I need more of this particular stock. But here's the problem. It's really difficult to track what's been ordered and when it should arrive without a proper purchase order.

9:05 Tamara Miller

So it's also not scalable, because if you are in that place where your business is growing and you're already feeling some of those pain points, you want to be able to have a purchase order, so that it's not only going to serve as an order acknowledgement, but it's also about accountability. Because it's going to ensure that there is no confusion, because you and your supplier are essentially working from the same list.

9:32 Tamara Miller

And in doing so it keeps everything clean from the beginning, and that really allows you to predict your arrival dates, which we commonly refer to as your ETA, estimated date of arrival, so that you know when inventory is going to be coming, or when you're going to have a shipment, so that you can plan for inventory better.

9:52 Tamara Miller

Now when your shipment arrives, you want to be able to check that receipt against what you've actually ordered. And if you skip that step, you may end up with a plethora of issues, whether it be a mixture of items, some you ordered, some you didn't, short shipments, and even damages that you weren't even aware of.

10:10 Tamara Miller

And also, when comparing that shipping receipt against that purchase order, it really allows you to ensure that you're being billed correctly. And that's really important. So I'm going to say that again. You want to make sure that you're being billed correctly, and only for the items that you've not only received, but also ordered.

10:31 Tamara Miller

I can't tell you how many times there's an imbalance in the system because the purchase order is not actually matching what has been received. And sometimes when we're trying to track these and we don't have a formalised process, you can essentially receive some goods and receive a bill for it, and it's not even what you ordered in its totality.

10:55 Tamara Miller

So when you get to that step of actually making that payment itself on the back end, you want to make sure that you're confident that you're paying only for what you've been billed correctly for, which is also what you have received, and that is going to tie back to what you ultimately ordered.

11:14 Tamara Miller

So it seems pretty simple, right? And when you're running a business, it can be simple at first. But as things tend to move in more of a fast paced environment, manually checking each one of these steps in that process can be daunting, it can be risky, and it can also lead to costly mistakes.

So I'm actually going to turn it over to Karlie now, who's going to talk about those mistakes and how we can avoid them.

11:40 Manual matching pitfalls

Karlie Lester

Yeah, it's interesting when we ask that question to our clients, well, tell me about your purchasing process.

We have some that come to us and say, we don't do purchase orders. We don't create bills. We just kind of pay the inventory when it comes. We don't even know who's receiving it. So they really have no process.

12:05 Karlie Lester

Or we have clients on the flip side that are tracking everything as hard as they can. They're trying to track POs. They're trying to track received, and they're trying to figure out when to pay it and to bill it. But because they're doing it manually in three or four different spreadsheets, and three, four different departments are trying to reconcile, it can be so hard when you have it all over.

12:27 Karlie Lester

So whether they don't have any processes at all, or they have really good processes in place and it's just all manual, they hit some of these pitfalls.

So one, data scattered everywhere. We see this with a lot of clients. They're trying to use a shared Google Sheet, but then one person's putting in the PO, another person's trying to put the bill in, another person's receiving it from the 3PL, and it's just scattered everywhere. It takes time to figure it out.

12:43 Karlie Lester

That causes mismatch of information. So one person thinks they're matching the right, maybe something's received on three or four shipments, they put it against the wrong PO, then we don't know if it's come or not. Tracking partial shipments and back orders can be so hard when you're doing it manually and two or three people are doing it. So that can cause back ordering and not knowing when things are ready to actually sell. So you're saying you have things to sell and you really don't, with all these back orders.

13:06 Karlie Lester

Vendor payment disputes. It's interesting, that poll that came up, no one said that they had problems with it. It kind of surprises me, because a lot of the time if you don't have the processes in place, the vendor sends you a bill and says, you owe us this, and you look at your records and you're like, what? We only got this.

13:31 Karlie Lester

So then there's a dispute with the vendor. Or you don't want to pay it yet, so you're behind on your payments because you're not really sure if that's what you've got.

So we see a lot of that disorganisation and miscommunication. Was that the biggest one? I think that was the biggest one, you guys, that you voted on.

13:46 Karlie Lester

Disorganisation and miscommunication. That's such a pitfall for everyone. If we can get all that information into one system, your POs, your receipts, your bills, all into one, there is no miscommunication. I mean, as long as everyone knows what they're doing in the tool. But it's not in five different places.

14:00 Karlie Lester

The lack of approval controls and spending controls, this is so big. When you think of inventory and AP and having to pay your vendors, you want to have control over who looks and says, yes, it's all received. I approve that it's received. We've got what we want. And then someone else has got to say, well, I'm the person that then says we can pay it.

14:18 Karlie Lester

And a lack of those controls, the bill comes in and someone's like, I'm just going to pay it. And they just pay it without getting those controls in place.

14:23 Karlie Lester

Time consuming reconciliations. Trying to reconcile what was ordered against what was received, or against what was billed, in three different spreadsheets can take a lot of time. If you get it to only one, you're spending a lot less time, being a lot more efficient.

14:37 Karlie Lester

Reporting and analytics. You try to get a report from three different data sets, three different sources, it can be hard. You do it all in Finale. We've already talked about how great the reporting is in Finale, and John is the wizard at this, creating really good operational data that we can then use financially.

14:56 Karlie Lester

And then another big one that we forget about is fraud and overcharge detection. It's really hard to detect fraud or overcharges if you don't have a good process in place and it's all over.

If it's all in one place, you're tracking in one place, you're like, gosh, every single time I order from this supplier, they short me. Every time, look at this, every time I'm getting less than what I want. Or they're charging more, the bill's off. And so that's a big one too.

15:27 Karlie Lester

So these pitfalls are so true whether there's no process or you're trying to do it manually. If we can get our clients to get it all into one system, so their operations are more smooth, it helps a ton.

15:39 Karlie Lester

And for that, I'm going to pass it off now to Brittany, to talk about this three-way match and how important it is to take that purchasing, the receiving, and the invoice, and make sure you're good.

15:48 What a three-way match is

Brittany Brown

Yeah. So I said at the beginning of the webinar I wasn't going to talk about what the three-way match was yet, because I wasn't going to steal my thunder. Because now I'm going to get into a detailed description of what this three-way match is, because then I want to talk about the benefits of it.

15:58 Brittany Brown

And as an accountant, when I first came across this, it really spoke to my heart and soul, because it checks all the boxes of things an accountant really cares about, which is visibility, transparency, and the ability to protect the assets of our clients.

16:20 Brittany Brown

So picture this with me. You guys order a product from your vendor. You send them a purchase order. At some point then they confirm that purchase order and they create the inventory and they ship it to you. And then you receive that into your warehouse.

16:36 Brittany Brown

And then they either billed you in advance for maybe a prepayment part of it, but also at some point you basically have to true up with the vendor. You have to pay them for whatever is now remaining and left for that order that they sent you.

16:51 Brittany Brown

But how do you know that it's time to pay them? How do you know that you've received everything that you needed to receive? How do you know that they sent you what you actually ordered? How do you know that what they're billing you is the price that you actually agreed on upfront when you sent the purchase order?

17:05 Brittany Brown

This is really what the three-way match is about. It's about creating confidence around your willingness now to send money to that vendor.

17:17 Brittany Brown

Now, what's really tricky about this three-way process is that these different pieces are often happening by a different individual. And one of the things that can be the most challenging about facilitating this three-way match is the fact that this paperwork and this process can be happening by three completely and totally separate people within your organisation.

17:34 Brittany Brown

And as a result, if you have not built this three-way match into your organisation's workflow, the person who's actually getting ready to write the check may not have the visibility they need to write that final check with confidence.

17:52 Brittany Brown

The purchase order is often issued by the person who's managing the purchasing process. The receipt of that inventory may not even be happening within your own walls. You might have a 3PL that's receiving inventory for you, or it might be happening in your own warehouse.

18:06 Brittany Brown

And is anyone even keeping a good record of what was received? Whether the inventory that was received was in good working order, whether it's inventory you're willing to receive and call it a completion of the original contract you made with the vendor when you issued the purchase order to begin with?

18:22 Brittany Brown

And when that bill comes, the person who's actually paying the bill, these are all key pieces of information that they need to know in order to feel the confidence to be able to turn around and write a check or send an ACH to that vendor. In order to ensure that we are not paying for inventory that we haven't received, that we're not overpaying for stuff on prices that we never agreed to, that we are not paying for inventory that showed up in poor selling condition and that we don't want to keep.

18:48 Brittany Brown

All of these things, this final three-way match is a way for you to protect your money, to protect your resources, and to protect everything you have.

18:58 Brittany Brown

So now that you guys know what that three-way match is, which is a coming together of these three pieces, and there should be a document trail associated with this. This is not just, I think this happened well. There should be a literal coming together of three documents.

19:06 Brittany Brown

A purchase order, where we see what we ordered and the prices that we agreed upon. A receiving slip that shows what was received and whether it was received in good working condition. And a bill indicating what the vendor believes that they are charging us for this.

19:30 Brittany Brown

And I'm going to add one more thing, which would be any sort of previous records against payments that have been made against this purchase order already, so that we know exactly where we stand on what should be paid before that final payment is issued.

19:43 Brittany Brown

So when all those three things come together, what are the benefits of this three-way match? I am glad you asked.

So number one, it helps to prevent fraud. This is so important. It really does help to prevent fraud, but it also helps to prevent overpayments.

19:59 Brittany Brown

It can help you prepare to get a loan, because you just have better financial records. One of the things that if you have to have an audit done, one of the things they do audit is your internal controls as part of a general audit. This is a really critical example of a control. If this does not exist for you at all, it definitely hurts you from an audit perspective.

20:18 Brittany Brown

It helps us simplify vendor relationships. I'm going to throw in here, it's not on this particular list, but when it comes to vendor relationships, it helps you have confidence.

So if you're the one who's actually getting ready to pay that bill, there's a lot of fear that would come in. As soon as you pay that money, as soon as you pay that final check to that vendor, you have lost all control. At that point, if there's a problem, now you have to try to figure out how to get the money back from that vendor, which is much, much, much harder than just choosing not to pay them to begin with if there's a problem.

20:54 Brittany Brown

As soon as you have made that final payment, you have lost all leverage in your ability to get issues solved.

20:59 Brittany Brown

So it improves your cash flow, it helps you to save time, it streamlines your operations, it helps you set smarter reorder points, and it helps with forecasting demand.

So you can see the list, and I could actually add probably five more on the fly right now if I wanted to, of things that I feel like are additional benefits of the three-way match.

21:20 Brittany Brown

So hopefully you guys are buying into the idea that this is a really critical thing. This is not just sort of a nice idea. It's something you absolutely need to be doing if you are purchasing and receiving and paying for inventory.

21:33 Brittany Brown

So I'm going to turn it over to John, who's going to talk about how to facilitate this process inside Finale, to make it a more doable, easy process using the tools we have.

21:40 Three-way matching in Finale

John McCoy

Yeah, thanks, Brittany.

So everyone knows this looks like a really simple screen. You create a purchase, you receive something, and then you pay your bill.

21:55 John McCoy

But generally that whole process, when you're doing that more than once a day, whether it's B2B, whether it's B2C, maybe you're ordering from overseas and you're just ordering a container, or maybe you're ordering special order and you're doing 50 orders a day, that can turn into chaos.

UPS only delivered half of this, only delivered four [unclear] packages. What do I still have incoming? How many have I received over the last 30 days of this product, and where are my other two that I have?

22:25 John McCoy

So to be able to put that all in and visually see your data, I'm a big advocate to visualise your data. When you can see it really simple and clear, then you can point out mistakes and you can get to the bottom of things really quickly. Instead of having to put everything into Excel and do all these formulas and try to figure out what happened, where's that product at?

22:49 John McCoy

But if you can just see it all in one place, that's where Finale comes in. And that's reducing the errors and improving that cash flow, because you're not double ordering something, and you're being able to forecast a little better.

23:05 John McCoy

Because obviously we can't control markets, and there's a lot more marketing side that goes into that. But when you're reordering based on sales velocity, which is just math, you have sold five a day for the last 25 days, well, most likely you're going to be selling five more. And if you don't, and it starts to dwindle down, then you slow down on your reordering.

23:21 John McCoy

And that's where Finale comes in, to really show that when that sales velocity is slowing down, we will slow down your reordering for you. And that saves time, because you don't have to go into each product and say, hey, I have a hundred, do I need a thousand more? Do I need one more? Do I need any? It depends on what you're selling. You can go look that up manually if you want on Amazon, but Finale helps you figure that out as well.

23:53 John McCoy

I think the biggest thing is the simplified data for audit on this one. Because when you're end of quarter, end of month, how much money did I really make? Because that's really what all of us are doing here, and what all of you guys are watching for, is you want to make money.

24:10 John McCoy

And that's really what it boils down to. It's streamlining the processes, being able to do things more efficiently, not losing money, eliminating fraud, not losing products, and being able to purchase a lot faster. So if you can purchase faster, you can sell faster and you can make more money.

24:39 John McCoy

So this is Finale. We have a three-way matching screen. We might have a three-way matching screen, we'll find out here.

24:51 John McCoy

So we have this three-way matching screen. It's basically just that entire process. But even though we know it can be chaos, this really simplifies it down.

25:03 John McCoy

So right here, you get your date, you get your purchase order. It's completed. All of these are completed. How much was it? That top one's $150. We fully received it and we fully paid for it. So that's perfect, it's all green.

25:20 John McCoy

If you look down at that, no bill posted. Well, now you've received products that a vendor is going to say that you owe them for, but you haven't posted that bill yet to pay it.

25:27 John McCoy

And then you've got your partially received, partially billed. Hey, I ordered 20 products, got 10 of them, so I paid for 10 of them. So we can track all of that visually and just be able to say, what are we waiting on? Who have we not paid? And if we have paid them and we haven't posted that bill, that's why that money is sitting in QuickBooks waiting to go to an accounts payable.

25:51 John McCoy

So all right, and then when we scroll a little bit forward, this is a purchase order. This is fully received, fully billed. We know that it's complete. There's nothing to do here. If we had a partial here, we would see that in those statuses.

26:16 John McCoy

We've received it in full. We have billed it in full. It even showed paid.

26:27 John McCoy

So this is what it's going to look like in QuickBooks. We received the product, so we need to pay for it. We created a bill, which automatically goes to QuickBooks. And then from here, you have your linked bank account. This goes to your accounts payable, your inventory value. There's a little snippet there for how to get back to it in Finale, so it's all linked.

26:48 John McCoy

And then you can even add maybe a signed bill of lading, a vendor invoice, as an attachment if you want, right there, just to have double clarification, proof.

26:56 John McCoy

And you know, that's it. It really simplifies all that chaos of receiving a hundred different things.

When I was using Finale in my previous business, when UPS showed up, it was 60 to 70 packages, and you have all these different purchase orders that were coming from five different locations. So I'd receive an order from a purchase order of a vendor five different days in a row. And so you don't know if you've ever fully received it. You don't know if you paid for it. And Finale really helped clean all of that up, and just be able to simplify it and visualise it.

27:40 John McCoy

But yeah, so I think we can be on to Q&A now.

27:40 Questions

Brittany Brown

Yeah, great, John. Thank you.

There are a couple of questions that have come in that I'm going to circle back on, just because I feel like there's a little bit more depth that our presenters can and should add to some of these more complex questions.

27:54 Brittany Brown

And I just want to start Q&A by saying, we specifically and intentionally leave a lot of time in these for Q&A, because people tend to have a lot of questions about inventory. And our team, we charge like $200 to $250 an hour for consulting on this. This is basically an opportunity for you guys to sit down with the smartest accountants and inventory specialists that I know and ask them questions literally for free, just for the opportunity of having come to the webinar.

28:29 Brittany Brown

So this is a great time, if you have any questions, to go ahead and submit them now.

The first question that we had come in is actually talking about the crossover issues between the accounting process and the receiving process, and the pain that we all experience with Amazon FBA.

28:48 Brittany Brown

And the question was, I have an accounting process where once purchased, the inventory goes into a prepaid inventory asset account.

So I'm just going to help break this down and interpret for everyone who's watching right now. This is when we place the purchase order, oftentimes we're required to put down a down payment. And because that's not inventory that we have on hand right now, this particular individual is tracking that against a prepaid inventory asset account, which is very correct accounting, by the way.

29:11 Brittany Brown

Then once we get a receipt from our supplier that the inventory is in our warehouse, then the idea is that it then goes on into an inventory on hand account inside QuickBooks, instead of being in a prepaid account. Again, very good accounting.

29:27 Brittany Brown

However, for Amazon FBA, it takes several days or weeks for Amazon to receive the inventory into its fulfilment centre. The question becomes, does Finale, first of all, are they able to pull this data in real time and give good visibility into what's actually happening at the Amazon warehouse?

29:47 Brittany Brown

And I would love for you guys on the Finale side to talk more about the integration you have with Amazon FBA, because it is a very unique thing to Finale and it's a huge value add to their customers.

30:03 Brittany Brown

But then the second piece of the question is about the QuickBooks side. And Karlie, this will then be your question. Does QuickBooks automatically then move that inventory over from prepaid into inventory on hand? So you might want to talk about some of the pain points and complications around tracking prepaid against on hand.

But Tamara, why don't you start by talking about your FBA integration.

30:26 Tamara Miller

Yeah, sure. I'd be more than happy to. So much to share about that.

First and foremost, as it pertains to our FBA integration, we've actually devoted a great deal of time over the course of the last, gosh, [unclear], year or so, building out a very comprehensive integration with Amazon FBA. Because there were so many questions about what happens once that inventory actually leaves from our warehouse, because there are so many gaps, there are so many missing holes.

31:05 Tamara Miller

And so because of that, what we've actually done here at Finale is gone beyond the, you've shipped and now you've ultimately received. What we're actually providing visibility into now is what's inbound, what's outbound. Also, if they're having to investigate the stock or any type of trouble stock.

31:38 Tamara Miller

Problem quantities, thank you for that, John. All of the moving parts of your inventory as it pertains to Amazon FBA can now be seen on a single screen inside of Finale.

31:51 Tamara Miller

So not only are you able to visibly see the inventory breakdown of what's within your warehouse, but in addition to that there is a consolidated viewing stock screen inside of Finale that also includes what is at Amazon FBA as well, and in what different columns. So you're not having to go into Seller Central to get that information, it's all in Finale, and it's broken out by warehouse, or by your 3PL, or Amazon FBA.

32:30 Tamara Miller

In addition to that, over the course of the last few weeks, we actually also rolled out a feature where we're even tracking what you've sent to AWD. So if you have inventory that's going to AWD, and then AWD with Amazon is then syncing that to Amazon FBA, we have that full on visibility, and we're able to provide you with those inbound shipment audits. And that can live directly within our system, so that also gives you the ability, if any of your stock is missing or if it's damaged, you have auditing records that you can utilise that are built into Finale in order to file claims against.

33:15 Brittany Brown

Thank you, Tamara. And as you guys all know, I have always said that selling on Amazon is like being in an abusive relationship. And that is particularly true when it comes to having visibility into what's happening in their warehouse.

For being the largest 3PL in the entire world, I would say they're the worst 3PL in the entire world, as far as the visibility you actually have. It's like throwing something into a big dark room and hoping that it comes out and that everything was okay. And it's just very, very hard to see.

33:44 Brittany Brown

So what Finale is building around better visibility into the 3PL called FBA is pretty phenomenal.

33:54 Brittany Brown

But when it comes to tracking the prepaid side of things, here at LedgerGurus we have shed many tears over the movement from prepaid into inventory on hand. I'm going to let Karlie get into that for just a second. Because while this person described a very good way of tracking this from an accounting perspective, the realities of it are that that movement can be really painful.

Karlie, do you want to get into that?

34:21 Karlie Lester

Yeah, for sure. And it is a really good way. And it is a way that we suggest people that aren't connecting Finale to QuickBooks do it.

All the purchases come in and they're going to hit that prepaid. Then at the end of the month, we can pull a report from Finale that shows us how much has actually been received, and then reclass that and move it from prepaid to inventory. So it's a great workflow if you don't want to connect. It works.

34:50 Karlie Lester

If you connect the whole purchasing process from Finale to QuickBooks, what would happen is the bill would sync over. When the bill syncs over, it hits AP, but it hits also a new account called the Finale Sales Clearing Account, which some people like to name goods invoiced not received. So you've invoiced it, but you haven't received it yet. So kind of a prepaid. So that's what it's called.

35:12 Karlie Lester

And then when it's actually received, when Finale receives the inventory, it sends over a journal entry to QuickBooks that moves it from the goods invoiced not received, or that clearing account, into inventory.

35:24 Karlie Lester

So it does manage that movement for you as you are billing it and receiving it, and that timing issue, because some people might receive it before they actually send over the invoice or bill it. So that clearing account just tracks all that for you.

35:34 Karlie Lester

They have a really nice Finale Purchase Clearing Account report. I love Finale's reports, that you can pull to see where it's all at.

So that's how it would handle it. Either way, manually pulling the reports that you need, I would do prepaid and just move that. But if you're connected, Finale will manage all of that.

35:57 Brittany Brown

Yeah, great, Karlie. And just so you guys know, if you experience some pain around the movement from prepaid to inventory on hand, you're not alone. This is one of the biggest pain points around inventory accounting from an accounting perspective.

36:12 Brittany Brown

So with that, I'm going to jump into the next one, which I'm also going to direct at Karlie again, because it is about the sync. And Madison did answer some of this, but I think you can add more flavour and colour to this, Karlie.

36:23 Brittany Brown

So the question was, does Finale keep track of inventory receipt by the item granularity? How is it pushed into QuickBooks? I guess QuickBooks can't handle the item by item inventory for high volume businesses.

So I guess what they're really asking is, are we trying to duplicate inside QuickBooks the same level of inventory tracking that's happening in Finale? Or what does that sync really look like? What is being duplicated?

36:49 Karlie Lester

This is such a good question. Because a lot of people, when they think, I'm going to connect Finale to QuickBooks, they think all their inventory quantities and movements are coming over. That is not what's happening.

37:02 Karlie Lester

QuickBooks, we have inventory turned off. It is not tracking quantities or movements on a SKU or product level. It's simply tracking the value of inventory as you're purchasing and receiving it.

37:15 Karlie Lester

Now, the bills and invoices will come over itemised, in case you're bringing in an invoice and have an AR component. Maybe you're sending your bills from Finale to be paid. It's itemised as a non-inventory item. So it's there, but it's not messing up your QuickBooks as far as quantities.

I hope I'm explaining this well enough. But if you need that granularity, it's in Finale. So you can go there and pull what you need. But we're keeping it out of the accounting system where we don't need it.

37:47 Tamara Miller

You did. You actually said it perfectly, Karlie.

And I will tell you what we've actually even been told, even by QuickBooks, is that, listen, we don't want to see all of that data in our solution. There's just way too much going on.

38:05 Tamara Miller

And so that's really what Finale is for. Every single touch point and every single movement, and every process that is associated with any of your inventory asset itself. We want to make sure that we as Finale are being that centralised source of truth, because we're seeing all of those moving parts. And because of that, all of that granularity already exists within the system.

38:41 Tamara Miller

So you don't want to push that into QuickBooks. But if you ever need to reconcile, or actually look for, if there are any questions about any transaction, or for that matter even a SKU itself, you have that ability to just go right into Finale. And once again, leverage those reports, or leverage your inventory auditing screens themselves, because we do have perpetual data, which just essentially means we're not going to kick some of it out due to the size.

39:17 Brittany Brown

And this concept I think is a really important concept, and it's one that we get a lot. And I actually think it segues really well into next week's conversation, because A2X will be joining us next week as well.

39:28 Brittany Brown

So one of the things that we struggle with, I think, as accountants and as firm owners, is wanting everything to live inside QuickBooks as a source of truth. But the truth is, when you try to duplicate inside QuickBooks everything that's happening on a transactional level somewhere else, you actually spend more of your time trying to sync and keep data clean than you do actually having clear visibility into what's happening.

39:47 Brittany Brown

So you guys, I need you to change your paradigm, shift away from thinking that QuickBooks is where everything sits, to thinking that QuickBooks is where the final picture sits.

40:00 Brittany Brown

So inside an inventory tool is where we track all activity on a SKU level. Or inside our sales channels is where we track all the sales at the individual sales order level. But inside QuickBooks is where we end up with a complete picture of everything that's happening. Not just inventory movement, not just sales movement, but every financial thing that happens through your entire business.

40:20 Brittany Brown

And so QuickBooks becomes the place where the picture is completed, but it's not the place where we're trying to duplicate the transactional level that's happening everywhere else. Because it actually just creates a situation where it becomes very difficult to maintain data continuity, rather than being able to really focus on making sure we have a clear picture.

40:44 Brittany Brown

The next question we're going to talk about is really getting into the landed cost situation.

So the question is, Finale can calculate the landed costs for each SKU. If expenses like freight delivery fees should be paid to each different vendor, we have to split the bills on the purchase order level.

40:59 Brittany Brown

So those of you who are kind of new to this, we're talking about how do we now move from a buy cost as a cost strategy to a landed cost, which means we're now trying to make sure that our SKUs include additional things like freight and delivery fees as we're looking at the SKU costs.

41:14 Brittany Brown

So the question is, can we track the landed cost in QuickBooks? How? Our goal is to have the actual stock cost valuation on hand.

So I guess what they're really trying to get to in the question, I would really love you guys to answer. First of all, Tamara, how does Finale incorporate the landed cost concept? And Karlie, how does that then become part of the overall picture of what we're seeing inside QuickBooks?

41:42 Tamara Miller

Yeah, thanks for that, Brittany. I'm actually going to let John answer that, because he's actually utilised your system on the product side as well, as well as internally on the consulting side. So John, why don't you take that, because I know you have a lot of great insight with this one.

41:58 John McCoy

Yes. So that landed cost is going to be calculated inside of Finale. We're not going to have the landed cost in QBO, but we will have the landed cost value of your inventory in QBO on your balance sheet.

42:11 John McCoy

So when you have expenses like delivery, freight, delivery fees, and they're all different vendors, so you're paying your duties or your import companies, you would do that all from the same purchase order, with just a different supplier on the bill.

42:29 John McCoy

And the calculated cost, we call them allocated costs, would increase your landed cost for that product. So if your landed cost, which is your shipping costs, your freight, your duties, fees, everything in that product, is $10, that's going to be the value that's inside QuickBooks. Not on the line item itself, but your overall inventory value would still remain accurate.

42:55 Karlie Lester

Yeah, and just to clarify a little bit, John. So if they have a PO and they do have a couple of landed costs, then we would create several different bills for those landed costs. When those bills sync over, and when we do some mapping, we're going to map it to the balance sheet for the inventory account.

43:12 Karlie Lester

So when the landed cost expenses off, it comes off correctly and flows. You just have to make sure you decide which of those purchasing adjustments do we want to allocate to the landed cost. And if we're allocating them to the landed cost, when it syncs over from Finale, it needs to go to the balance sheet. Those that are not allocated, because maybe you have some that you don't want to land, but it's on the bill from the vendor, then that would need to map to a different place.

43:35 Karlie Lester

So yeah, it's all about the mapping, and understanding what needs to hit which financial when.

43:40 Brittany Brown

Yeah. And whether you're doing this in a tool like Finale or whether you're doing this manually, the rule of thumb I always basically tell our clients is continuity through the whole process.

So if you're planning on taking landed costs and incorporating them in your final SKU costs, they need to be also moving through directly to the inventory asset. If however you're planning on only going by cost, your landed costs when they hit need to go directly to cost of goods sold immediately.

44:05 Brittany Brown

So basically they need to follow each other all the way through. Whatever process you're using, to Karlie's point around the mapping, you need to have consistency from the beginning to the end.

If it's going to be part of your SKU costs, it needs to go to inventory right from the beginning. If it's not going to be included in the SKU costs, it needs to be expensed right away. And that holds true whether you're in a system or whether you're not in a system.

44:35 Brittany Brown

But if you are planning on tracking landed cost inside QuickBooks, you do need to set up your mapping so that that is the way it lands in QuickBooks as well. And then you will end up with your actual stock valuation on hand matching between systems as well.

44:47 Brittany Brown

All right, the next question is one that I'm excited about, because I'm interested in knowing more about it. And really what they want to know is more about the sales velocity functionality.

45:02 Brittany Brown

So the question says, to decide on which quantities to order, can Finale, it's acknowledging that you can allow Finale to calculate quantities based on past sales, but it also wants to know, are you determining and estimating a future sales velocity when you're determining quantities to order? So increase or decrease in sales velocity based on an estimation of the future, not just the past, when you're determining quantities.

45:33 Brittany Brown

And this is such a cool feature inside Finale. I'm so glad we have a chance to talk about this some more.

45:39 Tamara Miller

Yeah, I'd love to take this one, Brittany, because I actually love this feature as well.

So Finale, when we're thinking about forecasting your inventory needs, yes, we do actually have a built-in sales velocity reorder calculation method itself.

45:55 Tamara Miller

Now, there are a couple of things that I want to make sure we walk away with as far as understanding what it is that Finale is doing when we're looking at how we are determining the stock that you're going to need.

First, we are looking at your sales velocity. So what your selling activity looks like. But in addition to that, we're also looking at your consumption velocity. And that's important because you may not just have stock that's at your warehouse. There may be stock at your 3PL, if you have one of those. There may be stock at FBA, AWD, you name it. And so we're understanding what the velocity is by location as well.

46:34 Tamara Miller

And then from there, we're actually taking into account several other data points. Your processing, so how long it takes your team to process a purchase shipment once it's actually arrived at your dock. It's really important, because if it takes a couple of days, then we don't want to be off with what we are anticipating as far as your needs are concerned.

46:55 Tamara Miller

Supplier lead time is one that I cannot begin to tell you how important that is, especially when there are fluctuations with your lead times. And I've seen this to be extremely true if you're procuring stock from overseas. Sometimes those lead days can increase by as much as a month. So we want to make sure that we are incorporating that data point.

47:22 Tamara Miller

That's actually automated in our system, because when you are adding your supplier data, Finale is automatically calculating the lead time from the data inputs that we've gotten from you.

47:36 Tamara Miller

Safety stock, we make sure that we have buffers so that you're not waiting till the last minute to order stock.

47:42 Tamara Miller

But when we're talking about what your future needs are, that future sales velocity, there is a data point that I really like within our solution, and it's called the usage growth percentage. So in other words, what's that year over year percentage of growth for a particular SKU? If it's 20%, if it's 30%, we're actually taking that into account. So we're not just looking at what your sales velocity is today, but we're looking at your anticipated growth, so that we're not flat when we're forecasting what your inventory needs are.

48:14 Tamara Miller

And then finally, one of the other data points that I think is really important to mention today is what's that minimum agreed upon quantity that you have to order from your supplier? Because we want to make sure that we are tying that into our projections when we are forecasting what those needs are.

48:35 Tamara Miller

Now as far as the decreasing is concerned, what I can say is that I think that that's probably going to be more organic, based on the actual sales activity itself. So if there tends to be this downward trend of your velocity, then I think we're capturing that.

48:47 Tamara Miller

I don't have a negative usage growth percentage, or at least let me say this, I've never tried a negative growth percentage to see, hey, is that going to work, and do we calculate that? So John, maybe that's something that we can try a little bit later. But I definitely know that we can get you taken care of if we're looking at, hey, what about the future, as long as we have that data point of that anticipated growth. We're going to be able to account for that as well.

49:19 Brittany Brown

Yeah, great, Tamara. Thank you. We've heard from our clients loud and clear for years now just how important the forecasting support is for them. And I really like what Finale does with watching velocity.

49:29 Brittany Brown

A really great rule of thumb that I heard once that I thought I'd just share is that people always wonder, should they err on the side of too much stock or err on the side of too little stock, when they're trying to forecast and they just don't know what the future holds.

49:48 Brittany Brown

And I heard a really good rule of thumb that says it depends on what your profit margins are. So if you have really good profit margins, there is more opportunity cost in the stockout. Basically meaning, if you run out of stock, you have huge lost opportunity, because your margins are really good.

50:04 Brittany Brown

If however you have really tight margins, then the risk is greater that you're going to end up with an overstock, and that the cost of the overstock will actually be more damaging than what you would have gained by not running out of stock.

So that's a really good rule of thumb when you're trying to figure out which side you should err on. Really good margins, err on the side of having too much stock. Really poor margins, err on the side of making sure you're not overstocked.

50:30 Brittany Brown

Okay, this question we have, I think it might be a feature request. I'm going to read it, but you guys can add whatever flavour you want to this.

Does Finale write inventory write-off shrinkage, in case of loss, theft, damage, whatever, into QuickBooks as a journal entry, aka removed from the inventory asset account and added as an inventory shrinkage expense account? The question is, can we add a parameter to do it by the item, or by some sort of monthly frequency, instead of right now?

51:05 Brittany Brown

Which I believe, I might be wrong about this, it's sort of more of a, when you write it off, you have one opportunity to point it at one account, and there's not a lot of wiggle room in that.

So do you guys want to give some flavour on what the options are today, and what you think, if there is anything on the immediate roadmap for additional capability around that?

51:24 Tamara Miller

Yeah, I'll touch on this a little bit, and John, you can tag team with me as well. I think it'd be largely helpful, especially with your reporting capabilities.

I know that right now, if there is any type of an adjustment, what we're doing is making a basic journal entry. So you're debiting your inventory asset account and then you're crediting that inventory adjustment or variance account itself.

51:46 Tamara Miller

I do also know that there's no automation with that, right? I mean, outside of, you perform a cycle count or audit your inventory, and whatever the booked quantity or value is, once you commit that inventory audit to Finale, then that journal entry is automatically going to be made to relieve the inventory. And that journal entry will then be pushed into QuickBooks.

52:13 Tamara Miller

I think that's where we stop today. John, do you want to add a little colour to that?

52:24 John McCoy

Yeah, that's pretty much where we stop today. It's just making that inventory variance adjustment on the balance sheet into your account.

Now we can have different accounts for every reason there's an inventory variance. This was returns, that was destroyed, this is lost, this was stolen, and so on and so forth. But that's about the only capability right now.

52:51 Brittany Brown

Yeah, thank you very much.

So someone just asked me if I could put the rule of thumb about the profit margins and levels of inventory into the chat. I'm working on writing this out.

52:57 Brittany Brown

But basically what I want you guys to think about is the greatest cost to your organisation, and how you're trying to maintain your ability to stay profitable, to stay solvent, and to take advantage of market opportunity.

53:08 Brittany Brown

We had a client years ago who sold child carriers. And his vendor gave him a really great deal on ordering a whole bunch of inventory. So he did, he ordered a huge amount of inventory, and that inventory sat in a warehouse and put him out of business.

53:30 Brittany Brown

And the reason why that inventory put him out of business is because he was using a 3PL. But even if he'd been using his own warehouse, the cost of him storing that inventory was so great. And at one point his 3PL got so unhappy about the fact that he was taking up so much room with inventory that just wasn't moving, that they actually forced him to move 3PLs. And he had to get all of that inventory onto a truck and move it to another 3PL, where that 3PL then cost him a fortune to just have that inventory sit there that wasn't moving.

54:02 Brittany Brown

It was literally the overstock that put him out of business.

So I think we all relate to the stocking problem of not having inventory that our clients want when they're ready to buy from us. But the risk of an overstock, and having inventory that just sits there and doesn't move, is tied up cash. And it is the cost of the storage of that. So it is not an inconsequential thing.

54:24 Brittany Brown

So I'm in the process of finishing writing this up. But while I finish writing this up, let me have you guys answer this question.

It would be great to be able to drill into a shrinkage account to know which item is risky about a certain inventory SKU. I actually agree with that.

54:41 Brittany Brown

Tamara, would you guys like to talk about some of the things that you have coming down the pipeline that you are the most excited about, that are on the verge of shipping? I don't know what you can or can't share right now. Or maybe some sort of visions about where you guys are hoping to go in the future. Because I think that we all get really excited about additional functionality that's coming along.

55:00 Tamara Miller

Yeah, absolutely. And I really appreciate that. Once again, John, this is your moment to shine. Why don't you go into some of that detail about some of those features that we can share right now?

55:21 John McCoy

Yeah, there are a lot of things coming. A lot of things are pretty much set in stone right now.

I know that there's one feature that is really underused in my opinion, and that's being able to track by classes. And I've just seen that question come through of, can we use class on QBO to track several costs into a single PO?

56:04 John McCoy

Yes, because you can track classes based on category or source of where it's coming from. And that really turns that P&L into a multi-channel P&L. So it's like one large P&L, and then you can just break it into 10 P&Ls, based on your categories and by source. So you have income by source.

56:24 John McCoy

So if you sell on Shopify, Amazon and eBay, and you have 10 categories of products, then you can actually have a P&L for each one of those. I paid Shopify X amount of fees. I had all these Amazon fees. And maybe your most profitable is eBay.

56:40 John McCoy

But if you're not using classes, which we do a really good job at classes, and I think it's the most underused feature we have. Because all the ecommerce and multi-channel ecommerce, especially even B2B and B2C, you don't really know where you're making your money. If you're making money, great, but when it's all broken down into one P&L, it's really hard to see if you're not classed out. I think that's one of the most underused features that I think people should look into.

57:01 Tamara Miller

Yeah, I agree, John. I'm going to throw another one out there. You guys are probably going to kill me for it.

We are really excited because we've had so many both current and soon to come businesses that are commonly asking for the same thing. There's always a top three. Sometimes you just see different trends, but one that has been constant has really single-handedly affected every single industry of ecommerce sellers.

57:36 Tamara Miller

Most businesses, in order to realise more sales, you're bundling, you're kitting. And so because of that, there's that need to have your build consumption velocity.

I don't want to just know what I need to replenish for my top line product, but I need to know when to replenish those raw materials, or when to replenish those other SKUs that make that kit or that bundle up.

58:04 Tamara Miller

And so that happens to be one of the features that I'm really excited about, because this is something that we've been asked for for such a long time. I don't have a timeline just yet, but it is definitely something that I'm really excited about.

58:23 Tamara Miller

And we're also looking into the seasonality with our sales velocity. No timeline on that just yet, but that is definitely something that we've been asked for for quite a while. So hopefully it's something that we can continue to dig into here internally. But that build consumption velocity, definitely stay tuned for that. Maybe we'll have more information that we'll be able to provide at the next webinar.

58:48 Brittany Brown

Awesome. Thanks, Tamara.

Okay, so a couple of last comments, not necessarily questions. A great tip from Cody Pope. I see no reason that you couldn't use variance reasons and account overrides to track shrinkage, and our general ledger will have it broken down by product, easy to report on. And then James, who said material planning would be great.

59:03 Brittany Brown

So with that, I'd like to take us to the last and final slide, where we tell you guys you have one more golden opportunity to come to a webinar to learn lots of wonderful things in the last part of this three part series.

59:16 Brittany Brown

The last one will be on COGS calculation, finding the best path to profitability. And we'll have a couple of other faces you guys haven't seen yet. We'll have Geoff, who is the vice president of marketing at A2X, one of our other favourite partners, and an individual who is part of the customer team on Finale as well.

59:36 Brittany Brown

So we're really hoping to see you guys there. It's March 19th at 10 PM Pacific, no, not 10 PM. It's not at 10 PM, actually, turns out. It's actually going to be at 10 AM Pacific time and 1 PM Eastern time, where you get to learn about finding the best methods for COGS calculations.

59:53 Brittany Brown

There will again be a great open Q&A. Hope you guys find this very valuable. You guys brought a lot of really great questions today. As you can tell, this team really knows their stuff. It's a great place to come and get your questions answered. So come tell all your friends to come as well. Tell them to bring all of their great questions as well.

And with that, we will see you next time.