Inventory, stock and wastage etc. - help please!

[camalidesign]

Hi all,

I am currently desperately trying to set up some software (Jewelry Designer Manager) to hold my stock of raw materials and finished pieces, but keep running into issues and limitations with it, so I need some help!! Bear with me, I have already bored my husband with this and he is now more confused than me!

Beads, cabs, findings etc are pretty straightforward as they can be counted etc. but silver and gold is not so easy.

For simplicity I have previously weighed an item before setting stones and then used the highest cost of any of the included silver raw materials as the cost of the silver, just to make sure I am not undervaluing the materials in the piece. I guess I ought to weigh each individual type of silver while making it (shank, backplate, bezel etc.), but just found it too much hassle and kept forgetting, so worked out this method instead.

So I guess I need to start weighing everything individually to be able to quantify and value each part of a piece when pricing, which is going to be major headache!...

OR, I could set up all the different sheets, wires, tubing, etc in the software (so I can see what each finished piece contains) but set the cost per unit (g) to 0. Then add a part item that is "cost of silver" which would be either an average of all my different items, or the highest cost of any of them and use this times the total silver weight of the piece.

What do you do??

Also, the other issues I have come across are waste and scrap and how to estimate an average wastage and value of scrap. How can this be accounted for in a software such as this? Do I add in scrap metal to my inventory and weight the lot? Or do I just multiply the weight of silver for each finished piece with a percentage for scrap? I am at a losss as to how to handle it. The idea with the software is that you set up finished pieces and that automatically takes off from the inventory so theoretically you should be able to "press a button" when it comes to stock taking time and get the figures.

Gosh, my head hurts now!! I don't expect a straight answer to this because there are so many unknowns, but I would appreciate any feedback you might have, especially those of you that have been doing this for 10, 20, 30 years or even longer! This is all part of me trying to get more "professional" about my business and understand the costs and implications of things, all to make sure I run a profitable business etc...

Carin

[pearlescence]

Hi
That all seems incredibly in depth for a small operation. I can understand a huge manufacturer having to weigh and cost every gram of precious metal but do you? Are you a ltd company or making a tax return as a self employed (full time or part time with other employment?)
I'm the head of a ltd company and neither I nor my accountant feel the need to delve this deeply

[camalidesign]

Hi again,

Well, it may seem like a lot for a small company, yes. I am a one man band making and selling jewellery part time (I also have another job as a director of a web design and development company, run by me and my husband). Even so, I want to get more insight into what everything actually costs me and what stock I have etc. Only yesterday Carole posted about not knowing how much stock she had! So, this is my attempt at being more in control of things. I have limited time to spend on this so want to take every opportunity of making my life easier and making my time count. When doing the self assessment tax return you have to put in a stock figure which without knowing some of these things will be a wild guess, which may actually mean that I have to pay more tax than I should, and trust me, I don't want to pay anything more than I need to! I want my business to be profitable and I want to know how and why it is, which is why I am looking over my pricing and also using this software to set up my materials inventory and finished stock. I should then be able to take a look at this and see what I am running low on rather than rummage through my materials to see.

I guess I am perhaps making it a tad too complicated, I shall probably carry on just weighing the finished piece and then using an average price per gram of silver. But, I do want to take into account wastage, so does anyone have a good way of working out "normal" wastage and how do you use that when calculating your materials cost when you cost your pieces? Do you use the silver weight times silver cost/price and adjust it upwards to take into account wastage? I'm hoping that there might be a "standard" rate for wastage out there somewhere! I know I have seen something on here or on "the other forum".

I know this subject is really boring and trust me I would rather make jewellery than do this, but I also want to make sure it's worth it!

Carin

[ps_bond]

TBH, when I'm pricing a piece in silver I base it on the cost of the material I have to purchase to make it. So, for example, if I do a roll printed leaf my materials costs are the leaf skeleton (negligible) and the rectangular piece of silver I printed it onto. Wastage depends on so many factors that you'd go mad calculating it to the gram (and the value of that vs. your time calculating it is somewhat disproportionate). If I then were to pierce out the skeleton as roll printed, my wastage would be even higher - but the labour costs would also be much higher; again, a far larger proportion of the price would be labour than materials.

As far as submitting stock of raw materials for tax purposes, I declare it fairly simply as x kg of gold, platinum, silver (although x might be a fairly small percentage of a kg). Finished items are much easier in that they are stock with a wholesale value.

[christmascakegirl]

Wastage in terms of tax usually applies to businesses where the product cannot actually be sold anymore, for instance, if a baker loses 20% of stock due to the bread going hard, then that is wastage. In thinking of silver I'd calculate wastage as the difference between cost price of the metal and the return value of the scrap. I realise that it's quite difficult to do, but I think that generally a "reasonable estimate" will do. If you're self-employed, then you can't take into account your own labour costs when considering wastage - for who is to put a value on that?

[camalidesign]

Thanks Peter and christmascakegirl (don't know your name!),

I see what you mean Peter, problem is I don't just buy a piece of sheet for one piece I am making, I buy larger sheets of silver and have in stock and so when I then use a piece there is always going to be a little bit of wastage around it, but it will also depend on how much waste other pieces make from that same piece of sheet and of course some pieces waste more than others. I guess I have to try and come up with an estimate for wastage e.g. 20% on average and multiply my silver cost to take this into account. My pricing until now has only been based on the actual weight of a piece, and I think I need to work in a margin for wasted metal that ends up as scrap which isn't worth as much as it was as new stock (wastage "cost" = metal cost minus scrap value?).

christmascakegirl, to calculate the difference between silver price and scrap price would be reasonably simple to do or at least estimate reasonably, but it's the amount of scrap that I need to get to somehow.

I guess there are 2 different things here, inventory and pricing. The former I think I will have to be a bit less precise about because it is so difficult to work out. I will simply weigh stock and scrap and put a value on it for self assessment purposes.

However, pricing should be something that most people have come across at some point in their career. How do you price the silver/metal material cost in your pieces? Is it based on actual weight, or do you add to it to cover wastage etc.?

Cheers,
Carin

[christmascakegirl]

Hi Carin,

I'm Sally by the way. I think the most important thing is just to keep a note of how you've calculated it, just to be consistent year on year, otherwise it all gets too complicated. I'd be interested to know how everyone costs pieces. I was thinking about selling a few bits and had so far only thought "well what would I pay for it?" I never considered weighing the pieces.

[camalidesign]

Hi Sally

I think a common pricing formula is:

cost of making something = Labour + materials (incl. packaging) + overheads

then you need to add some profit, say 15-20% and this gives you the wholesale price.

retail price would be e.g. 2 x wholesale

This is what I use (apart from the profit bit, so that will be added from now on to all my pieces!), but I would be interested in what others do!

Carin

[christmascakegirl]

Thank you for sharing that Carin - I've been happily making bits for family and friends, but started to think about pricing if I were to sell a few things. In a previous incarnation (pre-toddlers) I used to know a lot about accounting, but now I'm only just starting to regain enough brain cells to think about figures. Making silver pieces has certainly opened my eyes to what I've paid for jewellery in the past. Last year I bought my little sister a dainty silver ring with a star on it. It cost me £21. I realise now (after doing a repair on it as well) that it probably cost about £1.20 in materials and maybe half hour labour at most.

Sally