Fishbowl Inventory Accounting Basics

Fishbowl Accounting Basics

Understanding the Integration with QuickBooks

In a Fishbowl –QuickBooks world Fishbowl is the master for Vendors, Customers and all Inventory transactions.  QuickBooks is the master for the chart of accounts.  Fishbowl pushes transactions to QuickBooks.  Changes in QuickBooks are not reflected in Fishbowl.  Therefore it is important not to modify Fishbowl transactions in QuickBooks.  If you make a mistake in Fishbowl you need to fix the transaction in Fishbowl and allow the fix to update QuickBooks.

Fishbowl events that cause a transaction in QuickBooks

Shipment of items on a Sales Order

Receipt of an item on a Purchase Order

Fulfilment of all or part of a Manufacturing Order

Inventory Adjustments

Fishbowl transactions which do not drive a transaction in QuickBooks

Creating, issuing or modification of a Sales Order, Purchase Order, Manufacturing Order or Transfer Order

Costing Methods

Fishbowl supports four costing methods

·         Average Costing

·         First In First Out

·         Last In First Out

·         Standard Costing

You choose the costing method the time you set up the Fishbowl file.  The costing method cannot be changed without starting a new Fishbowl File.

Account Mapping

There are two places where you map the accounts in Fishbowl to QuickBooks, the default mapping, which is mandatory and is based upon the Fishbowl part type and individual part account mappings, which are optional.

Sales Orders

 Shipping products from a Fishbowl sales order drives two transactions to QuickBooks, an Invoice to record the sale and a Journal Entry to record the cost of goods sold.  These entries are independent, ergo if you change the date on an invoice after it is posted to QuickBooks the Cost of Goods sold entry will retain the original shipping date and you can get revenue in one period and cost of goods sold in a different period.  So of course we never change dates on Fishbowl transactions.

       Purchase Orders

 Fishbowl, similarly to QuickBooks has a two-step process to receiving and reconciling inventory.  Step one is to receive the parts in the receiving screen, at which point Fishbowl sends an Item Receipt to QuickBooks.  Step two, which should be done by the person responsible for accounts payable is to “reconcile” the vendor bill to the receipt, at which point Fishbowl sends a Bill to QuickBooks and deletes the Item Receipt.  The date on the reconciled bill should always be the date of the original receipt.  If it is not the same date then we have what I call dancing dollars in QuickBooks.  An example I receive a part on November 1st, but the vendor bill is dated in October when they shipped it.  If I use the vendor’s bill date I will move dollars from November to October making the Inventory Valuation from Fishbowl on October 31^st smaller than the QuickBooks dollars on October 31^st.

Work Orders/Manufacturing Orders

When you fulfill a work order in Fishbowl, either partially or completely, the component costs are rolled up into the cost of the finished good.  If you are using a single inventory asset account and your bill of material contains only inventory type parts, Fishbowl will not post an entry to QuickBooks because it would be both a credit (component parts/raw goods) and an equal debit (Finished Good).

If you have multiple Inventory Asset accounts, Fishbowl will send the appropriate Debit and Credit to the mapped account for that part.

If your bill of material includes other part types, non-inventory, labor or overhead, when you finish a work order containing these type of parts Fishbowl will send a debit to inventory to reflect the increase in the value of the finished good and a credit to the Expense Account mapped to that part (if no mapping, then to the default account for that part type).  The cost used for non-inventory parts is the “Cost” entered for that part under the detail tab in the part module times the quantity consumed.  If no cost is entered then there will be no increase in inventory value.

Inventory Adjustments

The types of inventory adjustments that are done within Fishbowl are:

·         Cycle Counts

·         Add Inventory

·         Cost Adjustment

·         Scrap Transactions

·         Add Initial Inventory (only happens when quantities are imported directly from QuickBooks)

Cycle Counts – These are the routine “Oops Fishbowl says I have five and I really only have four on the shelf so, I’m going to fix Fishbowl” sort of entries.  These transactions drive a journal entry to inventory and the inventory adjustment account.

Add Inventory – I use this adjustment type when my on hand inventory is zero to protect my costing layers.  The advantage to the Add Inventory adjustment type is that you can assign a cost to the parts you are adding.  This transaction type drives a journal entry to inventory and the inventory adjustment account.

Cost Adjustment – If for some reason (usually fat fingers), the cost of a part is incorrect and you change that cost in Fishbowl, Fishbowl will calculate the cost change times the quantity in inventory at that time and send over a journal entry for the difference to inventory and inventory adjustment.

Scrap Transactions – I like to differentiate these transactions from Cycle Count Transactions.  I like to define scrap not as an oops I have less than I thought I did, but as the parts are there on the shelf and need to go in the trash.  This adjustment sends a journal entry to Inventory and the Mapped Scrap Account.

Initial Inventory Count-  which is only used upon initial import of inventory quantities  directly from QuickBooks to Fishbowl from the Fishbowl accounting module and which make no financial entry in QuickBooks. 

Costing Layers – used for Average, FIFO & LIFO

Fishbowl keeps track of all the costing layers (Buy at $10, Buy at $8, etc.) in order to calculate Cost of Goods sold.  It’s important to not introduce artificial layers with zero cost.  I’ve seen this happen when clients have decided to use zero dollar purchase orders instead of inventory adjustments to add inventory to the system.

Standard Costing

Standard Costing is when you set the cost of each part based upon accounting judgment.  I only favor this method of costing for those Companies who have fairly static number of parts.  If operations is frequently adding parts or the bill of material configurations change frequently it is very easy to skip the standard cost field in Fishbowl.  If no cost is entered in the standard cost field then when this part is purchased or built the part will be valued at zero dollars and the actual cost will be a 100% percent variance.               

Drop Ship Purchase Orders

To simplify the placement and fulfillment of drop ship purchase orders Fishbowl has some automated work flow for these Purchase Orders.  In the Sales Order module you indicate which items on the Sales Order need to be ordered from your vendor and “dropped shipped” to your customer.  Once you issue that SO Fishbowl creates a linked PO in the Purchasing module.  Typically the vendor notifies you that they have shipped the order.  At that point you receive against the PO in Fishbowl and Fishbowl Fulfills both the PO and SO at the same time.  Because these parts never hit Inventory Fishbowl skips the Debit to Inventory and sends the Receipt dollars directly to Cost of Goods Sold.