CNC Plasma Business and accounting questions.

[slammedxonair]

Hello everybody, I am just wondering how others go about doing there books, accounting and some other aspects of a CNC plasma /fabrication business.
Steel sheets are obviously raw materials> cost of goods sold
Do you use plasma consumables, weldering materials as shop supplies or as a cost of goods sold?

What do you do with parts that get messed up being cut on the cnc or whatever? Just scrap them and try to recoupe some of the money you pay for the raw materials? Can messed up parts be wrote off as a loss of income or soemthing along those lines?

How about the scrap material that is left over after cutting out the parts?

I just want to get some other views on how these things are done by other people. Thanks.

[Bigrhamr]

Well I'm definitely not an acccountant and taking my advice on financial advice would be risky at best. But, since you asked here's what I know, or was told by my accountant.

Basically anything that is tangible in your finished product, (you can see it,touch it, etc...) is a material and intangible things, (plasma consumables, welding gas, solvents etc..) are supplies.

And as far as the practice or junked parts they told me definitely write off materials but after that it gets a little more complicated. If you are paying someone a wage to make those parts then that is a deductible expense. If you are a one ring circus like me they said claiming for your own time can get touchy if you are audited.

And that's my story for what it's worth, which isn't much!

[slammedxonair]

Yea I have been doing it for a couple years now and I just take my books to my CPA at the end of the year. Thats kind of how I have been doing mine but I was just looking to see what others had to say as I really have not had to really deal with inventory and many wasted parts up till this year where I'm starting to cut alot more parts. And yea its just me here for right now.

[millman52]

Yea I have been doing it for a couple years now and I just take my books to my CPA at the end of the year. Thats kind of how I have been doing mine but I was just looking to see what others had to say as I really have not had to really deal with inventory and many wasted parts up till this year where I'm starting to cut alot more parts. And yea its just me here for right now.

Here I don't "inventory" raw materials, it is written off as cost of goods sold as soon as it arrives. Likewise If I cut stock parts, they don't go into "inventory" either.

It really doesn't take a very big rack of 1045 CRR & other bar stock + 1/4" through 1" HR plate to add up several thousand dollars of "inventory"

I just don't make up "stock" components (other than torch table items) & then only to use scrap parts of a sheet that would otherwise end up in the scrap hopper.

Now if you have this stuff cataloged as of July1 you pay personal property tax on your "inventory".

It really depends on how creative your bookkeeper/CPA will allow you to get.
Good accounting services aren't cheap either. The more detailed your books become the more involved your tax return(s) get.

[WSS]

slammed,

If your not incorporated yet, ask your CPA about it (if he says there is no benefit, go somewhere else). It has some cash outlay to start with but it has many advantages. One being a shield between your personal and your business. Plus you can "take a wage" like a employee and pay taxes like an employee, get yourself out of that "self employed" tax bracket.

I will put in the same disclaimer as Bigrhamr! Ask your CPA, ask two CPA's.

Cheers and hope 2010 is profitable for everyone

WSS

[slammedxonair]

yea I have pretty much did that as listed above and never claimed inventory or anything like that yet. So far I have just done the basic income expense thing.99% of the products I sell are not custom or like bulk customer orders (although I wouldnt mind the extra work) and more less my own product line so to speak. If I ever change from a sole proprietership it will be to an llc and thats it.