Understanding Sales Categories
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Design Manager uses a system of Sales Categories to associate the specifications for a Client with the desired General Ledger Revenue and Cost of Goods Sold Accounts. When creating specifications, a Sales Category can optionally be assigned to each Item for the Client. Doing so allows the user entering the specifications to choose a categorization of the Item, "Furniture" for example, instead of having to choose the correct General Ledger Accounts. Many management reports may also be sorted and subtotaled by Sales Category.
Before entering Items into a Project, you should decide on the Sales Categories you wish to use. Design Manager comes with a preset list of Sales Categories which are typically used by design companies. You can, of course, delete them and define your own Sales Categories or simply modify the list shipped with Design Manager. The current list of Sales Categories can be printed by clicking the Reports button and selecting Glossary Listings - Sales Categories.
To add a new Sales Category, click Glossaries - Sales Categories which will display the Sales Category Glossary Window. Click on the Add button at the bottom to enter a new Sales Category or press the Edit button to edit a highlighted entry. Doing so will launch the Sales Category Window shown below.
The Sales Category Code is the first field on the window. The Code may be up to 5 alphanumeric characters. A descriptive Code assists users in recalling the Sales Category. A longer description may be entered in the Name field to further identify the Sales Category. You may edit the Name in the future but not the Code. As in all Glossaries in Design Manager, once the Code is assigned, it cannot be changed.
Below the Code and Name is a frame for each type of specification (Merchandise, Freight, etc.) used in Design Manager. For each type, you can designate the Sales (Revenue) Account and the COGS (Cost Of Goods Sold) Account. The Sales Account determines which Revenue Account will be affected upon invoicing the client for the particular type, while the COGS Account defines the Account affected upon entering Vendor Invoices.
Along with the Sales and COGS Account, a Company Default option is available for each type. Selecting this option will always set the Sales and COGS Accounts to the current Accounts on the Sales and COGS Account tabs of the Company Information window for the given type. The Account fields will also be disabled to prevent a user from changing the Account. An example of using the Company Default option may be for Freight. If you have a single, common Account for all Freight sales and a corresponding Account for Freight costs, these Accounts should be recorded on the proper tabs of the Company Information window. Next, edit each Sales Category and select the Company Default option for Freight. Now, all freight will go to the correct Accounts upon invoicing the client or posting a vendor invoice for freight.
How Sales Categories Affect Accounting Transactions:
As stated above, the Sales Accounts are used during the posting of Client Invoices. Design Manager examines each Item on an Invoice prior to posting. If a Sales Category is entered for an Item, the Revenue Accounts assigned to the Sales Category will be used. Each Account will be credited for the portion of the Item associated with each type of good or service. The COGS Accounts of the Sales Category are affected either by posting Vendor Invoices or Client Invoices. The determination depends upon how Work in Process is configured. If WIP is being used, posting the Vendor Invoice places the activity first in the Work in Process Account. Upon invoicing the client, the activity moves out of Work in Process into the proper COGS Accounts of the Sales Category. Remember, if the Item is not assigned a Sales Category, the Company default Sales and COGS Accounts will be used. For more information on Work in Process, see Work in Process.