BUYING GOLD OFF the street can keep the money rolling in, but you must account for it in QuickBooks or other accounting programs.
This will be a year for the record books. High gas and food prices, high commodity prices, gold and platinum skyrocketing and Joe Consumer unloading gold in record amounts. It’s back to the 1980s.
If you’re not buying from the public, you should be. There is no stigma attached to it; many high-end stores do it. Servicing the jewelry public means you’re there when they want to buy something and you’re there when they want to sell something, and you should make money on both ends.
Indeed, many jewelers have found it has saved them from financial problems because showcase sales are down. Some have even told me that combined with their repair departments, buying off the street has allowed them to pay down their debts for the first time and still have cash in the bank.
If you’re not buying from the public, you should be. There is no stigma attached to it; many high-end stores do it. Even if you make only 30 to 50 percent on buying, doing it consistently every week and selling it every week gives your store an awesome return on investment.
Turn is the name of the game here and it takes so little to make so much.
But how to account for it in QuickBooks? The simplest way is to assume you’ll send your gold to a refiner every two weeks or so.
So in QuickBooks you’ll need to make two new accounts. From “Chart of Accounts” (in QuickBooks hit Control-A) you need to make a new Income account and a new Cost of Goods account.
With the chart of accounts in front of you, click “Account” at the bottom left and then click on “new” and choose “Income” and name this account “Scrap Gold & Diamond Sales.” At the bottom, click save and new. The same screen returns but is blank. Now change the “Account Type” from “Income” to “Cost of Goods Sold.” Name this account “Scrap Gold & Diamond Buys” and then save and close.
When you buy items from the public, write them a check and use this new “Scrap Gold & Diamond Buys” account. This is assuming you will refine/resell these items quickly. On your profit-and-loss statement, this will show up as a cost of goods. Let’s assume over this week you buy gold from three customers and spend a total of $6,000.
[inset side=left]If you’re going to start buying off the street, contact your local law-enforcement officials first.[/inset]Next week you send all of the metal to a refiner and receive a check for $7,800. Make a deposit into the check register and in the “account” field choose the Scrap Gold & Diamond Sales income account. Hit “Record.” Now when you run your profit-and-loss statement you’ll see your sales, cost of goods and subtract one from the other and you’ll see the gross profit for the month, or quarter if the transactions are spread over two or more months.
Now what if you decide to keep an item you bought off the street? If you have a point-of-sale program (i.e. The Edge, Shopkeeper, Arms, etc) then the item is not a cost of goods but an “Inventory Asset” and should be recorded as such, with a SKU number.
If you’re going to start buying off the street, contact your local law-enforcement officials first. Many states require that you get copies of a customer’s I.D. or hold the goods for two to four weeks to give the authorities time to check out possible thefts. Some require a buying license.
If you’re new to buying from the public and want to learn more, visit: www.selfsufficientjew-eler.net.
This story is from the September 2008 edition of INSTORE.