10.10.23 - Managing Inventory in QBO

Michelle and Dan discuss various ways that business track and account for inventory. Some of these workflows can be accomplished in QuickBooks Online natively, but sometimes there are additional workflows where an outside inventory application is needed. Shawn Coultice from Katana will be on hand to help us navigate some of the more complex workflows and how Katana Inventory Management App can help address some of these workflows.

QB Power Hour is a free, biweekly webinar series for accountants, ProAdvisors, CPAs, bookkeepers and QuickBooks consultants presented by Michelle Long, CPA and Dan DeLong who are very passionate about the industry, QuickBooks and apps that integrate with QuickBooks.

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Transcript

Michelle Long: 0:30

Welcome everybody to another QB Power Hour. Today's topic is managing inventory in QuickBooks Online with a special guest, Katana. We're very glad to have them joining us today. My name is Michelle Long. I am a CPA with an MBA in Entrepreneurship, owner of Long for Success speaker for Intuit, author of five different books, check them out on Intuit, and co host of QB Power Hour for a long time with Dan DeLong. You can check out those links and join our Facebook and LinkedIn groups. Dan, go

Dan DeLong: 0:58

ahead. Yep, my name is Dan DeLong, owner at Danwidth, worked at Intuit nearly 18 years, co hosting today also at School of Bookkeeping, where we do a workshop Wednesday, oddly enough, it's on Wednesdays. And doing the wrapping up the finishing touches on the tech editing for the QBO for Dummies series. Always thought that was a weird title for books, to be acknowledging that you are a dummy by buying the book. But we'll actually have next time on the Power Hour, the author of the QBO for Dummies book. He's actually created a way to download. QBO desktop data and be able to access it in Excel. So he's got a couple of chapters in the book about he's a real good power user of Excel. And he's going to be coming on to talk about that process next QB power hour. And we have a guest. So Shawn tell us a little bit about yourself.

Shawn Coultice: 1:54

Hello, everyone. Yeah. I'm Shawn Coultice. I'm ahead of Channel Partnerships at Katana. I've been in manufacturing and inventory management for about, you know the last 10 10 to 12 years started out prior to that, actually working at a manufacturer myself at a university. We've got two young Children, a four year old and a six year old boy, and it is a little bit colder this morning, so they were putting on their fall jackets for sure. Before

Dan DeLong: 2:22

heading off to school we appreciate you you joining us here today as we talk about and unpack what you can do inside of QuickBooks online with managing inventory a little bit of the details about the QB power hour. It's every other Tuesday at noon Eastern. They're not eligible for CP credit. That was more effective Garcia's thing. You can always check the website for upcoming events. Michelle, you were saying something about the VCon coming up. Do you want to talk a little bit about that? Because we have to put that on the website. Yes.

Michelle Long: 2:56

Tomorrow and Thursday is the mid market VCon from Intuit. If you'd like to register for that, I will put the message... Link to register in the chat There's up to 12 hours of cpe credit and a lot of great topics out there including You know how to get those mid market clients advisory services converting from desktop to online I have a session down there on pricing and how to implement practical pricing great session So i'll put the link if you're interested That is tomorrow and thursday if you can't attend at all go ahead and register and you can watch those

Dan DeLong: 3:29

recordings later Very good. And now some, one of the things I want to mention about the QB Power Hour webinar, Michelle and I, we do this and it's great, right? And what we want to do and what we're, what we always try to do is make the QB Power Hour an educational experience and but, we want to be able to introduce new applications to the market and that's why we have folks like Katana come on. So you can really help us keep us going. Keep it free by supporting the applications that we do bring on and check them out. And you don't have to do anything with that, but find out more information if you see a need or see a fit. Now you can always go to the P D f or get, download the P D F or prior recordings or the podcast on qb power hour com slash resources. And a little bit of housekeeping. So if you have specific questions about the topics that we're talking about here today, please put those in the Q& A to make it a lot easier to not lose them as they go through the chat or the comments, the general comments. Please put them in the Q& A we do have some some folks at Katana also helping here with with some question and answering of the more technical questions about their service. So please put them in the Q& A so that we can either answer them live, answer them through text, or we can follow up post the the webinar as well. If you have just general comments of Burr is cold here too, and I had to put on my mittens please put them in the chat and then of course we have the link there for the handouts as well as the webinar archive. So today we're going to be talking a little bit about the different types of inventory tracking just in, in general, in a business workflow what we've seen of the clients that we've talked to, or the small businesses that we've talked to over the course of our tenure is there, it really falls into three buckets of they're not tracking. They're tracking in a way of either periodic versus perpetual. And then there's various different inventory workflows that inventory, businesses with inventory. And to tend to need and we'll unpack some of those things, and then we'll talk about some of the things that work well with tracking that in QuickBooks online. And then some other things that might require another solution, and then we'll talk about one such solution which is Katana, which is joining us today and Shawn will pack through that and give us a high level overview of that. But first, we'll start off with a poll. Our first poll will be not on my screen, ready to go. There it is. What version of QuickBooks are you using and support with your client? Maybe QuickBooks Online only? QuickBooks Desktop only? Both QuickBooks Online and Desktop? Maybe you're completely virtual? QBO and Xero? Or you don't have a prep? While those answers are filing in Michelle do you have any talks about inventory in general? That's one of those things that either you like it or you don't or you're

Shawn Coultice: 6:33

Born

Dan DeLong: 6:33

about it, right? Yes

Michelle Long: 6:36

When it comes to messes with clients, the two biggest methods that we usually come across are inventory and payable because clients can make those big methods. So these are the areas where the clients, they always need our help. And so it's really. If you like to clean up a good mess, this is a great

6:53

area.

Dan DeLong: 6:55

If you like messes, inventory is your thing.

Michelle Long: 6:58

Clients really need our help in these areas, to not only clean up the mess, but help them prevent the mess in the first place, and to teach them and train them the proper way to account for and track their inventory so they don't have these messes. It's very rewarding to clean it up and fix it. And then to prevent it from happening going forward, but you also have to have clients that are trainable So know thy client is very important and having clients that will work with you is very important And so we're going to talk about those three different options and it's important to understand the client's capabilities and the client's commitments as well because they're an important part of having a successful system Is the client's commitment to it as well,

Dan DeLong: 7:49

that is a good point. You do need to have a coachable, trainable client. Who will listen. To the advice.

Michelle Long: 7:58

I'm just kidding. I'm teasing. I don't advocate violence on your clients. I'm just kidding.

Dan DeLong: 8:04

Although we might want to. We do not want to to actually meet our clients. Or just

Michelle Long: 8:11

let him see the stick. You don't have to use it. Show him the carrot. Let him see the stick. There we go.

Dan DeLong: 8:20

The Teddy Roosevelt of of accountants. All right. So it looks like For the most part, both online and desktop is the winner today. We do have some QuickBooks Online faithful only, and then we also have our desktop only folks as well. So I wanted to talk a little bit about some of the things that we've done in the past. So if you have some In interest in learning a little bit more about maybe what prior power hour that we've done back in 2019. We talked about some six common mistakes in inventory and we talked pretty well about, things that you can do a desktop and things that are in QuickBooks online. So it's really good overview there. I tried to embed it in the slides and it doesn't seem to want to play here and I'm not going to play it today because we're going to be talking about other things today. But there's a link there for for it on Michelle's YouTube as well. We did, but in in the last couple of weeks, Michelle Dahlke and myself have been doing a discussion, a weekly discussion on the Workshop Wednesday about e commerce fundamentals, which is a subset Of inventory management, right? Because that's going to be, one of those unique nuances when it comes to, in managing your inventory is if you're managing it inside of the e commerce space of selling in multiple locations multiple places online so we talk a little bit about the inventory discussion there. I think Rachel is is joined us today. I'm not sure if she's if she's there or not. I can't see the chat flying by, but I'm sure she's there. It said who's going to be, but there's a link there for our inventory discussion specifically, and we talk about other things as well fulfillment and getting your sales into QuickBooks online as well. So you can, those are some. Resources for another time if you need more information, so we're going to talk a little bit about the type of tracking inventory and types of client needs. And we want to break it down into. I'm not tracking it at all. And Michelle and I were talking that there's actually a case for that. And we'll talk a little bit about that. Materials and supplies where it's not necessarily stuff. And this is where my day analogies come to play where I've broken this inventory management into three different. Versions of what you do with your stuff, right? So this perpetual and periodic inventory, we'll talk a little bit about that. But as far as what you do with your stuff, the inventory workflow requirements boil down into, beginning, intermediate and advanced inventory workflows. And it's what you do with your stuff where I buy stuff and I sell stuff. That's a simple thing. Not so simple, but it's simple in terms of what that, what happens to that stuff. Because the next one is I buy stuff, I build stuff, and then I sell different stuff. So I do something to my stuff before I... Finally have a finished good to sell. And then the advanced level is I buy stuff. I need to know everything about my stuff before I build or sell different stuff. So we'll talk a little bit about that and and unpack that. So let's first talk about the type of client or the inventory management workflow where they're not tracking it at all. And typically this shows up as I've, I got a bill from a vendor which has some supplies on it, and I account for it all in purchases or cost of goods sold at that point. Michelle, talk a little bit about that that process and when that's a good good use for some some clients.

Michelle Long: 12:02

For a lot of these small businesses, they don't have the time or the commitment to really track it all. And especially some of, we were talking about some of the smaller businesses that are making things, whether it's Things with recipes or making things on Etsy where it's really hard to track those things because of the nature of what they're doing and the fact that they don't have the time or the Commitment to really enter all those details and to do all that and they're not big enough To even warrant doing that and stuff where it would take more time and energy, tracking and dealing with it. And it's just not worth it. And so you really do want to keep things simple for them and just, keeping some kind of system simple and not tracking it at all. Maybe the right answer for them. And sometimes they do. They say, Oh, I want to track it. I want to track all my costs or else. Another great example that I have. I had a client that was a construction client and they would do remodeling and things like that. Not new home construction, remodeling jobs and stuff. And they actually wanted to track everything like they would go by cases of duct tape. And they wanted to track the duct tape they were using on jobs. And I'm like, Oh my God, are you kidding me? First of all, you can't expect these guys to say, I checked out 10 rolls of duct tape and used 7. 34 rolls of duct tape. It's not feasible. And then we also had to discuss materiality. Who cares? It's a duct tape. It's a roll of duct tape. It's not material. It's de minimus. It's supplies, that's materials to do the job. We also have to talk about what is inventory and supplies and materials that you use on the job, even though they have, they wanna buy a lot of it and keep it in stock so they have it ready to go to use on the jobs. And that's where they'll say I want to track it. So I know we'd reorder it. And that's where Shawn, he says we can help with that, which is awesome because these small businesses want to know when they need to reorder the materials and supplies, but that's not inventory. So there's a case for small businesses that don't need to track their inventory and also don't track it because it's not inventory. If you don't put it on an invoice. Or a sales receipt it never comes out of inventory So we have to also talk to our clients about what is inventory, you know so those are just some things to think about when you're talking to clients about inventory and when you're Deciding do we need to track inventory, so

Dan DeLong: 14:37

anyway all good lessons there for for dealing with those folks, so we wanted to unpack the just the term of Periodic versus perpetual as, as well as, in, in terms of as it comes to come to inventory. So this is something that I learned by talking to Rachel on the workshops, just really, because it really just set, set the light, the light bulb went off Oh, that's what you're talking about. Cause I always thought of if you have inventory, if you're turning on inventory and I always think of it in terms of the QuickBooks, definition. It's going to be tracking the on hand quantity, but there may be a need, not necessarily to be doing a perpetual versus periodic. As the CPA in the room here, how would you explain the difference between the two? So let's

Michelle Long: 15:28

say you have that small business that doesn't want to track inventory. They're not committed to tracking every single thing they buy and everything they sell because with a perpetual system you have to record I purchased five widgets and I sold three widgets. Every single thing you buy You have to record the unit quantity and every time you sell it you record the unit quantity And if you break something or you have spoilage or damage you have to record an adjustment So that you're tracking every single unit of inventory. That is a perpetual Inventory system and that's what we think of when you turn on Inventory in QuickBooks, that is a perpetual inventory system. The alternative is where we're not really tracking every single item, we're using a periodic system. Because the IRS says you have to count your inventory periodically. Not all the time. So the i r S says periodically, usually a year in, usually December 31st. For a lot of companies, you have to take a physical account of your inventory, so a lot of these small businesses won't really track it throughout the year. They'll just record their purchases to cost a goods sold, then periodically, and some of them might do it more frequently like a restaurant. They periodically will count their inventory to see where they are and make adjustments. But some of the smaller ones like Etsy company, Etsy, businesses or some of those, they may only do it a year in, but they will count the inventory and value it to see what they have and make an adjustment to actual. And so it may only be a year in for some of those companies, but that is a periodic system where you count it. Physically periodically, let's say year end or more frequently depending on the business and adjust to actual but you just record those Purchases straight across the default and adjust them

Dan DeLong: 17:25

periodically Yeah, and as don is saying in the chat, it gets very complicated When you're manufacturing and raw materials combining them in typically What's the kind of client or what's the tipping point that you've seen, Michelle, of, okay, you need to track perpetual inventory all the time.

Michelle Long: 17:47

When they get to a certain size and they, when they get to that size and it's not necessarily just volume of sales, but volume of activity. And it might be, a certain number of different different locations that they're selling it. Now, maybe they're selling it through different shopping channels. Now, maybe they have different warehouses. Maybe it's a different product lines when they hit a certain point. Where they can't keep a handle on it by themselves and they need to now Really have a better handle on all their inventory And knowing where it is and being able to manage knowing where it is so that they you know can manage the reorders and things like that. Then they really need a better understanding of it They need to be able to commit having somebody Who's going to be able to enter the information properly because they have to have somebody to afford purchases and sales properly. So that's one of the keys. And I don't say, and this is personally Shawn, I'm sure can give you some insights as well. I don't think it's a straight dollar amount. I think the tipping point is more based on operation. And once the business reaches a certain level of operations, whether it's selling channels or product sales, number of product items but I think it's more operationally once your operations hit a certain level that you mentally can't manage it. Then you need a system and you need the people in place to manage that and that's where you need to go to the

Dan DeLong: 19:15

perpetual system Shawn is that would you agree with that? As the inventory expert in the room What is your experience has been with katana?

Shawn Coultice: 19:26

Yeah, totally I think what it comes down to is when the customer or your client Starts to run into issues with order fulfillment. So often when they're in, when you say operationally I was thinking the exact same thing where you are starting to extend out the fulfillment timeframe from order received. To order actually arriving to the customer, or you're going into grab inventory for a raw material or a finished good, and you actually don't have it in stock and you thought you had it. So when you start to run into these issues that actually start to affect your relationship with your customers, that's when you need to start. Suggesting to your client, let's check out an inventory system cause it'll solve that problem and allow your business to continue to grow.

Dan DeLong: 20:11

Awesome. Beautiful.

Michelle Long: 20:12

Shawn that's what I was thinking. And that's perfect.

Dan DeLong: 20:17

You're

Shawn Coultice: 20:17

a very good Michelle

Dan DeLong: 20:18

Long interpreter. All right, so let's talk a little bit about the basic inventory workflows. Now, we're only have an hour here, so we're not going to necessarily be able to go into a deep dive demonstration of how you do and set up these things. Maybe we'll have Shawn and Katana come back on to just do just that when we, in a future Community Power Hour. But the simple thing of I buy stuff and I sell the same stuff. Typically and Rachel coined this it's a reseller, it's a reseller of hard goods, right? So I don't do anything to that. To that inventory item from the time that I purchase it and I sell it. And these are some of the examples are apparel or toys and games sporting goods. You buy a bat and you put it on the shelf and you sell it. So you've got your you've got your shelves and you've got your way you to market And sell these things, but you don't do anything to that stuff between the time that you start from the time that you buy it and the time that you sell it. Maybe you bundle it together, right? Like a gift basket type of thing, but you're not necessarily changing or altering the item itself. So you've got individual SKUs and those types of things. So then it gets a little bit more complicated when you talk about, I buy stuff. I build stuff. So somebody was in the the Q and a, I was talking about I sell chairs, like how do I create the assembly item, where I'm buying the raw materials, I'm turning that raw, those raw materials into something else. That's more of an assembly process where it's a bill of materials where you're going to be putting in the components of the, of what it takes to make one of those things, maybe there's. Non inventory types of things. Like you were talking about earlier about the supplies of the duct tape or the in this case of a chair the glue that you're going to be using to do that, to make that finish good you've got some, the Etsy sellers of the world COVID has exploded that panel of people doing those types of things, whether by tumblers or, do individual custom items, but they're taking. They're taking something and then turning it into something else, or they're buying in bulk and then selling individually. So you've got your unit of measure set where you have a case and then you sell it, break it into individual quantities to sell. So this gets a little bit more, more, more advanced, but not completely advanced because when we work into the, I buy stuff, I build, I move, I have plans for my stuff, I, before I build or sell other stuff where We have stuff in different locations. Maybe they're on field service trucks or bin locations where you have shelves and a warehouse and you want to make sure that you located where that is so it increases the efficiency of whoever has receiving it or picking it to be able to find it. Or serial number and lot number tracking with recalls and the warranty issues. Those types of things will be indispensable to know who you've bought it from and and when and who and when you sold it to the picking and packing, the receiving planning for manufacturing runs custom builds, the custom item calculating landed costs. So if you want to spread those fees, which are ever increasing of getting your raw materials through your eye, to your facility. And then being able to spread that across the individual cost of the finished item or the finished good you want to do landed costs, you've got multiple sales channels, maybe outlets and then outsourced manufacturers. So that's a pretty exhaustive list of extra stuff for your stuff. Shawn, did we

Shawn Coultice: 24:06

cover it all there? Yeah, I think you did a great job. And what we're finding is, as these smaller businesses through covid started to grow through in North America and being able to supply businesses locally. They've continued to grow. And then with that growth, they've needed to add. different aspects to their businesses. So maybe they're in the food and beverage industry and they had some things that they were providing, they need to add, that lot traceability because that's a requirement to be a food and beverage producer. Or maybe they started sourcing materials from overseas and they really needed to Include that landed costs now so that they do have an accurate cost of goods sold. So a lot of these things as business businesses continue to scale and grow, they start to not need necessarily all of these things, but certainly a few of them. And that's where a software can really help and be much more Support in that business continuing to grow rather than using Excel, because often a lot of these businesses will try to use Excel kind of and have the QuickBooks online running in parallel. And the problem with that is you just aren't updating the 2 systems continuously, and it just becomes

Dan DeLong: 25:21

error prone and inaccurate because we were talking about the AI. This last month and the tech trends that when we talked to Ted Callahan at at QuickBooks headquarters he was talking about, the way that you can. As a business can make better decisions is have accurate information instantaneously, and that would be super helpful. So if you've got this jointed system like an Excel spreadsheet and QuickBooks online, you may get, you may, it may be, there may be some gap between the time of one, one talking to the other. So if you have something that works in concert with each other, then you end up having better information to make those decisions. Shawn?

Shawn Coultice: 26:06

Totally agree with that. And I would add one point to that is having accurate information, certainly, but having accurate information that's available. And so that's where when you look at cloud solutions versus an on premise solution, a cloud solution that has an open A. P. I. Allows you to extend out that solution much further and adopt technology much faster. So if you're looking to adopt and utilize the newest and greatest technology within your business, you really need to source out solutions in a technology stack that will enable that through an open API in the cloud. Got

Dan DeLong: 26:43

it. Let's talk a little bit about what you can do inside of the different versions of QuickBooks to be able to track some of these inventory workflows. We're talking about QuickBooks online, or QuickBooks in the cloud, or inventory tracking in the cloud. So with lead off with what you can do inside of QuickBooks online. First you have to be on plus or advanced. But the functionality, the difference between those two flavors is not gonna be any different when it comes to. Inventory tracking, you're going to have the same function, core functionality in plus versus advanced. Of course, you have the other options of, customer reports and those types of things that might give you better information or be able to extract better information if you went with advanced, but as far as the core functionality of I buy stuff and I sell stuff the, those feet, that feature set is the thing between the two. It's important to note now that the cost basis. Is FIFO. So that means that you have to run your financial reports on an accrual basis because on a cash basis the FIFO record, recording of cost is it's non existent, right? So you do need to run it on an accrual basis inside of QuickBooks because of the FIFO cost basis calculation. But it's basic inventory tracking. There's no assemblies. There's no multiple unit of measure. You do have queues and reorder points so it's ideal for those resellers of of quantities. I buy stuff and I sell stuff, right? So it's. Tracking the quantities on hand. You have all of the things that flow into those workflows, purchase orders into receiving documents. You don't have one thing you don't have in QuickBooks online is a document that doesn't affect accounts payable, right? If you're receiving things and then getting a bill later that workflow is not it's not going to be handled very well inside of QuickBooks online, you're either going to be receiving it on a certain day. Or not, and then you receive the you receive it and then the bill at the same time So that's something important to note any other tidbits that I missed there michelle that you might want to add on to with quickbooks online tracking

Michelle Long: 28:48

No, I think you did a great job. I did mention to people that they should take the advanced training because it's really good. And there's a great guide with details there that they can have access.

Dan DeLong: 28:59

Yeah. So this is the list of yeah, but things when it comes to tracking things with inventory online in inside of inventory, there's no advanced inventory management. That's a nebulous term, but there's no sales orders. So the The concept of a sales order is a non posting document, but it does take away the available quantity so that I don't sell out from underneath somebody else. That functionality is non existent in QuickBooks Online. You can use estimates as sales orders, but it doesn't have that deduction from the available quantity. Partial invoicing sometimes is unavailable. The lack of omni channel sale consolidation Shawn, what is that?

Shawn Coultice: 29:44

I know, isn't that word a little crazy? It's like an industry term, but essentially if you're selling through, say, Shopify, but you also sell maybe point of sale, or you're also selling on Etsy. Like you had described earlier. If you're selling across multiple sales channels, it's difficult to bring in that demand across all those sales channels. And then further to that, it's very difficult. I don't think it's possible to update the inventory at those different sales channels so that your inventory is accurate, that you're showing on your website, as far as what you can actually sell. And that's something that Katana

Dan DeLong: 30:19

could help with. Yeah, there's there is, when we talked about it the future of commerce the commerce tab in QuickBooks Online that's like a combination of periodic with these omni channel sales consolidations, right? If you are actually tracking inventory you really, that's not really your best choice for getting the sales into QuickBooks Online. Using the Shopify, Amazon or eBay eBay sales channel functionality in QuickBooks online, because it doesn't affect your inventory. It's more of a hybrid, periodic inventory adjustment that gets your sales in great, but it doesn't do anything with the with the value of your inventory adjustment. So you end up having to do those periodic. Adjustments to your inventory evaluation. There's no production planning. Shop for data collection. It's unavailable. Really no, no real time job costing when it comes to inventory. And it's it's pretty difficult to scale or to grow like you reach the glass ceiling pretty quickly is really what we're boiling down to. But what about desktop has been around for decades? 30, 32 versions, I believe is the actual count of this day, or maybe it's 34 but enterprise platinum. Has a lot of advanced inventory functionality it gives you that available quantity, how much you're able to sell, negative quantity warnings there's an enhanced inventory receiving, so if you have that event where you receive merchandise and then you receive the bill later, you can separate those into two events, you can auto cost and price update, so as the price changes, there is landed costs, there's multiple Thank you. Multiple locations some of those things are built into the enterprise desktop or platinum edition, but there's drawback, just like there's gum on the shoe, right? You've got installation and setup, there's user license and access to be concerned about because you've got everything. Inside of one place, which might be a solution, right? Great. I've got I would like to have everything in one place. But then you have to the flip side of that point is you want to make sure that you you got to pay for a user license for that person to access just. Certain areas and then you got to set that up and then there's also environment issues of you know How do I do this remotely if we need to or there's windows permissions and things of that nature? To your point Shawn of what you said about an open api. There are integrations that integrate Into QuickBooks, but they have to be supported in that environment that they're in as well. And it might not be the most cost effective solution that's out there. Because especially if you need a hybrid, best of both worlds, where I have online access to a desktop software, you're looking at, a cloud hosting solution or an infrastructure to be able to remotely access that system. And that's going to have an additional cost associated with it as well. That's a lot of things there. So let's let's take a little break in the action here and just Throw out another poll question of what types of inventory clients do you have? It's just resellers or it's e commerce retail. Maybe they're tracking multiple locations large manufacturing operations, or Maybe I don't even want to take on inventory Especially after

Shawn Coultice: 33:37

hearing some of the horror

Dan DeLong: 33:38

stories, that we're talking about today.

Michelle Long: 33:41

So I have a question for Shawn Melissa would like to know what about when a client pays for inventory in advance, like a month in advance before receipt. She's using a goods and transit asset account. What do you do when you prepay for inventory?

Shawn Coultice: 34:00

So in Katana, you would accept that prepayment within QuickBooks Online. and you would have your purchase order created within within Katana, but you wouldn't receive it in. So essentially you can create that purchase order. You can then send it over to QuickBooks Online as a bill and then post the payment to it. And then once that inventory is received in it'll hit your inventory value. At that point.

Dan DeLong: 34:30

Okay.

Michelle Long: 34:31

So in QuickBooks, it sounds like using a clearing account, like an asset account, like she set up. It sounds like that is a good kind of work around there, putting it in. A prepaid asset account and then moving

Shawn Coultice: 34:44

it. Okay. Yep. That's perfect. And Rachel has some good examples of that. I think she made a comment there. Okay, great.

Dan DeLong: 34:51

Thank you. All right. Oh, I forgot to stop sharing because we're going to pass this over to Shawn so we can go at his pace rather than him saying next slide, please. Next slide, please. Let me go ahead and share the results while you're doing that. It does look like there we go. It looks like about 44 percent light manufacturing and resellers are the are the tops there as well as retail. Right across the board there. And then we've got some e commerce, large manufacturing, some drop shipping, those types of things. Running in the gamut of of inventory workflows. Shawn I'll turn it over to you. We have about 20 minutes to... Burn through all of this initial discussion here of what Katana

Shawn Coultice: 35:34

is. Yeah, absolutely. And there's quite a few slides here. I'll try and keep it high level, tell some stories as we go along here. But what is Katana? So Katana is a cloud inventory solution. That helps businesses manage their inventory as well as their production and manufacturing. And then we integrate really well into QuickBooks online, as well as those different e commerce solutions that are out in the market, like Shopify, BigCommerce, WooCommerce, Amazon. And so we help bring all that information together to enable businesses to run a bit more effectively and have better visibility and control over their inventory. And you might ask where the name Katana comes from. Dan had asked me it yesterday. Our founder of the company actually had a manufacturing facility and he went to market to try and find something and he couldn't. And so that's where Katana ended up being born from working and developing the solution for that manufacturing facility. And then as they were coming up for a name, they were also learning more about lean manufacturing and the Toyota way. And so that's where we get the idea of a katana, which is a Japanese sword and stealing some of that idea of creating a lean and an automated environment, enabling businesses to continue to grow.

Dan DeLong: 36:47

So it has nothing to do with Deadpool. It has

Shawn Coultice: 36:50

nothing to do with Deadpool. Great movie, but not related to Katana. Yeah, so Katana, we have around 7, 1700 customers today. And most of those customers are in North America. And one of the things that we really take pride in is the customer feedback that we receive relative to Katana. And if you were to go to QuickBooks online app store or the Shopify app store, you'll see there'll be hundreds of reviews and the average review rating is about 4. 8 out of five stars. And we really attribute that to a few things. But one is the ease of use of the system. So it really is intuitive. You can get up and running quite quickly and learn how the system operates and functions relatively fast as well as the customer support that we provide from our team. So those are two things that we hear often accountants and bookkeepers are focused on when they're partnering with a software solution is that it's easy enough for them to understand and can help their clients out with it. But also that the support's there to make sure that they are supported when they're having to get back to their customer with some information so that they're, keeping in good standing with their customer. So what the ideal customer look like at Katana, you'll see on the right here, there's a bunch of different industries. So you might have apparel. Companies that man it manufacture maybe furniture cosmetics. We work well in the food and beverage industry because we do have that lot treat and batch traceability on the electronics industry. We do really well because we have a serialization. So if you have customers that need serial number tracking, we have that also built into the product. But namely one of the main areas that Katana has a lot of success is if you were to look at a specific technology stack. So if the customer has Shopify and QuickBooks online and they're managing inventory they're likely a good candidate to take a look at Katana to help them manage that inventory more effectively, ensure that their cost of goods sold is accurate and have a nice smooth workflow between their e commerce store, creating that demand through to their inventory solution to help them fulfill that demand, and then rolling that up into the financial solution so they can run their business effectively.

Dan DeLong: 39:00

Immediately, when you're talking about advanced inventory options and I see the chats in here and some Q and A's, how does this compare to others that are out there? Where does Katana fit? Because one of the things that really impressed me the most is what you guys call is your transparency of like where, what lane do you drive in? When it comes to the inventory and where that fits in the scope of all of the other. Inventory solutions

Shawn Coultice: 39:28

that are out there. Yeah, absolutely. So the main ones that we see in the market that we, would consider competitors might be like sin seven core and fishbowl. So if we're looking at fishbowl, a comparison might be that they're more of an on premise solution. They really haven't made that transition to the cloud. And I believe that they're coming out with a cloud solution, but it's going to be a lighter product. I don't believe we'll have manufacturing. And so if your client is looking to go and move to the cloud, as well as you're looking to offer your services and extend those out, often a cloud solution makes a lot more sense for an accounting firm. to support their clients, that's where Katana would be a differentiator from that solution. When you look at SYN7 Core what we've heard is it is, it does have some more functionality built into the software. They're a little bit further down the road, but built into the software what we hear is it can be a little bit more complex and take quite a bit longer to actually get up and running. So the total cost of ownership Can be more expensive when you're looking at something like sin seven core. So Katana is more affordable solution, but we might be missing some of the features that, that something like sin seven core could potentially offer. But most of those things are on our roadmap and we'll actually have a lot of that covered off. And one of the reasons way we differentiate just overall is ease of use. I invite anyone that's here to go and start a trial. You can get a free 14 day trial and. You can sign up to our partner program and we'll extend out that trial so you can really, see how the system operates and that'll be a great way to see that ease of use in action as well as the support our team offers. And then as far as custom cut. Yeah, go ahead, Michelle. What's up?

Michelle Long: 41:04

I was just going to say, we're talking a lot about the bigger kind of companies and the bigger packages, but you guys also offer a 99 package. And can you mention something about all of these smaller companies and the growth that you saw with them over like COVID and all of those. Because there's a lot of our clients that are that size as well. I don't want them to get overlooked.

Shawn Coultice: 41:28

Yeah, absolutely. And I think that's where Katana does really well. So where Katana really skyrocketed was during that COVID period where there was a lot of these local manufacturers starting to pop up and need something to help them continue to grow in these, e commerce sales that they were making. And they needed something to help them manage that inventory. Can you hear me okay?

Dan DeLong: 41:53

That was

Michelle Long: 41:55

I can hear you and I can hear Shawn.

Dan DeLong: 41:58

Okay. I can hear you guys as well. Okay. Yeah. It came back.

Shawn Coultice: 42:04

All good. So during COVID we, our Katana grew about three X in that first year. And we just saw. A ton of customers coming in that were smaller. They needed many of them actually were running the businesses out of their garages where they, saw a need in the market. They were manufacturing these goods and they needed to track, some of the, those raw materials and know what they needed to buy to make sure they could fulfill the orders. That they were having to start rolling. And so that's where we saw a lot of growth within the company. And we still have a lot of customers that are under that 1 million in annual revenue mark that are using Katana with that 99 plan to get up and running, get some systems in place to give them that better visibility and then allow them to continue to grow and scale. So it's definitely much more attainable for some of those small businesses from a a cost perspective, but also from a usability perspective where they can understand where the sales orders are coming in, how to set up that inventory and connected even to QuickBooks online or Shopify. It's really straightforward and almost anyone can do it.

Dan DeLong: 43:08

Thank you. Let's press on. Yeah, okay, cool. We're coming on the top of the hour. We may go a little longer if you're okay with that. But we want to be cognizant or aware of The hour for the folks that are

Shawn Coultice: 43:20

joining us. Totally. Totally. I'll keep moving along here. So how Katana helps we do have that real time inventory and that's a really key aspect when you think of Katana. So often these companies are pulling in those sales in real time from that, that Shopify store, and it's going to come into Katana and it's going to create demand for that finished good, which they need to fulfill. But if that finished good is made up of components, it'll create demand for those components immediately as well. So they can go out and buy the materials they need based on that demand rolling in real time. So it really helps companies make decisions as those orders are coming in where most solutions you would actually have to have that order come in. Maybe they have to import their orders into a system because they can't connect to that e commerce channel. And then they have to go and create the manufacturing orders to actually create demand. For the raw materials in Katana, we do that all in one step. So you actually automatically are seeing the demand for those raw materials in real time. And that creates a really nice flow for the purchase order management. We can connect to multiple sales channels and pull that demand in. We've got manufacturing operations so we can track those shop floors on the those jobs on the shop floor. We can schedule the shop floor with drag and drop functionality so you can prioritize your jobs really easily out on the shop floor. And it's where I came from in a manufacturing environment. I used to work in the in the the scheduling area of the company. And the way we would organize was with paper, we'd stack up the most important orders would go on top with Katana. We digitized that process and made it really easy to make sure your most important orders are being worked on the shop floor. And then of course, we connect directly into QuickBooks online. So what's happening in the market. I'll just highlight a couple of key things. The trend to moving to hybrid order fulfillment. So more and more manufacturers are offering a customized product that is specific to that individual customer because they can charge more for it and that's where you need this sort of make to order a workflow enabled, but also they still have a standardized product that they can sell at a lower price point. So a lot of the, our customers, about 70 percent of them utilize both a make to stock and make to order workflow. Another thing that we're seeing is that. They're selling through multiple sales channels and fulfilling those orders in multiple ways. So they might buy and sell some products in that resale format. They might manufacture some goods. They may even outsource, manufacture some products and have someone else build it for them. And so those different workflows require software to help track everything that's going on within the business. And Katana has that flexibility to help those businesses utilize or. Operate in those different workflows seamlessly. And then one things we hear often is when clients are coming into some of the accounts we work with that don't have a system in place, their financials tend to be really out of whack if they have inventory. So one quote was they that, 80 percent of the clients that come in. Their financials are a mess because they're managing inventory. And I think Michelle had said yesterday, she's pretty sure it's a hundred percent. So there's a lot of opportunity for accountants and bookkeepers to add value to businesses that manage inventory. Michelle had alluded to it earlier that you can really help a business run much more effectively and have a major impact on these businesses that are managing inventory because typically their financials are in dire straits. One of the things here is this sort of resource challenges that's on the rise. And a key thing here is 75 percent of businesses are struggling to attract and retain a quality workforce. And one of the things that I think are an opportunity for bookkeepers and accountants is to capitalize on that from an outsourced service perspective. Getting that, that business on Monthly subscription to the services that you're providing and extending out that service offering beyond maybe, traditional bookkeeping and starting to offer advice around what technology stacks what would be most advantageous for them. And we've seen Rachel do a lot of that in partnering with Katana. She was brought up earlier and she's really taken her bookkeeping business has that expertise in e commerce and is really becoming a resource and consultant for the clients that she's working with and helping them set up the software that's going to enable them to continue to grow. And we'll keep moving on here. Reshoring and manufacturing and offshoring accounting sort of the manufacturing is growing. We're seeing nice growth rates in North America around manufacturing coming back from overseas, as well as these local manufacturers. There's a lot more demand in the market for people to buy locally. So there's more customers available for accountants and bookkeepers out there. But there's also a more complexity in those businesses and those businesses can't offshore the financial services that they need. They can't have AI come in and do their books because it's more complicated. So you can add a lot more value into those businesses. And so some of the main struggles that we're seeing, and I hear consistently, and I'll just touch on one is inaccurate costs of goods sold. So if a company has inventory or they manufacture. Typically, they have a big challenge in tracking and understanding what that cost of goods sold is, and that can lead into a lot of issues with business actually understanding how profitable they are. So with Katana, we really have a real, a really solid real time cost of goods sold calculation that's going on. We're looking at landed costs. We're looking at the operational costs as well as the materials that are rolling up to your finished product. And then we're syncing that cost of goods sold to the invoice over in QuickBooks Online. When that sales order is shipped out. So there's a really nice integration there to roll up that cost of goods sold.

Dan DeLong: 49:10

All right, let's let's blaze through high level things that Katana does and then we'll hopefully get to some Q& A near the end.

Shawn Coultice: 49:20

Yeah, absolutely. Sounds good. We talked about it. Bring all your sales channels together. This is an image of what the sales order screen would look like. And we have the sort of green, yellow, red stoplights to help indicate what is going on with that particular piece of information. And should you go and take a look at it? Then we look at your inventory insights. So a really solid real time inventory screen that allows you to see what's expected based on open manufacturing orders or purchase orders, what's committed from your sales order demand. What's your reorder point? And then what do you have missing or in excess of that? You might need to go out and purchase or manufacture in your inventory. And then we have the ability to really have a seamless workflow to creating those purchase orders based on your demand so you can issue your purchase orders right from that inventory screen and then email that directly out of the system to your supplier and then production. So if they are a manufacturer, your client is a manufacturer, you can track. The operational costs, you can send that out to the shop floor and they can track that through production as well as the material cost. And you can have that roll up into your total cost of material as well as the labor that's used on the job.

Dan DeLong: 50:33

I really like this part. This is really what struck me when I saw the, watch the demonstration is that you can, and this is what you were talking about where you digitize that, the priority where you can just drag and drop a particular. Production run and it will in real time go out and make sure that you have the available quantities to make or fulfill that order and give you that green light, yellow light or no red light.

Shawn Coultice: 51:02

Absolutely. And then also identify when you're expected to finish that order based on the availability of material and compare that to the deadline. So then you can identify, oh, this order is going to be due after my promised date to the customer. So it's a great way that you can know ahead of time that I can call the customer up or I can call my supplier up to try and, make sure that the customer isn't unhappy. Financial stability is a really strong integration at QuickBooks Online. We continue to improve on that. QuickBooks Online. So we'll continue to work and update some of the things that we were meeting with Rachel and some of our other partners this morning to understand what, what is missing within that QuickBooks online integration that we can even make it better and a stronger integration. So something we're continuing to work on and improve. And today it is really strong. It's making journal entries where we're increasing the inventory value. We're decreasing when you do a purchase order, when you're creating a. A sales order and an invoice. It's going to decrease your inventory value, increase your cost of goods sold. So all that is happening automatically with that QuickBooks online integration. And

Dan DeLong: 52:06

you have a nice slide that kind of, this is what I was talking about, yeah, so it gives a direction of which way, what's bidirectional and what is one way or the other. The transaction goes over into QuickBooks if it's a sales order, it turns into an invoice and then you'll be able to take it from there. Bills and, or purchase orders and whatnot they come over and then you can continue with that. Somebody was asking, does it. So it's synchronized with bill.com, not per se, through, through Katana, but you would then be sending that over into QuickBooks and then paying the bill through

Shawn Coultice: 52:40

there. You got it. Exactly. Yeah. So QuickBooks online's gonna handle the invoices, the bills and then Katana's gonna handle the sales orders and the purchase orders. And then we're gonna communicate by sending those over from Katana to QuickBooks.

Dan DeLong: 52:56

All right, any other and then you have this other nebulous one, right?

Shawn Coultice: 53:00

We don't need to go into this. We'll send out the desk, the deck after the presentation. But this just gives you an idea of the different things that are being handled within Katana. So sales inventory purchasing and then within the, within that and then what's being sent over to the financial solution with your cost of goods sold as well as some of the Other information there. And then I don't think we tech stack flow chart. Yeah, exactly. Just to give some idea around what's going on. But why don't we open it up for questions? We're right at the end of the hour here. I don't need to. There's only a few more slides. We'll send out the deck after. Why don't we open it up for some questions?

Dan DeLong: 53:42

Yeah, I think what version of QuickBooks online do they need? Do they need? Does it work with all versions or does it work with does it work better with certain versions? What flavor of QuickBooks Online? So

Shawn Coultice: 53:55

it will work with all versions of QuickBooks Online. So when we do send over the inventory into QuickBooks Online it will Often the items are set up as non inventory items within QuickBooks Online. And so it will work with I think any version of QuickBooks online. I think there's four different levels to it, though. Most of our customers we did a study on this. Most of our customers are using the advanced, the second, not the most.

Dan DeLong: 54:26

That would be plus. Yeah. Yeah.

Shawn Coultice: 54:28

So the one down from plus would be, I think advanced. And so that's what most of our customers are currently using today. I don't know exactly why, but around, I think it was 75 percent of our customers that are using QuickBooks Online are

Dan DeLong: 54:42

on Advanced. Yeah, I think Class is probably one of the key features for Plus that you'll be able to classify, these various sales channels, Shopify versus Etsy versus eBay, those types of things, that is probably that in tracking inventory quantities might be the might be the classification. What do you think, Michelle? Yeah,

Michelle Long: 55:04

I agree with you about using QBO plus for the reporting purposes to be able to get the kind of reports that you want and need and stuff like that. The one thing that would be nice about advanced would be able to have the advanced reporting and to be able to use spreadsheet sync to do some additional reporting if you wanted, but there is that additional cost. So I don't know about that. You'd have to weigh that.

Dan DeLong: 55:27

Michelle, did you see any questions fly by while we were while Shawn was doing his thing?

Michelle Long: 55:34

Somebody was asking if Katana will integrate with QBO Global. Is it U. S. only? Or is it available for the Canadian versions? And what about any of the other global versions?

Shawn Coultice: 55:45

It is available globally. I think that is one of the unique differentiators. One of our partners that's in the QuickBooks Online ecosystem had identified Katana as the only solution in the market that could work with his clients globally. I don't know if that's true or not, but that's what he had said why he decided to partner with Katana and he's got customers. In Italy and in South America. So he's got customers all over the globe and utilizes Katana. As his go to inventory solution.

Dan DeLong: 56:16

So I think and one of the things I wanted you to point out, Shawn is, the person who started Katana was looking for his own solution. And that's one of the things I think that's so great about some of the folks that have partnered with the QB power Hour is that they went out looking for a solution, didn't find it, and then took it upon themselves to create their own. Talk a little bit about that.

Shawn Coultice: 56:39

Yeah it's really interesting. So it was a larger manufacturer that he, not a larger, like he's actually based out of Estonia. And he had midsize manufacturing company and they were looking for an inventory and manufacturing solution. And what he had to look at was like SAP and Oracle and these larger systems that were really complex and extremely expensive. And that's where something like Katana came came to light. His best friend was actually one of the developers of Skype. I don't know if you guys remember Skype the calling platform. And that was actually developed in Estonia. And so him and the Skype developer partnered up to start developing Katana. And so that's where it began is he went to market to try and find an easy to use. cloud based manufacturing inventory solution. And he wasn't able to find one that was cost effective. And he decided to work together and created the company. And I guess it's about seven years later now, we've got, almost 2000 customers using the

Dan DeLong: 57:43

system globally. Awesome. And you guys have been nice enough to give our listeners or attendees a An extra 30 percent off if you go through the. Through our friend, Jason, who's been lurking in the background, answering questions. The links on the Kibbe Power Hour page it's also in the in the slide if you download it. And if you're listening to the podcast later you will, it will be in the show notes. All of those things are available there. We appreciate you joining us today. We did go over a little bit, so appreciate those that hung around for a little bit. Any final thoughts Michelle?

Michelle Long: 58:19

I just was going to point out that Jason just. Put in the chat that it does work in the cannabis industry and so that is good to know because they are always needing to track inventory. That is a very important thing in that industry. So that is very good to know. But I think this has been awesome. Shawn, you guys have great solution and you've done a fabulous job. So thank you guys for coming. And Jason in the background. So thank you guys very much. It is very impressive. Thank you. And wonderful. Thank you, guys. And thank you, Dan.

Dan DeLong: 58:50

All right. We will see you next time on the QB Power Hour, where we'll be discussing how to download something from QuickBooks Online Advanced into Excel, so you don't need QuickBooks Desktop. So for those of you that are virtual only, but still have a desktop client or want to have something tangible, that would be a good one to tune into. And we'll see you in a couple weeks on the QuickBooks Power Hour.