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Statement of invoices for Production

in this video I'm going to show you how to use chat gbt to augment or enhance your accounting experience and knowledge so that if you are taking on a new role at a company where the role is maybe slightly bigger than you you can use chegebt to come up with detailed answers on some of the questions that come up when you're taking on a new role at a company so I'm going to go ahead and ask very specific questions I have five questions that I'm going to ask chargt and I'm going to show you when we're going to assist together how detailed and accurate are these answers from an accounting perspective so let's go ahead and Jump Right In All right so we're going to assume that our company is in the manufacturing space and has annual sales of about 1 million dollars so this is kind of a small company okay so we're going to ask specific questions on the setup of the accounting process for the company and you're going to want to stick around till the end because the final question is probably the most important one that you get asked when you take on a new controllership or a new accounting leadership role at a company so let's go ahead and start with the questions and first one is about the choice of the iconic software so let's say you're taking on a roll of the company and you're being tasked with choosing an accounting software for the business so we're going to ask Chad gbt here hey we have a company any manufacturing space with one million dollars annual sales what do you recommend as far as accounting software so let's go ahead and type that in all right so we open up a chat GPT window here and we can ask it the first question and we'll say what accounting software should I use for a manufacturing company with one million dollars in annual sales and why all right let's check the answer so it's going to say Obviously there are a few options in the market to choose from it's going to say QuickBooks Online which is a valid option for a small business it's going to recommend Sage Sage also is a leading software in the small business space netsuite netsuite is obviously a more comprehensive solution which is a very valid option as well all right and it's going to say you know ultimately ultimately the decision on which iconic software to choose will depend on your specific business requirement budget and all this stuff so we're going to go ahead and say you know what if we have a limited budget here so we want to test check gbt and say what if we have a limited budget so let's ask that question so which one do you recommend based on a limited budget all right let's see what it says all right if you're looking for an iconic software with a limited budget QuickBooks can be a good choice QuickBooks offer various features that can cater to the needs of a manufacturing company with a million dollars in annual sales okay this is actually a good response here QuickBooks online is pretty decent and pretty affordable um it's not the best option so netsuite most likely is probably better for a manufacturing company so I'm going to go ahead and ask chai gbt and say what if I have a limited budget or budget is not an issue here in this case so let's go ahead and ask the question so which option if I have a really big budget let's see what it comes up with if you have a really big budget and looking for a more comprehensive accounting software netsuite Erp can be a good choice okay so this is a good job from chat gbt netsuite is obviously the big leader here in the manufacturing space when it comes to an accounting software so so far so good so we've asked chai gbt to recommend an accounting software and I told us the options it told us if you we are on a budget which one to use so if you're working at the company and their mandate is that you have a limited budget so net so QuickBooks Online is going to be the option for you if you have a bigger budget netsuite is the option to go with all right so let's say that we now know what accounting software to go with and the next thing that's going to come up is going to be the chart of accounts so how to set up a chart of accounts a chart of accounts is a listing of all of the accounts that are going to roll up later into the financial statements so for example for cash you might have multiple accounts one for each Bank a bank account that you have for accounts receivable you have one account and then you have multiple other accounts for inventory other assets liabilities and all this stuff so we're going to ask chai gbt how to set up a chart of accounts it's going to guide us into the process so let's go ahead and ask the question I'm going to say give me a list or a full list of accounts in a charter a chart of accounts for a manufacturing company all right let's see here is a sample chart of accounts and it's saying assets you know what are what types of current assets would you have um you know property here are the different kind of property plant and Equipment accounts intangible assets liabilities you know current and long-term liabilities equity pretty good Revenue accounts expenses okay so far so good but there are some accounts that I'm not seeing here so this is probably pretty basic so for example for inventory I'm not seeing work in progress or finished products maybe that that should be a distinction for inventory so this is probably like pretty basic Bare Bones um chart of accounts which is good to start with and then you can go ahead and customize it more in the accounting software and if you're looking for more guidance on setting up the shot of accounts I made a video on that in the past I'm going to go ahead and Link it up right here but this is pretty good for a shot of accounts too as a starting point if you are out of your depth and you don't know exactly what to do this is a good starting point for a chart of accounts okay so this is question number two let's go ahead and ask it um an important aspect for a manufacturing company is how to manage inventory okay so the accounting side of managing inventory is pretty important so we're going to go ahead and ask it that question and see what kind of guidance we get out of it so I'm going to say what's a good accounting process for inventory for a small business all right so it's going to say that a good accounting process for inventory management um it's going to consist of a few steps uh tracking inventory level Coastal goods sold inventory evaluation all right this is good General guidance but are are there more specific steps here to follow here are some some steps all right so it's going to talk about choosing an inventory evaluation method so that's pretty good right so it's going to say you know there are a couple of big ones you know first and first out which is fifo or Los Angeles out or lifo which is a pretty big decision to make in a business so we're going to go ahead and ask the follow-up question should I use fifo or lifo this is a pretty important one all right so this is the first uh point that it's making it's going to say you know to set up the inventory accounts in accounting software uh you know create separate accounts for inventory this is pretty good you know advice here let's see what else it comes up with you know obviously a good practice is tracking inventory level uh to monitor your inventory levels to ensure you have adequate stock to fulfill customer orders okay pretty good advice let's see what else we got yeah obviously you have to record inventory transactions for your financial statements to be complete so you got to record inventory transactions such as purchases sales returns so this is pretty good so chat GPT so far has actually been pretty comprehensive you know the good thing is that this is here if there is one aspect of the inventory management you're not aware of you can use this as a checklist and just check it off all right I set up a process for tracking purchases boom I set up a process for tracking sales boom so this is pretty good and comprehensive number five is to conduct regular inventory accounts this is pretty good so you can catch any kind of missing inventory or expired inventory this is pretty good and then reconcile the inventory accounts um this is pretty good advice uh generate inventory reports of month end this makes a lot of sense okay so so far so good I mean some of this stuff is pretty General and some of it is pretty good as a full checklist to go ahead and check it off as you're starting a new role in setting up the accounting process this other company all right so I wanted to ask jaji BT on the choice between fifo and lifo right first and first out or loss in first out in inventory pricing or inventory evaluation so go let's go ahead and ask that question all right so how to choose a method of valuation for inventory such as first in first out or loss in first out all right so it's going to say that choosing it depends on some business needs and iconic practices you know that makes sense um course flow assumption so if I feel assumes it's going to Define it for you so 5 assumes that the first item purchased out of the first items sold um so you know this is just overall high level what it means tax regulation is going to say you know some tax jurisdictions may require you to use specific inventory um evaluation method for example the IRS in the US allows businesses to use lifo for tax purposes but you may need to obtain permission to use this method so this is pretty good advice all right accounting software compatibility obviously you have to make sure your accounting software can support the method that you're going to choose complexity business needs all right so this is pretty decent advice um it could be a very good starting point in deciding whether to use fifo uh delightful for your valuation of inventory alright the next big item in our list is going to be billing and invoices how to set up billing and invoices for a manufacturing company so let's go ahead and ask that question how to manage invoicing for manufacturing company with one million dollars in annual sales all right so it's going to say to establish the manufacture or the invoicing process for the manufacturing company one establish an invoicing process uh you know clear and consistent invoicing process that includes the required information such as customer name address contact information all that stuff number two is to use invoicing software you know we talked about that in the first bullet point Which accounting software to use set payment terms this is something that's pretty obvious you have to have pretty clear payment terms with your customers monitor your accounts receivable makes sense monitor accounts receivable regularly to ensure that your customers are paying on time automate the payment process automate payment to streamline your basic process record payments received that makes sense uh reconcile your accounts if you reconcile your accounts regularly which means mostly a month end to ensure that you're invoicing a payment are correct and up to date so this is pretty good advice you know it's pretty General so far um but I'm gonna go ahead and ask it more specifically how to create invoices I want to quiz Chad jbt whether or not it knows how to create invoices say in QuickBooks Online all right so let's go ahead and ask you this very specific question what are the steps to generate an invoice in QuickBooks Online okay all right so log in to your cookbooks online account go to click on new button on the top left corner of the screen all right so this is very specific stuff so let's go ahead and open up QuickBooks online and see if this stuff works all right all right so we're here in QuickBooks online and it's saying to go to the top left of the screen and click on new and then under customer select invoice all right so far so good and then from there it's saying to add the customer so I'm going to add customer right here from my drop down menu all right so actually it knows what it's talking about and then it's asking me to enter the quantity of the product or the product name and then the quantity um so it actually knows what to do here so this is actually pretty good guidance when it comes to creating an invoice in QuickBooks online so this actually has been pretty good I can get pretty detailed instructions on how to create an invoice in QuickBooks online so if you're taking on a new role and you don't know what to do you can do this here and look it up in charge gbt this is similar to Googling stuff you can Google this same question as well but I find that chat gbt is pretty specific on what the answer is more than Googling you would have to click on multiple links to figure out where the right answer is okay so so far so good um so so far we did four things and now is the final thing that I'm gonna do which is how to close the books and how to close the financial period so I'm going to ask chargpt how to close the books at month end let's go ahead and try it out I'm going to say what are the steps to close the financial period for a manufacturing company all right so came up with a few steps here on closing the books um reconciling all accounts obviously reconciling the accounts helps you catch any missing transactions from your books so if you're reconcile for example your cash account to the bank statement on month end that's when you catch any transactions that are missing from the books and Records so that's pretty good uh review and adjust the entries uh so review all your entries and make any necessary adjustments to ensure the accounts are accurate so far so good and if you're actually looking for a more comprehensive guide on closing the books I'm going to leave a link to a video up here on a video I made a while back on how to close the financial period a review accounts receivable and accounts payable that makes sense create financial statements um so this is pretty good and I I suspect that you know any of these points here the pretty general for example reviewing accounts receivable accounts payable this is a pretty General but what you can do is even ask chargpt how to review accounts receivable and accounts payable and I'm pretty sure it's going to give you something more specific guidance on what to look for when you review these things so so far so good these are the five questions that are necessary when you're starting a new role as to understand how to set up the accounting system for the company you can go ahead and play with yourself and find out some answers from specific questions you might have so if you like the video give it a big thumbs up and if you know someone who might benefit from listening to it go ahead and share it with them and I'll see you in the next one