Switching from Indirect Expenditure to COGS
If you have been previously claiming your material usage via indirect expenditure (i.e. claiming material purchases in the year that they were made) then you’ll need to at some point switch your inventory valuation method to COGS (Cost of Goods Sold) to use Craftybase.
There are a couple of different options for this situation. To determine your best way forward, you’ll want to consider:
a) how far along in the current year it is and
b) how accurately you can reconstruct your past inventory changes.
Option 1: Begin on current date
If it is later in the year and you find you cannot reconstruct your past inventory changes, this is the option we generally recommend in most cases. This option allows you to work forward with Craftybase from today's date using COGS. All material purchases you have made before this time will be claimed as indirect expenses on your next tax return.
Option 2: Backdate to 1 Jan of this year
If it is early in the year and you feel you can reconstruct your manufacturing and purchase history back to the 1 Jan, then you can consider this option. This involves switching your inventory valuation method to COGS on 1st January and backdating to this date.
Option 3: Begin Craftybase on 1 Jan next year
If it is very late in the year and you do not want to use Option 1, another option is to begin tracking with Craftybase as of 1 Jan next year and use your current indirect expenses method until the end of the this year.
If you have any questions about your backdating strategy please feel free to get in touch and we'll be happy to help.