How To Account For Rarely Used Cake Tools - Financial Advice

Decorating By Pearl645 Updated 12 Jul 2012 , 1:14am by SweetTzippy

Pearl645 Posted 10 Jul 2012 , 9:28pm
post #1 of 20

I have some a few cake tools like a gum paste mold, a wilton stencil, cutters and unique cake pan shapes (flat wilton topsy turvy cake pan) that I bought in the 1st yr of my biz but have never used since then. Imagine spending $ on tools you haven't used in 3 yrs. Sometimes I always know when I get a request for a cake that the tools I buy to do the job won't be used again for another few yrs. Like today I got an airplane cake request and would have to buy the cake pan for $20US. I know this isn't a popular style cake among my customers and it isn't a style that is in high demand. Has this happened to you? Do you have tools or cake items that are just sitting down for months and years and not giving you a good ROI bcuz the demand for that style isn't there? How do you account for them? Charge the customer for it because u know u may never use it again or record it as an asset?

19 replies
auntginn Posted 10 Jul 2012 , 10:07pm
post #2 of 20

I think that it has happened to all of us. Its the nature of the beast so to speak. Especially since we are in a business that changes with trends.

A few months back I took 2 container boxes of items that I no longer use, where brand new and just sitting around and sold them as a lot sale. About $500.00 worth, I do not regret it because I wanted to free up space and those items I don't see coming back around for a while.

But.. thru experience I have learned 2 lessons, #1 Don't run out and buy the latest toy, wait and see if it will be a valuable tool or an in & out fad. #2 For every thing I've learned to make there are several ways to accomplish the technique so I don't necessarily need that toy.

HTH

kakeladi Posted 10 Jul 2012 , 10:18pm
post #3 of 20

..... took 2...boxes of items that I no longer use,...brand new and just sitting around and sold them as a lot sale........

Where did you take them/how did you sell them? I have lots of stuff I'd like to sell but this site does not allow posting of such icon_sad.gif

auntginn Posted 10 Jul 2012 , 10:24pm
post #4 of 20

Facebook, craigslist, ebay and 3 local supply stores. A friend of my daughters actually bought it all because she saw it posted on facebook.

You might consider breaking it down into smaller groups such as flower cutters vs cake decorating items etc.

Anyplace you can get free advertising will work. Send me a list of what you have

jgifford Posted 11 Jul 2012 , 2:19am
post #5 of 20

Actually, any tools and equipment are considered at best, company assets and at worst, sunk costs. I vote for the company assets.

jason_kraft Posted 11 Jul 2012 , 3:24am
post #6 of 20
Quote:
Originally Posted by jgifford

Actually, any tools and equipment are considered at best, company assets and at worst, sunk costs. I vote for the company assets.



They can be both assets and sunk costs. The book value of an asset (what you originally paid for it) will almost always be higher than the market value of an asset, so the difference between book and market is your sunk cost, while the remaining market value of item is a company asset.

Normally this cost is the result of depreciation, but from an accounting perspective you will probably record most small supplies as expenses instead of assets and thus won't need to bother with recording depreciation. If you sell those supplies I believe that sale is taxable, which has the effect of reducing the benefit of the deductible expense from purchasing the supplies, but you should talk to your accountant to be sure.

For examples like the airplane cake pan, I would charge the customer for the cost of the pan plus markup if I was pretty sure the pan wouldn't be used again.

Pearl645 Posted 11 Jul 2012 , 3:28pm
post #7 of 20

Thanks for the valuable responses. Needed this advice.

Jess155 Posted 11 Jul 2012 , 4:14pm
post #8 of 20

If I, as a customer, was charged for a cake pan - I'd be expecting that pan to be mine after the cake was made.

carmijok Posted 11 Jul 2012 , 4:27pm
post #9 of 20
Quote:
Originally Posted by Jess155

If I, as a customer, was charged for a cake pan - I'd be expecting that pan to be mine after the cake was made.




Not necessarily. If you are requesting a cake that requires special equipment to make--that does need to be passed on to the total...which can be put into the 'per serving' cost.

A lot of the equipment I own now is a result of specific cake requests....and I don't think I could part with any of it! It's nice to know it's there 'just in case'! thumbs_up.gif

jason_kraft Posted 11 Jul 2012 , 4:33pm
post #10 of 20
Quote:
Originally Posted by Jess155

If I, as a customer, was charged for a cake pan - I'd be expecting that pan to be mine after the cake was made.



Except you wouldn't be charged for the pan specifically, it would be built into the premium for the design.

Many designs can still be done without a specialty pan, but they would require more labor, which would probably be more expensive than the pan. The customer doesn't really need to know if you purchased a specialty pan at all.

Pearl645 Posted 11 Jul 2012 , 4:37pm
post #11 of 20
Quote:
Originally Posted by Jess155

If I, as a customer, was charged for a cake pan - I'd be expecting that pan to be mine after the cake was made.




I know what you mean but I have had stencils purchased for wedding cakes that I haven't used since. It adds up each and every time with customized jobs. Not every stencil will give the ROI I would like it to for its lifetime. I asked this question because from a business pt of view, a business has to survive but it can't with heavy investing in customized tools that aren't covered for in the cake price. If I keep investing in tools for $50US for each large custom job and not passing this cost onto the customer that eats into my profit margins. I just wanted to know how others in similar situations handle this. Feel good with the advice I got.

Jess155 Posted 11 Jul 2012 , 4:39pm
post #12 of 20

Yes, but you do not know for sure that you will never, ever use it again. It's your cost of doing business. Change the design, decline the order, or eat the cost of the pan and try to use it again in the future.

jason_kraft Posted 11 Jul 2012 , 4:45pm
post #13 of 20
Quote:
Originally Posted by Jess155

Yes, but you do not know for sure that you will never, ever use it again. It's your cost of doing business. Change the design, decline the order, or eat the cost of the pan and try to use it again in the future.



A specialty pan is usually a way to save money for the customer's requested design by reducing labor costs. If the customer doesn't want to pay the cost of the design (including either the added labor or the pan cost), that's when you can discuss simplifying the design, and if the customer doesn't agree to pay your price or change the design they are free to find another bakery.

Pearl645 Posted 11 Jul 2012 , 4:54pm
post #14 of 20
Quote:
Originally Posted by Jess155

Yes, but you do not know for sure that you will never, ever use it again. It's your cost of doing business. Change the design, decline the order, or eat the cost of the pan and try to use it again in the future.




I've been running my business for 3 yrs. I am usually on point with knowing if a tool will never be re-used for yrs. If a customer wants a specific look, I give them that look. I am very accommodating so I wouldn't decline an order and neither would I change it bcuz they will not be 100% happy when they get a variation. They will be like "ok thanks" not "omg wow that is exactly what I wanted!".

I ate up all the costs of specialty tools (not tools for $5US but tools for $50US per job at times) and after I did financial analyses, the 1st 2 yrs of my business didn't make sense. Now it makes sense bcuz I factor in the tool cost now for ea custom job. My post was really to find out if other ppl did it for their business or how else they worked around it. Got the answers I wanted.

Pearl645 Posted 11 Jul 2012 , 5:02pm
post #15 of 20

A specialty pan is usually a way to save money for the customer's requested design by reducing labor costs. If the customer doesn't want to pay the cost of the design (including either the added labor or the pan cost), that's when you can discuss simplifying the design, and if the customer doesn't agree to pay your price or change the design they are free to find another bakery.[/quote]

True. I always work out the cost of using the specialty tool vs doing it myself. Carving takes way more time and $ than throwing in batter into a perfectly shaped pan. I have a nice topsy turvy flat wilton pan that I have had since yr 1 of my biz but there isn't a demand for that style. Now ppl want the real stacked topsy turvy cakes. See what I mean? Either I buy the topsy turvy cake pans online for lots of $ or I stand up for a day by myself carving and carving icon_smile.gif

Either way, I know now in my 3rd biz yr to charge them for it and I got the advice I needed here to know that this is financially right. No way will I be absorbing those specialty tools costs anymore. The 1st 2 yrs of my biz were rough doing that. My accounting software generates great cross-yr analyses so I know that a business is going to be stuck in a rut if it keeps taking on those specialty tools costs.

Hope other ppl gain some good insight as well and apply what they can from all of this to their own business.

carmijok Posted 11 Jul 2012 , 5:03pm
post #16 of 20
Quote:
Originally Posted by Pearl645

A specialty pan is usually a way to save money for the customer's requested design by reducing labor costs. If the customer doesn't want to pay the cost of the design (including either the added labor or the pan cost), that's when you can discuss simplifying the design, and if the customer doesn't agree to pay your price or change the design they are free to find another bakery.




True. I always work out the cost of using the specialty tool vs doing it myself. Carving takes way more time and $ than throwing in batter into a perfectly shaped pan. I have a nice topsy turvy flat wilton pan that I have had since yr 1 of my biz but there isn't a demand for that style. Now ppl want the real stacked topsy turvy cakes. See what I mean? Either I buy the topsy turvy cake pans online for lots of $ or I stand up for a day by myself carving and carving icon_smile.gif

Either way, I know now in my 3rd biz yr to charge them for it and I got the advice I needed here to know that this is financially right. No way will I be absorbing those specialty tools costs anymore. The 1st 2 yrs of my biz were rough doing that. My accounting software generates great cross-yr analyses so I know that a business is going to be stuck in a rut if it keeps taking on those specialty tools costs.

Hope other ppl gain some good insight as well and apply what they can from all of this to their own business.[/quote]

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kathie-d Posted 11 Jul 2012 , 5:07pm
post #17 of 20

I would check to see if there are any local stores or suppliers that rent out pans. Around here there are a few places you can rent pans for $5/day. If it's a pan that is not going to be used again then it's definitely the way to goicon_surprised.gif) HTH

Pearl645 Posted 12 Jul 2012 , 12:54am
post #18 of 20
Quote:
Originally Posted by kathie-d

I would check to see if there are any local stores or suppliers that rent out pans. Around here there are a few places you can rent pans for $5/day. If it's a pan that is not going to be used again then it's definitely the way to goicon_surprised.gif) HTH




Thanks. Only wilton character pans and regular round or square cake pans are rented out. In the case of a specially shaped pan say pillow case pans, those have to be purchased in a set.

SweetTzippy Posted 12 Jul 2012 , 1:13am
post #19 of 20

Whenever I need to buy new pans and/or tools for a specialty cake I add 80 to 100$ of its cost to the price of the cake. If the client does not accept the price then I suggest to make a simpler version of that cake at a lower cost. Some pans/tools are not used often but you never know when you might need them so its good to keep it just in case.
I never regret buying a tool as much as I regret NOT having it when needed.

SweetTzippy Posted 12 Jul 2012 , 1:14am
post #20 of 20

I meant 80 - 100% of it's value icon_lol.gif

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