Setting up donated goods for the charity-shop till
How a charity shop sets up donated items as products for the till when they cost nothing, what the cost price does to cost of sales, and negative stock.
By Achekam · · 5 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
A charity shop's stock arrives in black bags and boxes: a winter coat, three paperbacks, a kettle, a child's bicycle, a set of wine glasses with one missing. None of it was bought, every item is different, and the volunteers sorting it on a Saturday morning have no time to create a product record for each piece. Yet the till wants a product for every sale, and the product wants a cost price.
Setting up donated goods well is mostly about planning the product list before the first sale. This article explains why the cost price still matters for goods that cost you nothing, how to build a product list by category, what a nil or nominal cost does in the ledger, why the list has to be right first time, and how to handle stock that arrives faster than anyone can count it.
Why the cost price matters even for stock that was given to you
At the till, every sale posts to the ledger immediately. Every till sale that reaches the server posts a balanced journal in the same step: each payment method to its own account, revenue, output VAT where it applies, and cost of sales against inventory at the product's cost price.
So the cost price on each product decides how much cost of sales, and how much reduction in inventory, every sale records. For bought stock, that is the purchase cost. For donated stock, you have to decide what figure to use, because "nothing" is a choice with consequences.
How donated goods should be valued in your financial statements is a question for your accountant, and the answer depends on the reporting framework your organisation follows. The IFRS Foundation's summary of IAS 2 Inventories explains how the cost of inventories is determined, which cost formulas may be used, and why inventories are carried at the lower of cost and net realisable value; your accountant will take those principles, or your own framework's equivalent, into account in advising you.
Creating products in the Item Master by category with a selling price
Products are created in the Item Master, in the Accounting menu, with a SKU, name, category, selling price, cost price, opening quantity and VAT treatment. The Item Master needs the Point of Sale, Warehousing or Wholesale add-on.
A charity shop cannot create a product for every unique item. Instead, create products by category and price point:
| Product | Selling price | Use for |
|---|---|---|
| Adult clothing, standard | A fixed price you set | Most adult garments |
| Adult clothing, premium | A higher fixed price | Branded or as-new items |
| Children's clothing | A fixed price | Children's garments |
| Books, paperback | A fixed price | Paperbacks |
| Bric-a-brac, small | A fixed price | Ornaments, mugs, small kitchenware |
| Furniture | A price per item band | Larger pieces priced on the day |
Volunteers then price donated items into one of those bands with a sticker, and the cashier rings up the band. Your sales reports still show what kinds of goods sell, without a product for every coat.
What a nil or nominal cost does to cost of sales on every till sale
Because cost of sales uses the single cost price typed on the product, with no FIFO or weighted-average costing, the cost price you choose flows straight through every sale:
- A nil cost price means each sale records revenue with no cost of sales, so gross profit equals sales. Simple, and it reflects that the goods cost the shop nothing in cash.
- A nominal cost price, such as a small amount for sorting, cleaning and pricing, records some cost of sales on each sale and keeps an inventory value in the books.
- A value-based cost price, set by your accountant, may suit organisations whose framework requires donated goods to be valued.
Whichever you choose, apply it the same way across the list, write it down, and agree it with your accountant before the shop opens. Changing your mind later is harder than it sounds, for the reason below.
Products cannot be edited after they are created, so plan the list first
No screen lets a business change a product's price, cost or VAT treatment after creating it, or deactivate it. A product created with the wrong selling price, the wrong cost or the wrong VAT treatment stays that way.
So:
- Draft the full product list on paper or a spreadsheet: names, categories, selling prices, cost prices and VAT treatment.
- Have the shop manager and your accountant check it, including whether VAT applies to your shop's sales at all.
- Create the products only once the list is agreed.
- Plan price changes as new products with new names, and retire old stickers rather than old records.
Stock that arrives faster than you can record it, and the negative-stock setting
A till sale takes the sold quantity off stock at the till's location in the same step, and will not let the quantity go negative unless the business allows negative stock. In a charity shop, donations arrive in a steady, uncounted stream, so the quantity on record will often run out long before the shelves do.
Two workable approaches:
- Allow negative stock for donated categories, accepting that quantities on record will not reflect the shelf, and use sales reports rather than stock levels to manage the shop.
- Count regularly if you hold the Warehousing add-on: a stock count sets a location's quantity to what was counted and records the difference as an adjustment, so a weekly count brings the figures back in line.
Most small charity shops choose the first and keep counts for higher-value categories such as furniture. Discuss it with your accountant, because the cost price choice and the stock approach work together. Cash that customers drop in the donation box at the counter is a different thing again, kept apart from sales as explained in donation-box cash in a charity shop.
Before opening the till
Agree the cost-price approach with your accountant, draft the product list by category and price band, check it twice, and decide on negative stock. Then create the products, brief volunteers on the price bands, and run a trial sale in each category. Shops that also buy in new goods should see a procurement integrity review for keeping purchasing clean.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
