Partnerships (Co-Owned Inventory)

A partnership marks an inventory item as co-owned. When the item sells, the gross profit is split between you and your partners based on the percentages you set up. JewelTrak tracks the obligation, calculates the suggested payout per partner, and records each payment.

Partnerships work on jewelry, watches, and stones (anywhere you have an inventory item with a cost basis).

Setting up a partnership on an item

On the inventory detail page, open the Partnership tab:

1. Set Actual Cost — your true cost basis for the item (what was paid out of pocket).
2. Set Partnership Value — the agreed valuation that the partner is claiming a share of (often equals Actual Cost; sometimes higher when the partner contributed expertise/sourcing).
3. Add Partners with their splits:
   • Owner % — partner’s share of the gross profit on the sale (after cost basis is recovered).
   • Profit Only % — alternative model where the partner only takes a slice of the profit, without claiming any of the cost.
   • Selling Partner — flag the partner who is making the sale; affects reporting.
4. Save. The item now shows a P badge in inventory lists and on invoices.

You can have multiple partners on the same item — splits stack as long as the math works out.

When YOU sell the item to the end customer (default flow)

Selling a partnership item works like any other invoice line — pick it, set the price, finalize. Behind the scenes the system records that this item was sold from a partnership and that a reconciliation is owed.

The item appears on the Partnerships page under “Sold partnership items not yet reconciled.” Each row shows the sale price, your cost, the calculated gross profit, and the suggested payout per partner.

Reconciling (paying partners)

When you’re ready to pay a partner:

1. Go to Partnerships, expand the item.
2. Review the suggested payout amounts (computed from the percentages).
3. For each partner, fill in Payment Date, Payment Method, Check/Card Number (if applicable), and any notes.
4. Click Reconcile.

Once reconciled, the item moves to the Paid status and stops showing on the open list. The reconciliation creates a permanent record (the partnership snapshot) showing the actual costs, the GP at the time, and the per-partner payouts.

Adjusting a suggested payout (with reason)

The reconcile drawer pre-fills each partner’s payout from the formula (cost recovery + their share of the gross profit), but you can edit the amount before saving:

1. Click the suggested amount on a partner’s row and type the actual amount you’re paying.
2. If you change the suggestion, a Reason field appears and is required. Briefly note why (e.g., “$250 trade discount applied per agreement”, “partner forfeit due to late delivery”, “rounding”). Saving without a reason is blocked.
3. The tenant’s share auto-balances: if you reduce a partner’s payout by $X, the tenant keeps that $X. The reconciliation snapshot records both the formula-suggested TotalOwnerProfitValue and the actual TotalOwnerProfitActual so the audit trail captures the original intent and the realized outcome.
4. The AdjustmentReason is stored on the per-partner reconciliation detail row alongside the adjusted Payout — viewable later from the reconciled-partnerships report.

This keeps the formula honest (you can’t quietly underpay a partner without a paper trail) while leaving room for the real-world negotiations that come up case by case.

When the OTHER PARTNER sells the item (“Sell to Partner” flow)

Some partnerships are set up where the OTHER partner takes possession of the item and sells it to their end customer. The partner then remits your share back to you. From your books’ perspective, you never sold to the end customer — you sold your interest in the item to the partner.

To make this clean and IRS-auditable:

1. On the inventory item’s Partnership tab, pick the Selling Partner from the dropdown (the list is populated from the partners on this item).
2. Click Sell to Partner. A draft invoice opens with:
   • Customer = the selling partner (a wholesale-to-partner invoice)
   • Line Cost = your share of the partnership cost basis (PartnershipValue × your owner % / 100)
   • Line Price = empty — enter what the partner is remitting to you
   • Taxable = unchecked (the partner is the merchant of record and owes the sales tax to their customer)
3. Save the invoice and capture the partner’s payment normally (cash, check, ACH).

The moment the invoice is paid in full, the partnership auto-reconciles — no separate Reconcile click needed. A reconciliation snapshot is recorded with SettlementType = 'PartnerSold' (vs the default 'OwnerSold' for the flow above), and per-partner Payout rows mark each partner’s capital recovery with PaymentMethod = 'PartnerSoldSettlement' + Notes “no cash from tenant; capital recovered via partner’s own sale.”

What this records for an IRS audit

Audit question	Where it’s documented
What was the item’s total cost?	reconciledpartnerships.ActualCost
Who funded each share?	reconciledpartnershipdetails.CostPaidAmount per partner
Who sold it?	reconciledpartnerships.SellingPartner + SettlementType = 'PartnerSold'
What did you receive?	The settlement invoice — line price + payment record
What was your basis?	reconciledpartnerships.PrimaryCostValue
What was your gain?	line price − line cost (also stored as TotalOwnerProfitValue)
Did you pay partners cash?	No — captured by PaymentMethod = 'PartnerSoldSettlement' and the explanatory Notes
Where did the rest of the inventory dollars go?	Partner-equity cleared via the per-partner Payout rows (capital recovered via partner’s own sale)

The reconstructed journal entries: cash +$10K, AR cleared, inventory −$10K total ($5K via COGS for your share + $5K cleared against partner-equity), revenue $10K, profit $5K. Every dollar accounted for.

Sales tax

You don’t charge sales tax on the settlement invoice (Taxable is forced off). The partner is the merchant of record for the end-customer sale and owes the tax in their jurisdiction.

Cancellation

If the deal falls through (partner returns the item, end customer rescinds, etc.), void the settlement invoice the same way you’d void any invoice. The reconciliation reverses and the partnership goes back to active status.

Trade-in negotiation and partner protection

If the sold partnership item’s price was inflated to fund a trade-in over-credit (a common negotiation tactic — see Trade-In Negotiation), the Trade Concession on the line backs out the inflation before the partner’s split is calculated. The partner gets paid on the realized sale price, not the puffed-up negotiation number. Without that, you’d take a loss out of pocket on every partnered trade.

How the Gross Profit report treats partnerships

GP is the full transaction profit in both cases — no automatic subtraction for partner shares. The partner payout you record on /partnerships is an equity distribution, not a margin reduction.

• You sold to the customer: invoice line uses the full inventory cost ($10K on a $10K item). GP = sale price − full cost ($20K − $10K = $10K). Reconciling the partner payout records what you paid them for the audit trail, but doesn’t reduce the GP shown on the report.
• Partner sold (settlement invoice): the line cost on the settlement invoice is your basis (PartnershipValue × your owner % / 100 — $5K on a 50/50 of a $10K item). GP = settlement price − your basis ($10K − $5K = $5K). Your accounting only sees your share of the deal.

This separation keeps the income statement clean (full transaction profit on the line) while still capturing the partner-equity movement (your reconciliation record) for audit.

Tips

• A partnership only pays out once — after reconciliation, the obligation is closed. If you returned the item and re-sold it, that’s a new partnership cycle (you’d need to reset the partnership status).
• “Profit Only” partners (no cost claim) are useful for finders’ fees or commissions — they take a slice of the profit but never recover cost.
• The sign convention for the reconciliation suggestion math: profit pool = sale price − (trade concession) − cost. Partners take their % of that. The amounts you actually pay are editable per partner — the suggestion is just a starting point.

The Sold Partnership Items report

The Sold Partnership Items report (reached from the Dashboard, exportable) lists every co-owned item that has sold — Stock #, Type, Description, the invoice it sold on (number + date), Quantity, Ct Wt, Cost, Sell Price, Gross Profit, Pending Payouts, and the partner names. Filter by partner. It’s your settle-up worklist: the Pending Payouts column is what you still owe partners on items already sold, so work it down to zero as you reconcile each one on the Partnerships page.