Why customer materials are not your warehouse stock
At many Swiss SMEs — machine shops, carpentries, printers, logistics providers, machinery repairers, or industrial integrators — premises hold assets that do not belong to the company. Rolls of fabric, components awaiting assembly, equipment under repair, or pallets in storage remain the property of the principal, even when they are physically in your buildings or on workbenches.
Treating these assets as own stock distorts margins, inflates inventory, skews working capital, and complicates insurance and audit. The Swiss Code of Obligations (CO) governs custody and work on third-party materials; Swiss accounting standards (FER / Swiss GAAP FER) require that you do not record in the balance sheet what is not a company asset, except in well‑justified cases.
This guide explains how to organise custody, documentation, insurance cover, and accounting entries in line with common SME practice in Switzerland, without mixing customer assets with purchases, work in progress, and own inventory.
Own stock, processing, and pure custody
Before opening new accounts or warehouse labels, classify every physical flow. Accounting depends on legal title and economic risk, not only on where the asset sits.
| Situation | Ownership of asset | Typical SME balance sheet | Main risk |
|---|---|---|---|
| Purchase of goods for resale or own use | SME | Inventory / stock (class 1xxx) | Obsolescence, theft, inventory adjustment |
| Customer material in processing (WIP) | Customer; SME provides labour | Generally off balance sheet; optional note / memorandum account | Damage during processing (contractual liability) |
| Storage / custody without transformation | Customer | Off balance sheet; custody register | Loss, confusion with own stock |
| Use of own materials on customer job | SME until invoiced | Issue from stock → job cost / COGS | Job margins, VAT on invoice |
| Customer equipment on loan for testing | Customer | Loaned-goods register; no asset | Damage, unauthorised maintenance |
Legal basis: deposit, mandate, and work on third-party materials
The relationship with the customer must be set out in writing. Without precise clauses, federal law applies default rules that can surprise operators used to treating everything as an “internal order”.
Deposit (Art. 472 et seq. CO; warehouse deposit Art. 482 et seq. CO if paid commercial service): the depositary holds the asset and returns it. They do not acquire ownership; in case of loss or deterioration they are liable under the general rules on breach of contract (Art. 97 and 99 CO), unless they prove absence of fault; for gratuitous deposit fault may be assessed more leniently (Art. 99 para. 2 CO). An in/out register identifying the principal is essential evidence in disputes or claims.
Mandate and work on third-party property: repairs, cutting, assembly, or customisation often fall under a contract for work and services (Art. 363 et seq. CO) or mandate (Art. 394 et seq. CO). Liability for deterioration during the activity follows general fault rules and what was agreed (liability caps, obligation to carry professional indemnity insurance). Clauses excluding or limiting liability for wilful misconduct or gross negligence may be invalid or challenged under the CO (in particular Art. 100 CO for general terms and conditions).
Ownership and pledge: as long as the material remains the customer’s, the SME cannot record it as an asset or use it as security, except for a right of retention for due and admitted receivables (Art. 895 et seq. CO) within contractual and statutory limits.
Operational setup: warehouse, labels, and traceability
Physical separation prevents accounting errors more effectively than month-end corrections. Accountex and similar tools benefit from clear item codes and statuses at the movement level.
Dedicated zones and codes
Reserve shelves or areas marked “CUSTOMER CUSTODY” separate from own-stock locations. Use SKU prefixes or warehouse statuses (e.g. ownership = third party) not valued in balance-sheet inventory.
Each unit shows customer, order number, date in, and description with serial number where applicable. Photos on receipt for lower-value items reduce disputes over pre-existing scratches.
Accompanying documents
Custody slip or signed acceptance of work by the customer (or email with inventory attachment). For B2B deposits, match quantities to the principal’s delivery note and flag discrepancies before loading.
On exit, return document or inclusion on the service invoice. Keep copies for statutory retention (generally ten years, Art. 958f CO, for documents relevant to accounting).
- Annual physical inventory: two separate lists — valued own inventory and non-valued custody register.
- Staff training: do not take “customer” material for other jobs without written authorisation.
- ERP integration: warehouse movements flagged “third-party ownership” that do not generate purchase entries or own-stock adjustments.
Insurance: what the SME policy covers
Standard goods and premises policies often insure only assets owned by the insured. Customer materials in custody or processing may be uninsured unless specific extensions are added.
| Cover | Subject matter | Typical SME action |
|---|---|---|
| Own goods / inventory | Stock and business equipment | Check limits and deductibles on inventory |
| Custody / bailee | Third-party assets in storage | “Goods in custody” extension with limit aligned to average value on hand |
| Professional / employers’ liability | Damage caused during processing | Per-event limits; exclusions for pre-existing defective materials |
| Customer’s policy | Principal’s property | Request certificate; define who bears premium on long-term deposit |
After a loss, immediately split the damage list by owner of asset and attach the custody register and photos. Accounting records insurance indemnities and any liability to the customer in accounts separate from ordinary revenue, with documentation for auditor and trustee.
Accounting under FER and Swiss GAAP FER
A customer asset does not meet SME depositary asset criteria (economic control, probable inflow of benefits). Putting it in inventory inflates current assets and equity and distorts stock turnover ratios.
Off balance sheet and memorandum: many SMEs use a subsidiary register or memorandum accounts (account 9xxx in a typical chart) with a matching contra account, to track quantities and informational value without impact on equity and profit. In notes to the financial statements (Swiss GAAP FER 5 / 6) you may disclose significant obligations or risks linked to custody if material to users.
Revenue and costs: the SME’s performance is the service (processing, paid storage, logistics), invoiced at the correct VAT rate. Materials supplied by the customer do not appear in turnover; materials bought by the SME and recharged to the customer follow purchase → stock or cost → revenue with VAT documentation.
Losses and indemnities: damage attributable to the SME may create liability to the customer and costs; indemnities from custody or liability insurance hit the claims account. Do not silently offset own stock with customer assets.
Schematic example of entries (custody, informational value CHF 50'000)
Customer material received — memorandum only, no P&L impact:
Debit 9000 Assets in custody (memorandum) / Credit 9001 Custody contra — CHF 50'000
Full return — reverse memorandum. Processing invoice CHF 2'000 + VAT to service revenue account, independent of value of asset in custody.
VAT and reporting: avoiding double counting
Customer material is generally not in the SME’s tax base until ownership passes. Watch mixed scenarios: purchase on behalf of the customer, imports, or cross-border B2B supply chains.
- Custody or processing only: no transfer invoice on asset value; VAT on service fees.
- SME purchase with resale to customer: VAT on purchase and on revenue; asset flows through own stock even if already earmarked for an order.
- Import into Switzerland of customer goods: clarify who is de facto importer and who bears duties and VAT; errors here lead to disputes with the Federal Tax Administration and the principal.
- Tax inventory: align declared own inventory with warehouse; explicitly exclude custody assets from stock valuations.
Common SME profiles in Switzerland
Workshop / repair
Customer machine in bay: job card with serial number, optional memorandum at agreed value, liability cover for processing damage. Own parts on invoice separate from labour.
Logistics and storage
Deposit contract with pallet/day rate, insurance limit, and monthly inventory. WMS movements with third-party ownership flag.
Toll manufacturing
Principal’s raw materials: track consumption per job without valuing in SME stock; report scrap per contract (offcuts, tolerance).
Checklist for owner, back office, and trustee
Aligning operations and year-end accounting avoids urgent adjustments before the annual accounts or after a claim.
- Standard contracts: deposit, processing, liability limits, and insurance required from customer.
- Chart of accounts: memorandum accounts or external register with totals reconciled at least quarterly.
- Policies: custody extension with limit ≥ average exposed value; check professional liability cover.
- Warehouse: “third-party ownership” statuses and report separate from valued inventory.
- Month-end close: no own-stock balance includes customer-custody item codes.
- Notes to accounts: any significant long-term custody commitments.
- Accountex: customer master data linked to jobs/deposits for audit trail on movements and invoices.
Summary
Customer materials and equipment at the SME remain the principal’s property: they must be held, insured, and tracked under rules separate from own stock. Federal law on deposit and services defines liability; Swiss accounting standards exclude these assets from the balance sheet unless contractual exceptions transfer risk and ownership.
Physical separation, in/out documentation, targeted insurance extensions, and memorandum accounts (or equivalent registers) keep margins, inventory, and equity reliable. By integrating movements and invoicing in one accounting system, the SME reduces the risk of confusing “what is ours” with “what we hold for the customer” — an essential distinction for owners, auditors, and fiduciary partners in Switzerland.