“ Your First Time with QuickBooks Online ” is a series geared towards first-time QuickBooks users who want to get started bookkeeping right now. These articles cover all of the setup and accounting workflows you need to know for a comprehensive setup, guiding you from your initial sign up through your next financial quarter and beyond.
“Setting up for Success” is a series of snack-sized, task-oriented tutorials curated around specific accounting workflows and the fundamental concepts behind them.
Each article includes a few comprehensive video tutorials and accompanying highlight summaries. While we've handpicked these tutorials for first time QuickBooks Online users, this series is an excellent resource for anyone needing a refresher on QuickBooks Online and accounting basics.
We recommend watching all of the videos as a set so you can confidently complete the specified tasks in QuickBooks Online. If you do decide to skip ahead to specific sections, do set aside time to go back and read the article in its entirety so you have a firm grasp of the fundamental process end-to-end.
When it comes to accounting, many believe it’s better to do things right than do them quickly. We’re here to show you how to accomplish both – including the essentials in the most efficient ways possible.
Follow our checklists to review your progress and ensure everything is in order. If you’ve already completed the task, you can confidently move on. If you need help, click the link and go to that section – and don’t forget to check it off your list!
These guides are the source of truth, the what, how, and why behind every feature and function in QuickBooks Online. They provide facts, figures and detailed visual walkthroughs to help you do your QuickBooks accounting quickly and efficiently.
Do more with QuickBooks by knowing exactly what each feature is and does. The QuickBooks Encyclopedia is designed for everyone -- those who are brand new to QuickBooks as well as those in need of a quick reference.
Welcome to QuickBooks Online! This is an exciting time. We're going set your business up for success from the start. Before you start sending invoices, there are a few decisions you'll need to make about your accounts and associated preferences.
These videos cover the absolute fundamentals of QuickBooks Online: basic navigation, program structure, the importance of sales forms and lists in QuickBooks Online, online banking and how these all lead you to what is likely your first task – sending an invoice.
The dust has settled and you’ve successfully set up your QuickBooks Online in just 15 minutes. Now, let's start building a robust company file and ensure all the parts are aligned. By the end of the hour, you’ll have everything in place and ready to handle the fundamental account tasks for your business.
Your first 15 minutes with QuickBooks Online
Your first day with QuickBooks Online
Interested in QuickBooks Online for your Specific Industry?
While we recommend certain time-frames, please go at a comfortable pace - - what's important is following the series in order. If you prefer an activity-based setup workflow, check out our series “ Setting up for Success with QuickBooks Online ."
Minute 15: Customize your Invoices (and Sales Forms)
(Gear Icon [ ] > Custom Form Styles > New)
You can start sending invoices using the default template, but you should spend time designing and personalizing them. Even small changes can have a big impact. Sending your first invoice is a milestone for your business, so invest a few minutes towards making a good first impression.
The Custom Form Styles module is where you create and manage your invoice (and sales form) templates. There are lots of tools that will help you enhance different aspects of your invoice. You can make basic layout and design modifications from the "Design Tab." The "Content Tab" is where you can adjust column widths and data fields – not all data fields are enabled by default and there are some you may want to omit. You can also customize the message customers receive along with their invoice in the "Email Tab."
Once you’re done, save the template so you can use it again and again. You can create and save multiple templates for Invoices, Estimates and Sales Receipts. For the complete guide, check out “How to Customize Invoices in QuickBooks Online.”
Minute 20: Decide how you want to get paid for Invoices
(Gear Icon [ ] > Custom Form Styles > New)
Don’t leave the Custom Form Styles module just yet. Out of the box, customers can’t pay you electronically for invoices until you enable QuickBooks Payments.
QuickBooks Payments is the easiest way to accept invoice payments. Once a payment is received, the system will automatically update your books. While there are nominal fees for processing credit cards, consider signing up for the $0 “ Pay as you go ” plan so you can at least accept ACH Bank Transfers for free. If you already have a processing service you like and don't want to process credit cards through QuickBooks Payments, we encourage you to continue using it.
To enable online payments, while you're still in the Custom Form Styles module, go to the "Payments Tab" and click the link at the bottom to complete your payments profile (you make changes to from Accounts and Settings > Payments) and follow the step-by-step guide. When you’re done, you’ll be able to select which payment methods you want available to your customers when you create templates in the Custom Form Styles module. This applies to all invoices using the specified template. If you ever want to disable payment options for a particular customer, you can toggle them off as you’re creating the invoice.
This is what your customer will see when they receive your invoice:
Minute 27: Learn about Receiving Payments and the "Undeposited Funds" Account
Learn more in The QuickBooks Encyclopedia
Take a minute to study the workflow below. In QuickBooks, there are a few types of sales forms: Invoices, Sales Receipts, and Estimates . Which one you use to record payments depends on when your customer paid you.
You use invoices when you sell a product or service and expect to get paid in the future. Once the invoice is paid and the money is received (whether through QuickBooks Payments or some other means), you record the payment in QuickBooks.
You use sales receipts when you sell a product or service and are paid at the time of sale. The payment will be recorded and accounted for in QuickBooks once you send the sales receipt since you’ve already received the payment. This means you don't have to complete the receive payment step.
Upon receiving an invoice payment, process the invoice by clicking ( ) and selecting “Receive payment.” From there, you'll receive the payments against the invoice and deposit those payments into your “Undeposited Funds” account. This is the default “deposit to” account for the Receive Payments feature. Once you receive the payment into the Undeposited Funds account, you need to use the “ Bank Deposit " function to record these payments to the correct account in QuickBooks.
You can also receive single payments and deposit them directly into a checking or savings, but there are advantages to following the Undeposited Funds workflow. We’ll cover all of this in the next article after you've received your first invoice payment. For now, we wanted to introduce this concept since this workflow is unique to QuickBooks.
Minute 33: Send your first Invoice
(Global Create [ ] > Invoice)
The foundations have been laid -- you're ready to send your very first invoice!
Click the Global Create ( ) button to start an invoice. Right away, you’ll notice you don't have any customers or products and services to add from the drop-downs, though you do have several default accounts we can use when you begin creating these items. Let's go over each highlighted area of the invoice.
You have two methods for how you build out your customer and products and services lists: build lists all at once or build them as you work. We go over both methods in detail in the QuickBooks Encyclopedia.
For now, let’s get started the latter and create some items as we work. Eventually, you can decide which method you prefer.
(1) Let’s start from the top with your first customer. Since you have anyone in the system yet, click the drop-down and select “+Add New.”
You can simply add their name and click “save” to get rolling with your invoice, but we’re going to dive a bit deeper. Instead, click “+ Details” to bring up the complete customer profile module.
Here’s an important tip - even if you decide to stick with this build -lists-as-you-work method, seize every opportunity to fill out the complete customer, vendor, and product and service information sooner rather than . A few extra minutes spent inputting accurate sales form data will save time in the long run and prevent potential, cascading errors. If you are in an absolute rush, write yourself a note to go back later.
(2) Head down to the product/service table to add your first product and service item. Again, since you don't have anything in QuickBooks yet, click the drop-down and select “+Add New.” The following module will appear:
If you have QuickBooks Online Plus, you can enable Inventory Tracking to track quantities and create purchase orders to send to Vendors from QuickBooks when your stock runs low. Setting up for Inventory is a fairly involved process that applies to specific users, so we will cover that in a different article.
For now, select either a non-inventory product or service your business offers. If you're curious, the bundle option combines multiple products and services into a single item. Depending on whether you selected non-inventory product or service, you’ll see one of two similar variations of the following:
Fill out as much information as you can for the product or service item. The same guidance for customers (and vendors) applies here as well – invest your time entering complete data now rather than later. This is especially important for products and services - - prices and sales tax errors are very difficult to correct after the fact.
What data you enter for a product or service depends on what information you have on hand and what you’re planning to track (for instance, if you use SKUs). Here are some tips to keep in mind as you build your first product or service item:
It’s wise to add a brief item description so customers feel confident about what they’re purchasing.
Adding a picture will help you stay organized, bu t images aren't isn't customer facing.
The “I sell this product/service to my customers” box is automatically enabled when you create items from a sales form and cannot be turned off. When you create non-inventory items you want to track but don’t sell, you’ll have to create those from a different workflow.
“Is taxable” is automatically enabled when creating a new item (which is why we already set up your Tax Center in the previous article). If you’re selling products, unless you’re selling to states that don’t require, you’re probably going to charge sales tax . In most cases, you don’t charge sales tax for services, but it depends.
Sales Tax can get complicated. You probably already know the sales tax rules for your business or industry. If so, proceed with confidence. If you aren’t familiar with sales tax codes, do some research online (state tax boards are a great place to start) and reach out to a tax professional.
You can create categories for items for better data tracking, but this feature isn't necessary. We will go over categories in more detail in a later article.
The Income Account you select determines how sales income is tracked once it's processed. Basically, this tells QuickBooks what money from the sale of this product or service is for and thus how it should be recorded. QuickBooks Online comes with several essential income accounts right out of the box and we will teach you how to create new ones in the next article . Initially, it's a good idea to create income accounts that are somewhat broad, but not as general as "products" or "services." Was income related to your design work? A specific type of product? Create incomes accounts at the "category" level. This is also where "sub-accounts" come in to help you stay organized. For instance, you may offer multiple "Design" services and want to track income for each service. You can create a "Design" parent account and sub-accounts for each specific design service you offer.
The sales price/rates you enter are applied every time you add an item to a sales form. You can adjust the rate directly from an invoice, but this change only applies to that specific invoice. If you plan to have special rates for certain customers, it’s best to create two separate items with differentiated prices.
That's all it takes to create a product or service in QuickBooks. Soon, this process will feel very second nature. Keep adding items to your Invoice until you’re finished.
(3) Make sure your payment terms and due date are what you want to offer to with your customers. Learn more about Net Payment Terms.
(4) Since we already set up your online payment options, you can enable them at the top for this invoice.
Tip - As a quick check, always check the “ Balance due, ” subtotal and sales tax total before hitting send. Ask yourself, do these numbers look right? Are taxable items being taxed? If something's off, these numbers will tell you immediately.
(5) If you want to save and send this invoice later, check the box at the top. There’s another feature called Delayed Charge that saves anticipated charges so they can be added to future invoices so you don't have to create and hold several invoices for long periods of time. (6) At the bottom, you can preview the invoice or print out a paper version to send. We highly recommend sending Invoices via email so you always have a digital record and can send reminders.
Click “Save and Send” and you’re done.
Congratulations, you’ve sent your first customer invoice in QuickBooks Online!
Minute 41: Build your Products and Services List
(Sales > Products and Services > New)
The next two sections lead with the “build-lists-all-at-once” methodology, which we encourage you to spend the rest of your hour doing. If you want to skip ahead to the next concept at minute 52, please do so.
From the left navigation bar, click on the Sales Tab. The proceeding dashboard is where you can see all of your invoices (including the one you just created). Click the Products and Services sub-tab to bring up the following screen:
Click “New” and create a few more items. This is module is exactly the same as the one you used on your invoice. Spend a few minutes creating 5 or 10 more items from scratch, remembering to include the important information like sales tax and descriptions. With a bit of practice, this entire workflow will feel second nature.
Minute 45: Create your Customer list
(Sales > Customers > New)
Let’s do the same process for your customer list. Click the Customer sub-tab at the top of the Sales Tab dashboard.
You will see your solo customer on the list. You may also notice that you have 1 open invoice (in the grey box). This bar at the top shows all outstanding/open, overdue and paid invoices within the given time periods. Click on squares to sort the list for the segment you’re interested in.
When you click “New customer,” the same familiar module from the invoice will appear. Try adding a handful of your customers to get a solid grasp of the workflow.
Minute 52: Decide if you want to track inventory sooner rather than later
(Gear Icon [ ] > Accounts and Settings > Sales) or (Sales > Products and Services > New)
We're always talking about planning ahead. If you plan to track inventory quantities, now is the time to set this up. If you have QuickBooks Online Plus, go into Accounts and Settings (Gear Icon [ ] > Accounts and Settings > Sales) and enable “Track quantity on hand.” We cover the whole inventory set up process here.
Take some time to think about it. If you don’t use inventory now, will you need to track quantities on hand in the future? What about two years from now?
If the answer is yes, it’s best to start using the Inventory feature from the beginning. Going back to re-edit your entire list of products, not to mention the related vendor and expense accounts, is a heavy lift. Instead, save yourself the work and build your Products and Services list for inventory tracking.
Minute 53: Familiarize yourself with the Online Banking feature
(Banking > Add Account)
One the many areas QuickBooks Online shines is Online Banking. You don’t have to decide now, but consider whether or not you want to enable this feature sooner rather than later so you get in the habit.
If you connect your bank accounts to QuickBooks Online, the program will automatically import and create records for transactions recorded on your bank and credit card statements. You can always record individual transactions manually, but this saves a ton of time. This will encourage you to track all income and expenses for your business you have a complete perspective of your business’ overall health rather than specific streams of cash-flow.
You can connect multiple bank accounts to QuickBooks (including credit card and PayPal) from the Banking Tab. Once you connect an account, QuickBooks will download all transactions from the last 90 days. Learn more about "How to Connect My Bank Account in QuickBooks Online."
Take a moment to reflect …
As we build your QuickBooks accounts from the ground up, here are some key organizational and operational principles to keep in mind. These will help you feel confident with every decision going forward:
Everything is a process – this is true of most tasks in life, but it's especially true for accounting. Most activities in QuickBooks Online, from Invoicing to Payroll, follow a particular set of processes in very a particular order. There’s an assumption that QuickBooks has a learning curve. Learning how to do things right takes practice. The methods we recommend in the Getting Started series may not always be the fastest, but if you invest the time to learn these workflows and plan ahead, you will avoid many problems in the future.
Context Matters – accounting is contextual. Many accountants will tell you there’s a “right” way to do accounting. This is a true statement, but “right” is highly dependent on circumstances and industry. There is no single accounting method that will work for everyone. How you get to step 3 for your business depends entirely on how you did steps 1 and 2, information only you (and your accountant) will know.
Make everything simple, relevant and personal – there are names and data points (your Chart of Accounts, for instance) that should be kept fairly standard. At the same time, you have opportunities to personalize your accounting experience. In general, feel free to give customers “nicknames” and rename non-standard accounts (like Undeposited Funds). as long as the names remain relevant and easy to understand for whoever does your bookkeeping. The little things do matter.
Less is more – time and time again, we hear professional accounts recommend the same advice: create fewer accounts and only enabling features/apps you really plan to use. You’re already busy running your business, so aim to make QuickBooks as manageable as possible.
You’ve come a long way in one short hour. When you're ready, check out a few more lessons on the Getting Started with QuickBooks Home Page or see what we recommend for "Your first day with QuickBooks Online."
< Setting up for Success: The Big Picture
Setting up for Success: Next >
> Want a bigger overview? Start with the “Setting up for Success with QuickBooks Online” series
> Want to jump right in? Check out our “How to Use Basic Features and Functions in QuickBooks Online” series
For this set of videos, there are no exercises to follow along with. Instead, we insist you simply absorb the broader accounting and workflow concepts introduced in this article. Taking a few minutes to contextualize your business within the broader “ how’s ” and “ why’s ” of accounting will go a long way in preparing you for sustain success. So sit back, relax, and let it all sink in.
What impression do you want your invoices to leave on your customers?
A customized invoice, even semi-stylized ones, is an opportunity to enhance the perception of your business. The Custom Form Styles module in QuickBooks Online lets you edit the layout, design, and data fields that appear on your invoices.
There’s nothing wrong with plain invoices. Customers aren’t going to abandon your brand because you use generic sales forms. Invoices do, however, make them think something.
Unlike other branding solutions, this one requires very little effort and has no added cost . You don’t need an MFA to create an eye-catching invoice template. Anyone with QuickBooks Online Essentials and QuickBooks Online Plus can use the Custom Form Styles module to create an attractive, professional-looking invoice.
Why do I need to customize my invoices (and other sales forms)?
Customizing invoices give your communications a bit of texture. Simple changes, such as layout and logo location, can make the difference between staying top-of-mind or getting lost in the noise of email inboxes.
As ProAdvisor and ParkWay Inc. CTO Matthew Fulton reminds us, “It can be easy to forget that to someone else, your invoice is no different than the other 9 forms in front of them.”
You also need to provide customers with the right information. Consider those on the receiving end of an invoice - at a minimum, customers deserve an invoice with relevant information presented in a clear format.
Get started creating customized invoices
To begin, click the Gear Icon ( ) and then select Custom Form Styles. From the Custom Form Styles dashboard, you can manage and edit templates for Invoices, Estimates, and Sales Receipts.
While you can create multiple iterations of a form from a master, you can only apply one template at a time.
Let's create a new template from scratch. Click the New Style button and select “Invoice” from the drop-down.
There are four sections of the customization module: Design, Content, Emails, and Payments. You’ll spend the majority of your time in the Design and Content sections.
The Design Tab
This is where you choose fonts, color-schemes, and your logo. This is also where you can adjust the overall template layout.
The Content tab
Your company information automatically appears in this tab, but you can decide what you want (or don’t want) displayed on the final form.
This is also where you modify data fields (more on that below) and adjust the width of columns.
The Emails tab
You can create a unique invoice email message if you don’t want to use the default.
The Payments tab
This tab is simple but very important if you want customers to pay you electronically directly from the form. If you’re using QuickBooks Payments, QuickBooks Online will automatically update sales information once the payment is processed.
When you’re done editing the template, you can click Preview PDF or Save and Exit to return to the Custom Form Styles dashboard.
The first invoice template you create will become your master default template. To change the default form, click the Arrow Icon ( ) next to the form you want to designate and select “Make Default."
Designing Custom Invoice Templates
When designing your invoice, ask yourself the following:
Appearance – Do you want your brand to appear everywhere on your invoices, or do you prefer a more subtle approach? Try to match your existing marketing efforts to create a sense of uniformity.
Data-fields – What information matters most to your customers? How much information is too much? Do you provide clients with specific units of measurement? How about tracking information, like drivers’ names, to add peace of mind? These can always be updated later on.
Format – Are your invoices easy to read? Where does the most important information appear on your forms? Which data fields are absolutely necessary? Do your customers prefer larger fonts for improved readability? Start with the basics, then add icing to the cake.
Personality and Tone – Is being approachable important to your business? Do you want to sound casual or official? Design accordingly.
Creating a custom logo
When you first create your QuickBooks Online company file, you can add your business logo. This same logo will appear on all of your invoices and sales forms, so take pride in its design and presentation.
Logo edits should be made outside the program before uploading the image. Note that square and circular logos with white backgrounds tend to look the best on invoices. Logos files have a few technical requirements:
Must be one of the following formats: .gif, .bmp, .jpg, .jpe, or .jpeg
Be smaller than 1MB (this helps with loading speed)
Have a bit-depth (aka color-depth) of 24-bits or less and use standard sRGB
Customizing data fields
You can add, remove, or rename certain data fields from the Content Tab. To edit a section, click on the pencil icon ( ) on the preview form. Each section has its own set of customization features.
There are numerous available customization options. We won’t go over everything, but we will highlight a few important areas:
In the “Header” section (top section), you can add up to three custom fields by clicking “+ Custom Field”
In the data table section (middle section), you can edit, remove, or rearrange the item description, quantity, and rate data fields. Click the blue “Edit Labels and Widths” title at the top to enable the column and data field editor. There’s underlying flexibility in this particular module – for instance, if you prefer to display unit quantities in “lbs,” “grams,” or “boxes,” simply enter the unit of measure into the text box.
To change the order of the columns, grab the square icon and drag it until the solid line becomes dotted.
Use the slider bar to adjust the width of each column. Column width is relative and finite – you may need to narrow columns that are taking up space before you can adjust others.
The “Products/service” line in the data table section includes item categories by default. You can turn these off, but product categories provide customers with more information and you get better data (learn more about item categories – Introduction to Categories in Products and Services).
Any other tips I should keep in mind to be successful?
Let your invoices portray you and your brand in the best light. Treat them you would any other type of communication, be it email, phone call, or face-to-face meeting. Keep them simple but impactful.
How to Adjust Invoice Payment Terms in QuickBooks Online
How to Review Open Invoices and Send Payment Reminders and Balance forward Statements in QuickBooks ...
How to Send Paper Invoices in QuickBooks Online
Check your Progress
Am I Ready to Send an Invoice in QuickBooks Online?
Invoice payment terms are an agreement between you and your customers regarding when invoice payments are due . “ Net ” refers to the number of days before the expected payment. Adjust your payment terms to fit the pace of your business, industry, and your relationship with your customers. Even simple things, like net payment terms, set expectations and tone for all parties involved.
Social media is a great way to grow your business' online footprint and requires minimal input. The simple addition of social links can greatly increase awareness of your brand online and offline, which in turn can lead to boosted sales.
In QuickBooks Online, rather than embedding social media buttons in the body of sales forms, you can add clickable hyperlinks to the email message portion of invoices, estimates, and sales receipts.
Why should I add social media links to my Invoices and Sales Form emails?
Adding clickable “like us on Facebook” or “follow our Instagram” hyperlinks to invoice email messages is a simple way to stay connected with your customers, enabling you to broaden your brand’s reach without additional (or costly) marketing efforts. This approach separates
branding and business so the prior doesn’t get lost amongst line items and figures (or vice versa). In short, keep the actual invoice form focused on business.
You should add whatever social channels resonate with your brand. Add your most popular channels, but also consider boosting your newer or less popular outlets if their growth will benefit your long-term str ategy. Be sure to add personalized "call to action" messaging to go along with.
Using this creative opportunity to make your brand stand out may have a very positive effect on your bottom line.
Get started adding clickable social media links to Invoice and Sales Form email messages
There are two ways to edit the messages you send to customers when they receive an invoice. From the start, decide whether you want your branded messaging to be part of your default message or a custom template you only send to certain segments of your customer base.
Add social media links for all sales forms (i.e. your default message)
Starting from any page, click the Gear Icon ( ) and select Accounts and Settings (or Company Settings).
Click the “Sales” tab on the left and scroll down until you see the “Message” section. Click the pencil icon ( ) to edit the default email message.
Now, add an enticing “call to action” message and include the full hyperlink for your social media channel with the "http://" or "https://" prefix.
Tip - While you might want to add an eye-catching subject line, don't let that eclipse the purpose of the invoice email. Customers need to know first and foremost that this is an email for a sales form. Strike a balance and don't add unwanted noise to the sales process.
Important - The hyperlink won’t appear clickable while you’re editing the message but don't worry, your customers will be able to click the link once the invoice reaches their inbox. You can always email yourself a copy to confirm it looks perfect.
Click Save and you’re done.
Create a custom template with specific social links for segmented customers
You know your clientele better than anyone else. If you believe certain clients would benefit from connecting over certain social media channels, create a custom form linked to those specific channels.
From any page, click the Gear Icon ( ) and select Custom Form Styles. You can either edit an existing invoice template or create a brand new one for this modest branding campaign.
Go immediately to the “Emails” tab of the Custom Form Styles Module. Write a simple yet compelling “call to action” and add the full hyperlink, including the "http://" or "https://" prefix.
Again, the clickable hyperlink won't appear while you are editing the template or if you go back into the form to make edits.
We recommend trying out a few variations of your template to see which has the biggest impact. Subtle changes to the "call to action" wording, layout, and format can make a significant difference.
Show me why I should add clickable social media links to Invoice and Sales Form emails
My business Facebook account has quite a few followers and I want to grow my Instagram following since it has proven to be a great lead-generation channel. Now, every time I send invoices or sales receipt to customers, there’s a new opportunity to attract more business through branding.
While I have other social media channels, I only want to add ones I want to grow and know will have the biggest impact. Adding too many links will clutter up the email and my customers' inboxes.
Know your audience and match their expectations – if you sell art or photo products, lead with a visually-driven channel like Instagram; if you make instructional videos for the items or services you sell, add a link to your YouTube Channel.
Any other tips I should keep in mind to be successful?
Keep it simple. Less is more.
Make sure you start hyperlinks with "http://" or "https://" or else they will not be clickable.
You can add a URL to the memo section of an invoice or sales receipt, but it will not be a clickable link. In any case, it's best not to mingle marketing and sales information. Keep this type of branding off sales forms.
Check your Progress
Am I Ready to Send an Invoice in QuickBooks Online?
How to Use the Undeposited Funds Account to Receive Payments in QuickBooks Online
Setting up for Success in QuickBooks Online - Adding Products and Services, Customers, and Vendors t...
How to Adjust your Invoice Payment Terms in QuickBooks Online
Connecting your bank and credit card accounts to QuickBooks Online is a great way to track your income spending without having to manually enter every transaction. Only recording your income through sales forms while leaving out your expenses provides an incomplete perspective of your business’ overall health, but creating records for every transaction can be a huge task.
If you connect your online bank accounts in QuickBooks Online, the program will automatically download the last 90 days of transactions recorded by your bank. The program will match existing entries already in QuickBooks online and add new records for incoming transactions without a matching entry. This feature ensures your accounts are always up-to-date and drastically reduces the amount of data-entry you need to do on a daily basis.
The Undeposited Funds account in QuickBooks Online serves a similar function – it’s a special temporary account that QuickBooks uses to hold payments received from invoices before you deposit them into in the bank . This workflow is especially important for QuickBooks users who don't process transactions through QuickBooks Payments and import payment data from external processing services.
After you’ve sent an Invoice and received the payment into your Undeposited Funds account, you need to deposit these payments into an account in QuickBooks (typically into your savings or checking account), just like you would visit the bank at the end of the workday. Remember, transactions in QuickBooks should reflect real life scenarios - if money is in the actual bank, this should be reflected in QuickBooks!
The following tutorials focus on the “items” that you add to lists and use to create sales forms: product or service items, customers, and vendors.
Every time you create a new customer, vendor, or product and service item, you’re adding it to a list. By extension, QuickBooks uses these structured data points to organize your transactions and accounts.
This set of videos focuses on QuickBooks Online Inventory, which is available for QuickBooks Online Plus. The inventory tool offers basic quantity-on-hand tracking and reporting features.
While adding and managing basic products and services is a fairly straightforward process, the full inventory experience is quite a bit more involved and requires regular upkeep.
It’s best to start with inventory as you set up your product list, but you don’t need a clean slate to get set up (just know it will require some extra work). If you are converting from QuickBooks Desktop with existing inventory, there is a different workflow (found here). Note that inventory should be set up immediately after conversion, not later.
How to Create an Inventory Product | QuickBooks Online Tutorial 2018
After enabling inventory tracking (Gear Icon [ ] > Account and Settings > Sales > Products and Services > Track Inventory Quantity on Hand), you will use the same basic workflow to create inventory items as non-inventory and service Items.
For the most part, creating an inventory item will feel very familiar. You're already well aware of how to enter information for sales price/rate, sales tax, and income accounts (if you need a refresher, review "Setting up for Success - Adding Products and Services, Customers, and Vendors"). There are, however, a few key differences and new data fields that now appear in this module.
Initial Quantity on Hand – this should be the number you have in stock right now, at this very moment. Now might be a great time to do a physical inventory of your storeroom, just to make sure. This is important to get this right because going forward, any time you sell or purchase more of an inventory item, this number will change.
Reorder point – set this to whatever feels comfortable to you. There are a number of factors to consider: the size of your storeroom, the frequency of sales (this is where reports come in handy), and how quickly your vendors can send new shipments. You will know best.
Inventory Asset Account – this is an “Other Current Assets” account created by QuickBooks to record the current value of your inventory assets.
Purchasing information – add whatever information your vendor typically provides when you place an order (i.e. model number, part/item name or SKU shows up on the invoice you receive). Also, enter the price you pay. Expense Account - the chosen Expense account will be the Cost of Goods Sold account which will now appear on your Profit and Loss Statements. QuickBooks will calculate the cost of purchasing these inventory items after you sell it against the revenue from said item.
Inventory products will now display with this additional information on your Products and Services screen.
How to Record Sales of Inventory Products | QuickBooks Online Tutorial 2018
Recording the sale of inventory products is identical to how you'd record sales of any non-inventory product …
… save the addition of the quantity field. You can mouse-over the quantity field to see the remaining quantity on hand. Also, be very cognizant of what you put in the quantity field as this will automatically deduct from your standing inventory.
How to Track What You've Sold: Inventory, Summary Reports, & More | QuickBooks Online Tutorial 2018
The Sales by Product/Service Summary Report is the same report you’d typically run to track your overall sales, but the Cost of Goods Sold and Gross Margin columns only apply to your inventory items. You will see the average sales price alongside the COGS figure. The Gross Margin is the revenue made from the sale of the product minus the COGS expense.
QuickBooks Online uses the First-in-First-Out (FIFO) method to average the purchasing costs for COGS when the price of an inventory item is variable. Sound complicated? Don’t worry, QuickBooks calculates those price variations for you. If you're curious about the details on how this works, check out this article.
Keep an eye on your Costs of Goods Sold numbers and the profit margin from those inventory items – make sure what you’re selling makes financial sense to your business.
How to Enter Purchase Orders: Recording, Tracking & More | QuickBooks Online Tutorial 2018
The easiest way to track which items need reordering (based on the quantity you set) is to keep tabs on the stock bar at the top of the Products and Services list. Make it a habit to check every time you navigate to this menu.
When you use purchase orders to reorder goods from vendors through QuickBooks Online, the program will automatically update and accurately track quantities.
It’s also wise to use stock numbers as a reminder to do physical inventory – any time you see a low stock notification, set aside time to look over your stock room to make sure nothing else potentially needs reordering or quantity adjusting in QuickBooks.
Remember, purchase orders are your intent to purchase inventory products. No inventory will be received or processed at that point.
When you're are ready to place an order for more inventory, create a purchase order (Create button [ ] > Purchase Order). You can pull in existing vendor information, designate a shipping address, and even send purchased items directly to customers when they become available.
You can save customized Open Purchase Order Detail Reports and help your team stay on top of open orders by scheduling them to be emailed on a weekly basis (set for “All Dates” and called something like “Our weekly open purchase orders”). Learn more about customizing and scheduling reports.
How to Handle Inventory From a Vendor: Expenses & Backorders | QuickBooks Online Tutorial 2018
Once you (or your customer) receives the inventory from the purchase order, process the open Purchase Order (PO). Select either an expense, check, or bill (review the expense workflow if you’re unsure) depending on when and how you pay your vendor. For all three options, all open purchase orders for the specified vendor will appear on the right after you select the vendor. You can add the transaction to the form or open it to make sure it’s the correct one.
If any numbers were different between the PO and the bill/expense, such as the quantity or amount due, adjust them now. Using this workflow closes the open PO (unless you only received a partial order). Whatever adjustment numbers you entered will be used going forward.
How to Make Adjustments to Your Inventory Levels | QuickBooks Online Tutorial 2018
Use the inventory adjustment tool very, very sparingly.
Life happens. Items get lost. Accidents occur. Food spoils. There are a host of use-cases adjusting inventory, but try not to make it a habit. The more changes you make, the more complicated your accounting and explanation of your business’ assets will become.
If you’re constantly finding misalignments between your physical inventory and what’s recorded in QuickBooks, identify the source of the problem and shore it up early. If items are consistently damaged or going missing, work with your team towards operational solutions.
As the narrator notes, QuickBooks will already have Inventory Shrinkage (Cost of Goods or Expense Account) and Charitable Contributions (Expense) Accounts created for you. You can use these accounts for inventory adjustments, but you can also create your own account in the Chart of Accounts (learn more). Quantity adjustments show up on your Inventory Valuation Detail Report (below) alongside other changes that impact inventory quantities.
We’d also recommend utilizing the memo section to write notes detailing the reasons for the adjustment, written so anyone on your team can comprehend the notation.
How to Use Inventory Reports: Tracking, Maintaining, & More | QuickBooks Online Tutorial 2018
Inventory Valuation Summary Report – a “status check” of your current inventory with the calculated average cost per inventory product (based on FIFO).
Physical Inventory Worksheet – hand this to your team when they do a physical count of your stockroom.
Inventory Valuation Detail Report – think of this as a line-by-line history of your inventory products and any changes (i.e. start, bills, purchase orders, and transactions that diminish quantity on hand) that affect them.
Set up for Success in QuickBooks Online
"The Big Picture"
Creating and Managing Accounts
Understanding (and Separating) Owner Funds and Company Funds
Financial Reports and Reporting Features
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How to Customize an Invoice in QuickBooks Online
How to Record Bank Deposits in QuickBooks Online
How to Use the Undeposited Funds Account in QuickBooks Online
Here we cover basic accounting terms and how they are related to QuickBooks. Luckily, QuickBooks doesn’t require you to know complex accounting concepts, but it's good to have a basic understanding of what goes on during the bookkeeping process.