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How to set up Inventory and tracking

For many business owners, inventory (also known as stock) is at the core of their business. QuickBooks Online Plus is able to track quantity, sales revenue, and cost of goods sold. In this article, we’ll give you a quick overview on what you need to know when tracking inventory, and show you how you can enable inventory tracking, add inventory, and edit your product and services by batch in QuickBooks Online Plus.

Inventory tracking: What you need to know

  • The value of an inventory item in your books is the amount you paid for it.
  • Recording the purchase of an inventory item increases the value of Inventory Asset account on your Balance Sheet report by the cost of the item and increases the Quantity on Hand units for that item.
  • Recording the sale of an inventory item decreases the value of Inventory Asset account by the original cost of the item and decreases the Quantity on Hand units for that item.
  • Recording this sale also increases the Cost of Goods Sold account (COGS) by the original cost of the item and increases the Sales of Product Income account by the amount your customer paid you for the item. The difference between the income amount and the COGS amount is your gross profit on that item.
  • At times, you may pay more for some units of a given product than for other units due to price fluctuations. When this happens, QuickBooks Online uses a method called First In First Out (FIFO) to manage the cost accounting as you sell units of that product.

Four Types of Inventory Items to Track

QuickBooks Online allows you track four different types of items.

  • Inventory items: These are the items you buy and/or sell and that you track quantities of. Inventory items require that the Tracking Quantity on Hand option be selected. (See the Enable Inventory Tracking section below for more information.)
  • Non-inventory items: These are items you buy and/or sell but don't need to (or can't) track quantities of. Example are nuts and bolts used in an installation.
  • Services: These are services you provide to customers. For example, landscaping or tax preparation services.
  • Bundle: A collection of products and/or services that you sell together such as a gift basket of fruit, cheese, and wine.
Warning
  • The default items created by QuickBooks (Hours or Services) cannot be changed to an Inventory Item type.
  • Items that have been classified as Inventory cannot be changed.

Items that have been added as either Non-inventory items or Services can be reclassified into either category by editing the product or service. To do this:

  1. Select the Gear icon on the Toolbar, then choose Products and Services.

  2. On the Products and Services list, select Edit next to the item that needs to be changed.
  3. Within the edit screen, select Change type and choose the appropriate selection.

Enable inventory tracking

To enable inventory tracking, you can either turn on inventory tracking with quantity on hand, or you can import your products and services Excel/CSV file into QuickBooks Online.

Turn on inventory tracking with quantity on hand:

  • Select the Gear icon on the Toolbar.

  • Under Your Company, choose Account and Settings (or Company Settings).

  • In the left sidebar, select Sales.
  • Select the pencil next to Products and services and mark the option Track inventory quantity on hand. (Note: This will enable the new item type called Inventory item when selecting New under Products and Services.)
  • Select Save.

To import your products and services Excel/CSV files into QuickBooks Online, see Import or export list data in QuickBooks Online

Tip :
  •  If you need to track inventory quantity on hand and costs, use the Inventory type.
  • You now have the ability to include “Taxable” data for each inventory item that has been imported via CSV/Excel.

After you've turned on inventory, you'll need to set up your products.

Create inventory items

  1. Select the Gear icon on the Toolbar.

  2. Under Lists, select Products and Services.

  3. Select New.

  4. Choose Inventory as the type.

On the Product/Service information window:

  1. Enter a name for the product/service.
  2. (Optional) Upload an image and enter SKU. Note that SKU will print if you are using the Airy form template.
  3. In the Category drop-down, add a category or choose the appropriate selection if available.
  4. Enter the Initial quantity on hand.
  5. In the As of date field, enter the date you start to track the inventory item’s quantity on hand. (Note: Remember that you cannot save a transaction with an inventory item in QuickBooks if the date comes before the as of date.)
  6. (Optional) In the Reorder point field, enter the minimum quantity of the inventory item you want to have in stock.
  7. From the Inventory asset account drop-down, choose or add an asset account. This account must be of the Inventory detail type. (See Account detail types for steps to change the detail type if necessary.) Complete the following optional fields:
    • Sales information
    • Sales price/rate
    • Purchasing information
  8. In the Income account field, select Sales of Product Income.
  9. In the Expense account field, select Cost of Goods Sold.
  10. Select Save and close.

Continue this process until all the appropriate products have been marked for inventory tracking.

Add inventory items to products and services

The Products and Services page lets you see all your products and services along with the available quantities, costs, selling price, and more. To go to this page:

  1. Select the Gear icon on the Toolbar.

  2. Under Lists, select Products and Services.

When you are on the page, you can choose to add individual items by selecting the New button or import from Excel in bulk (New Import). On the Product/Service information window, you may select one of the four types of items:

  • Inventory
  • Non-inventory
  • Service
  • Bundle
Tip :
  • Inventory tracking can't be turned off for an item after it's been turned on. Instead, you can select Make inactive for the item and add a new item if you no longer want to track inventory. Making an item inactive doesn't affect the transactions that use it.
  • Historical account usage of the product or service item cannot be changed if the option for Track Quantity on Hand is turned on.

Edit products and services by batch

Products and services can also be edited as a group. To edit multiple products, place a check mark in the box next to the items and choose the appropriate selection at the top. You can assign different categories, make the items inactive, or change the type (non-inventory item or service).

edit products and services by batch in QuickBooks Online

Do more with your inventory

Using inventory items in transactions

Once you've set up your entire inventory list, you can start selling and purchasing items by creating new invoices, bills, purchase orders etc. You can even add new products or services on the fly within transaction forms (e.g., invoices) by clicking in the Product/Service column and selecting Add new from the drop-down list.

Using categories to group your products and services

If you have the Categories option turned on and using the new Redesigned Reports you can filter by category. To learn more, see Introduction to categories in Products and Services.

Using reports to better understand your inventory performance

QuickBooks online has a number of reports that can help you better understand the performance of your products and services. You can access reports by selecting Reports from the left menu.

To go to all inventory reports:

  1. From the left menu, select Reports.

  2. Some relevant inventory reports are:
    • Inventory Valuation summary
    • Sales by Product/Service summary
    • Sales by Product/Service detail
    • Purchases by Product/Service detail

Physical Inventory Worksheet

You may print and use the Physical Inventory Worksheet when you conduct a physical inventory at your warehouse. This report is accessible under the Manage Products and Inventory section of the Reports page.

 

 

More resources

Now you know how to set up your inventory tracking. If you want more information on inventory processes and best practices, please check out the following resources:

Now you've gotten a quick overview on what you need to know when tracking inventory, and you can enable inventory tracking, add inventory, and edit your product and services by batch in QuickBooks Online Plus.