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Community Explorer **

Manufacturing Inventory

I am new to QBO and Inventory.  We currently purchase raw materials and those raw materials are then put together by another Vendor.  This vendor also does the packaging and shipping of the finished products.

I need to show the Raw Materials purchased (have set up a Raw Materials Asset account), and then I need to show that raw material moved from that asset account to a Finished Materials asset account.  When sales are made , COGS are recorded and Finished Materials decreases by the same amount.

End result trying to get a more accurate inventory valuation on Financial Statements.

I hope this makes sense.  Any suggestions to very simply do this is much appreciated.

Thank you in advance

8 Comments
QuickBooks Team

Re: Manufacturing Inventory

Hello Chris,

 

We can create inventory items for the raw materials. And use them to create bundle items for the finished products.

 

 

First, let's turn on the inventory function:

  1. Click the Gear icon in the upper-right corner and select Account and Settings.
  2. Select the Sales tab and go to the Products and services section.
  3. Mark the Track inventory quantity on hand box.
  4. Click Save and Done.

Then, here's how to create an inventory for the raw materials:

  1. Click the Gear icon in the upper-right corner and select Products and Services.
  2. Click the New button and select Inventory as the item type.
  3. Enter the details of the raw material and click Save and close.

You can follow the steps to above to create the bundle item. Make sure you select Bundle as the item type. You can also refer to this article for more information: How to Set Up Inventory Tracking.

 

I'd also recommend asking your accountant to see if they have different ways of doing this.

 

Feel free to reach out to us if you need anything else.

Community Contributor **

Re: Manufacturing Inventory

Hi, Chris!

 

If you want to manage your inventory, and also take care of your accounting, you can try ERPAG. We integrate with QB Online: https://blog.erpag.com/2018/09/quickbooks-online-erpag-manufacturing.html

Established Community Backer ***

Re: Manufacturing Inventory


@ERPAG wrote:

Hi, Chris!

 

If you want to manage your inventory, and also take care of your accounting, you can try ERPAG. We integrate with QB Online: https://blog.erpag.com/2018/09/quickbooks-online-erpag-manufacturing.html


In case you missed my question about your app

https://quickbooks.intuit.com/community/Other-questions/Manufacturing-How-do-I-enter-Production-of-a...

Established Community Backer ***

Re: Manufacturing Inventory


@ERPAG wrote:

Hi, Chris!

 

If you want to manage your inventory, and also take care of your accounting, you can try ERPAG. We integrate with QB Online: https://blog.erpag.com/2018/09/quickbooks-online-erpag-manufacturing.html


Looks like COGS is created when the finished goods are created, which is wrong

Established Community Backer ***

Re: Manufacturing Inventory


@Chrisb1988 wrote:

I am new to QBO and Inventory.  We currently purchase raw materials and those raw materials are then put together by another Vendor.  This vendor also does the packaging and shipping of the finished products.

I need to show the Raw Materials purchased (have set up a Raw Materials Asset account), and then I need to show that raw material moved from that asset account to a Finished Materials asset account.  When sales are made , COGS are recorded and Finished Materials decreases by the same amount.

End result trying to get a more accurate inventory valuation on Financial Statements.

I hope this makes sense.  Any suggestions to very simply do this is much appreciated.

Thank you in advance


 

A 3rd party app may be easier, but you can use QBO if the quantities used in each Finished Good item are known and simple.
Create Items for the Raw Material components, and the Finished Goods , and use a zero Expense-type transaction to move inventory from RM to FGs. Enter the qty. of each RM component used as a negative, one line for each component. The qty is how many FG items are being moved times how many of that component in each FG item. Get the current unit cost of each component from the Inventory Detail report*, and enter that as a positive, so that the total column (qty x cost) will be negative for each RM component. Enter how many FG items are being moved on the last line, and in the total column enter the sum of the RM components as a positive so the total value of the transaction is zero.

*FIFO not average would be better - one way to get it is to create a Sales Receipt, look at the Transaction Journal to get the FIFO cost, then delete the SR - but if the differences are not material it doesn't matter, because when the FG item is eventually sold it works out the same.

This tracks both Raw Material and Finished Goods inventory

An easier option is to not track Raw Material inventory

Established Community Backer ***

Re: Manufacturing Inventory


@Malcolm Ziman wrote:

@ERPAG wrote:

Hi, Chris!

 

If you want to manage your inventory, and also take care of your accounting, you can try ERPAG. We integrate with QB Online: https://blog.erpag.com/2018/09/quickbooks-online-erpag-manufacturing.html


Looks like COGS is created when the finished goods are created, which is wrong


and they are using estimated cost = actual cost

with no relation to actual cost of the FIFO item

Community Contributor **

Re: Manufacturing Inventory

The 'Deliver Finished Goods' document forms COGS on the credit side. When the finished products are sold, COGS are formed on the debit side, since we also (as an MRP software) have CORM account (Cost Of Raw Materials). The real COGS = COGS + CORM (and QBO doesn't have an account for cost of raw materials). The result is the same anyway. Accounting in ERPAG if of internal character, that's why our clients rely on the QBO integration. We are willing to email you a detailed procedure if you are interested. Different countries have different accounting standards, in some of them, COGS is temporarily on the credit side, especially in cases of unfinished and started (in process) manufacturing.

Community Explorer **

Re: Manufacturing Inventory

Thank you this is the direction we decided to take.  Using SOS Inventory to manage this portion of the company.  Thank you for suggestions and responses.