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Set up initial cost for inventory items

by Intuit•322• Updated 3 weeks ago

Learn how to set up initial cost for your inventory items in QuickBooks Online. 

A lightbulb icon Inventory features are available for QuickBooks Online Plus and Advanced. If you don’t have Plus or Advanced, upgrade your QuickBooks plan to start tracking your inventory.

When creating a new product or importing from a sales channel into QuickBooks using Commerce, you’ll need to add in the initial cost for each product. Initial cost is the total amount you paid to get the product and may include shipping, freight, sales tax, and customs. Adding initial cost helps you keep an accurate cost of goods sold and accurately track your profit margins.

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Initial cost is the buy price plus any additional fees, costs, or discounts it takes to get the item from a vendor to you. This can include shipping costs, manufacturing costs, sales tax, discounts, and so on. Adding the initial cost of a product is important for tracking the health of your business. It gives you a better picture of your business by providing accurate cost tracking and better profit accounting. Here are some ways knowing initial cost can help your business:

  • Correct profit margin reporting: Tracking the cost of an item will help you calculate the profit you get from that item, called the profit margin. 
  • Accurate calculations of business tax: Adding the initial cost contributes to the Cost of Goods Sold (COGS), which you need to know to calculate the correct tax for your business. 

Add initial cost

QuickBooks will prompt you if some of your inventory doesn't have an initial cost added. You’ll see this on your Products & Services list or as part of the Commerce set-up checklist after connecting a sales channel.

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  1. In the initial cost notice, select Add now.
  2. Select Add Initial Cost.
  3. In the Initial Cost column, add the initial cost in the field for each product listed.
    • If the product has variants, you’ll see how many variants you’re adding the initial cost for.
    • If variants need different initial costs, select the product to view its variants and specify initial costs. 
  4. Select Finalize. 

Note: If you need to adjust the initial cost later, edit the starting value of the variant. 

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