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Best method for drop shipping items that are also inventoried

We are a distributor and sometimes we sell items out of our warehouse, other times we will sell the same items drop shipped from a manufacturer to take advantage of free freight.

What is the best way to enter/receive orders that are going to be drop shipped? We currently receive it as if we have physically received the items, but this throws off our inventory numbers.

 

Thanks for the help!

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Best answer 01-04-2019

Accepted Solutions
QuickBooks Team

Re: Best method for drop shipping items that are also inventoried

Its nice to see you in the Community, JDCSupply. 

 

Thanks for providing such detailed information. I have a suggestion on how you can record these orders. 

 

You can create bills to record the purchase of the items, then mark them billable to your customers. This way, the program recognizes that the ordered products are charged to your clients. 

 

To mark a bill as billable:

  1. Go to Vendors at the top menu bar and select Enter Bills.
  2. Click the Items tab, enter the inventory you've entered. 
  3. In the Customer:Job column, enter the name of customer.
  4. Put a check mark in the Billable field. 
  5. Click Save and Close (see screenshot below). 

To record the bill payment:

  1. Re-open the bill you created for the vendor.
  2. Click the Pay Bills button at the upper right side.
  3. Choose Ok, then Done.

Capture 2.PNG

Once done, create an invoice to link the billable charge. Check out the steps below:

  1. Go to Customers at the top menu bar, then select Create Invoices.
  2. In the Customer:Job field, choose the customer you've charged the bill to.
  3. Mark the Select the outstanding billable time and costs to add to this invoice radio button and click Ok.
  4. From the Choose Billable Time and Costs box, pick the Items tab.
  5. Select the items you need. 
  6. Click Ok (see screenshot below).
  7. In the Invoice screen, click Save & Close.

To receive the payment:

  1. Re-open the invoice you've created.
  2. Click the Receive Payments button.
  3. Select Save and Close

Capture 1.PNG

That should do it! Though you've entered the inventories in QuickBooks Desktop, the program will recognize them as sold. Therefore, the income incurred for selling these items will be recorded regardless if they've been drop shipped. 

 

Let me know if you have questions or if you're referring to something different. I'll be around!

View solution in original post

5 Comments
QuickBooks Team

Re: Best method for drop shipping items that are also inventoried

Its nice to see you in the Community, JDCSupply. 

 

Thanks for providing such detailed information. I have a suggestion on how you can record these orders. 

 

You can create bills to record the purchase of the items, then mark them billable to your customers. This way, the program recognizes that the ordered products are charged to your clients. 

 

To mark a bill as billable:

  1. Go to Vendors at the top menu bar and select Enter Bills.
  2. Click the Items tab, enter the inventory you've entered. 
  3. In the Customer:Job column, enter the name of customer.
  4. Put a check mark in the Billable field. 
  5. Click Save and Close (see screenshot below). 

To record the bill payment:

  1. Re-open the bill you created for the vendor.
  2. Click the Pay Bills button at the upper right side.
  3. Choose Ok, then Done.

Capture 2.PNG

Once done, create an invoice to link the billable charge. Check out the steps below:

  1. Go to Customers at the top menu bar, then select Create Invoices.
  2. In the Customer:Job field, choose the customer you've charged the bill to.
  3. Mark the Select the outstanding billable time and costs to add to this invoice radio button and click Ok.
  4. From the Choose Billable Time and Costs box, pick the Items tab.
  5. Select the items you need. 
  6. Click Ok (see screenshot below).
  7. In the Invoice screen, click Save & Close.

To receive the payment:

  1. Re-open the invoice you've created.
  2. Click the Receive Payments button.
  3. Select Save and Close

Capture 1.PNG

That should do it! Though you've entered the inventories in QuickBooks Desktop, the program will recognize them as sold. Therefore, the income incurred for selling these items will be recorded regardless if they've been drop shipped. 

 

Let me know if you have questions or if you're referring to something different. I'll be around!

View solution in original post

Not applicable

Re: Best method for drop shipping items that are also inventoried

Hi,

Would this also work for Quickbooks Online?

 

Thank you!

Moderator

Re: Best method for drop shipping items that are also inventoried

Yes, this will work in the QuickBooks Online Plus and Advanced versions, Jordank.

 

You'll have to turn on the Billable option first. Then, mark your items as billable.

 

Here's how to turn it on:

  1. Click the Gear icon, and then select Account and Settings.
  2. Go to the Expenses tab.
  3. Click the pencil (edit) icon in the Bills and expenses section.
  4. Tick () the Make expenses and items billable box.
  5. You can enter the default rate for those items.
  6. Click Save, and then Done.

I've added an article here as your reference in entering a billable expense: Enter billable expenses.

 

You always have me at your back, whenever you have challenges entering your billable expense.

Not applicable

Re: Best method for drop shipping items that are also inventoried

Great!

One more question, if you don't mind:

 

Is there a method that would allow the creation of an invoice first (before the creation of the bill).

 

We invoice the customer upon shipping, but we do not always get the invoice from our suppliers before they ship.

 

Thank you!

Moderator

Re: Best method for drop shipping items that are also inventoried

Hi there, @Jordank

 

On her behalf, I'd love to provide the clarification you're looking for.

 

When you create an invoice, you're unable to link any open billable expense after saving it. Thus, linking a bill after creating an invoice isn't available. 

 

In the meantime, you can use a spreadsheet to manually track the invoice or use a purchase order. First, enter a PO to track this transaction upon shipping. Once you receive the invoice from suppliers, you can now convert the PO to a bill, then link the billable expense to the customer's invoice. 

 

Here's how to enable this feature: 

  1. Click the Gear icon and choose Account and Settings.
  2. Go to the Expenses tab on the left.
  3. In the Bills and expenses section, check the Edit icon.
  4. Put a check mark on the Make expenses and items billable box.
  5. Hit Save.

Then, create a purchase order.

  1. Select the Plus icon.
  2. Click Purchase Order

Once you receive the supplier's invoice, convert the purchase order to a bill. 

  1. Open the purchase order.
  2. Click the Copy to Bill button.
  3. Make sure to check the Billable button and add the customer's name.
  4. Hit Save and close.

Lastly, add the billable expense to an invoice.

  1. Select the Plus icon, then choose Invoice.
  2. In the Choose a customer field, enter the customer name. Any OPEN billable expenses will populate on the right side of the screen.
  3. Select Add for the billable expense you like to include in the Invoice.
  4. Save the transaction.

For additional reference, you can refer to these articles to know more how PO works, as well as how to track your sales, restock the inventory, and use reports to check the status of your inventory: 

Drop me a comment below if you have any other questions. I'll be happy to help you out. Have a great day ahead.  

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