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Level 1

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!

Solved
Best answer January 04, 2019

Best Answers
QuickBooks Team

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

17 Comments
QuickBooks Team

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

Level 1

Best method for drop shipping items that are also inventoried

Hi,

Would this also work for Quickbooks Online?

 

Thank you!

Moderator

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.

Level 1

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

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.  

Level 1

Best method for drop shipping items that are also inventoried

Customer orders product that we will ship direct from factory (we also inventory these items). Customer pays in advance. Product ships and factory sends us the invoice. What is the correct process? The above doesn't really address this situation. I have a workaround that is somewhat tedious and would like smarter minds to enlighten me on a better way, and save me some work. Here is our process (in chronological order):

  • Customer sends order
  • We send PO to vendor. When creating PO I enter customer in drop-ship-to field, copy the ship-to address, delete customer from drop-ship-to field and paste their address back in the ship-to field (but make sure to not save address when I send/close PO). I tried using the drop-ship-to field but it creates a bill and messes things up (see below), probably because I don't know how to do it right.
  • We send proforma invoice (just a different invoice template) to customer. This will put inventory in an imbalanced position since we just "sold" inventory that was not here.
  • Customer pays the proforma invoice and we receive payment against proforma invoice.
  • Factory ships the product and sends us their invoice and packing list.
  • We receive the PO (which now corrects the inventory imbalance).
  • We then go back to the customer invoice and print out a commercial invoice to send to customer along with a packing list we create in Excel.
  • We pay vendor and PO is then closed.

I have tried to enter the customer in the drop-ship-to field, but then a bill is created when PO is received but customer has already paid and then I am lost and screw things up. I am sure I am probably missing something simple, but then again Quickbooks wasn't set up for importing or drop-shipping and maybe my process is the best way.

Key concerns: a) customer is invoiced and pays before we ship, b) product being shipped is also stocked, c) inventory becomes temporarily imbalanced and if I forget then cycle counts may be off.

Please help this wayward soul improve my "DI" process.

Level 1

Best method for drop shipping items that are also inventoried

Customer orders product that we will ship direct from factory (we also inventory these items). Customer pays in advance. Product ships and factory sends us the invoice. What is the correct process?  I have a workaround that is somewhat tedious and would like smarter minds to enlighten me on a better way, and save me some work. Here is our process (in chronological order):

  • Customer sends order
  • We send PO to vendor. When creating PO I enter customer in drop-ship-to field, copy the ship-to address, delete customer from drop-ship-to field and paste their address back in the ship-to field (but make sure to not save address when I send/close PO). I tried using the drop-ship-to field but it creates a bill and messes things up (see below), probably because I don't know how to do it right.
  • We send proforma invoice (just a different invoice template) to customer. This will put inventory in an imbalanced position since we just "sold" inventory that was not here.
  • Customer pays the proforma invoice and we receive payment against proforma invoice.
  • Factory ships the product and sends us their invoice and packing list.
  • We receive the PO (which now corrects the inventory imbalance).
  • We then go back to the customer invoice and print out a commercial invoice to send to customer along with a packing list we create in Excel.
  • We pay vendor and PO is then closed.

I have tried to enter the customer in the drop-ship-to field, but then a bill is created when PO is received but customer has already paid and then I am lost and screw things up. I am sure I am probably missing something simple, but then again Quickbooks wasn't set up for importing or drop-shipping and maybe my process is the best way.

Key concerns: a) customer is invoiced and pays before we ship, b) product being shipped is also stocked, c) inventory becomes temporarily imbalanced and if I forget then cycle counts may be off.

Please help this wayward soul improve my "DI" process.

 

QuickBooks Team

Best method for drop shipping items that are also inventoried

I appreciate the detailed information, JOEBCO. It helped me understand your concern more.

 

I can think of one way to record your transactions. You'll have to record them as retainers. This method applies when your customers pay or deposit before performing any services. Although, you'll have to add the inventory items in the sales transaction.

 

We have different steps to set up and record the upfront deposits. I'll share the article that'll walk you through the process.

 

If you have additional questions, please feel free to leave a comment below. Keep safe!

Level 15

Best method for drop shipping items that are also inventoried

@JOEBCO 

If you run a dropshipping business, explore this app

https:// spocket.grsm.io/spockets

You may import the data into QBO by using a 3rd party tool.

 

If you wish to automate your business process later, integrate it with Shopify/WooCommerce to accept orders and utilize an inventory management app to sync it with your QBO.

 

 

 

Returning Member

Best method for drop shipping items that are also inventoried

Sorry I am missing something...... 

 

I entered the customers PO into my systems as a  bill...checked the billable item. 

Entered my drop shipments separately (Not the same name as the PO ....which may be the problem)  

Example:  Name Brand Store - Drop shipping to all their locations.  

How do I zero out the payable and reflect withdrawals from the original purchase order. I am trying

to locate a report that would say......  PO is  $500  

                                                     Drop ship -$100.00

                                                     Drop Ship- $100.00

                                                     Funds still available on PO $300

 

Please and thank you...

Returning Member

Best method for drop shipping items that are also inventoried

How do you remove the payable?  Entered the customer purchase order...... received in under a bill... 

Checked off the billable tab.  Here is our situation.. 

 

Company sends one big PO...  $500

We drop ship to their franchises (3) packages -$300

Need a report that shows  the $500 coming in minus the $300 used up.. 

and... how do I remove the payable from my payable report? 

QuickBooks Team

Best method for drop shipping items that are also inventoried

Thank you for the detailed information, @Handeholder.

 

QuickBooks Desktop (QBDT) only reflects transactions on what you recorded. Thus, entering separate bills for your customer's purchase order and drop shipments won't display withdrawals from the original purchase order and zero out your payable.

 

For now, the best way to handle your drop-shipping items is to create an invoice to link the billable charge. You can follow the detailed steps and information provided by my peer VivienJ above.

 

However, if you want to track the drop-shipped items, you can utilize Sales Order Fulfillment Worksheet feature. This feature allows you to complete the pick and pack steps for an order as a single action instead of separate processes.

 

Keep in touch if you need any more assistance with this, or there's something else I can do for you. I've got your back. Have a good day.

Returning Member

Best method for drop shipping items that are also inventoried

Thank you for your reply and assistance...  So basically I can't do it unless I have Enterprise? Correct? 

Everything I enter into our QBooks Desktop is recorded and in order to get a billable purchase order I have

to have the payable (which can't be removed)..  Just wanted to be sure I am wrapping my head around this... 

Sorry if I am not understanding....  Drop shipping is a new one for us...Just want to start on right foot.. 

 

Please and thank you A TON!!! 

QuickBooks Team

Best method for drop shipping items that are also inventoried

Thanks for coming back for more support, @Handeholder

 

To clarify, the Sales Order Fulfillment Worksheet also works in QuickBooks Desktop Premier. You just have to ensure to enable the appropriate Advanced Inventory preference. 

 

Then, you can start managing and fulfilling your sales order by selecting the Customers menu and then the Sales Order Fulfillment Worksheet.

 

For future reference, you'll want to learn more about tracking the sales order fulfillment progress. Read through this article for more insights: Pick tab in Sales Order Fulfillment.

 

Let me know if you have more questions. We're always delighted to help in any way we can. 

Returning Member

Best method for drop shipping items that are also inventoried

Thank you for responding so quickly...  Unless I am not looking in the right spot I am unable to click on ADVANCED INVENTORY SETTINGS...  We are using Premier Desktop........  I am on a mission to figure this out...LOL

 

Thanks again for your assistance.. 

QuickBooks Team

Best method for drop shipping items that are also inventoried

I can help you enable the Advance Inventory Settings, Handeholder.

 

You need to turn on this before before proceeding. And, I'm here to provide the detailed steps;

 

  1. From the Edit menu, select Preferences.
  2. On the left pane, choose Items & Inventory then go to the Company Preferences tab.
  3. Check the Inventory and Purchase Orders are Active box.
  4. Select the Advanced Inventory Settings button. 

If the button is grayed out even though you have purchased the feature, you will need to sync license data online so that QuickBooks recognizes it. Here's how:

 

  1. In QuickBooks, select Help then Manage my License and then Sync License Data Online.
  2. Check that Advanced Inventory Settings is no longer grayed out.
  3. Close and re-open the QuickBooks program.

If syncing fails, download and install the QuickBooks Tools Hub to help fix common errors. For the best experience, we recommend using Tool Hub on Windows 10, 64-bit.

  1. Close QuickBooks.
  2. We recommend you download the most recent version (1.4.0.0) of the QuickBooks Tool Hub. Save the file somewhere you can easily find it (like your Downloads folder or your Windows desktop). Note: If you've already installed Tool Hub before, you can find out which version you have. Select the Home tab.  The version will be displayed on the bottom right or you can select About to view the version.
  3. Open the file you downloaded (QuickBooksToolHub.exe).
  4. Follow the on-screen steps to install and agree to the terms and conditions.
  5. When the install finishes, double-click the icon on your Windows desktop to open the tool hub.

Once done, run the Quick Fix my Program to shut down any lingering background processes QuickBooks may be using. 

 

  1. In the tools hub, select Program Problems.
  2. Select Quick Fix my Program.
  3. Select the QuickBooks Program Diagnostic Tool.

Let me know how this goes by commenting below. I'm always around to help you.

Level 15

Best method for drop shipping items that are also inventoried

@MaryLandT 

Advanced Inventory is available for QBD Premier now? not only on Enterprise Platinum?

 

@Handeholder 

You may consider the inventory management app to integrate with your QBD Premier. As another option, explore the dropshipping management app. The app doesn't support QBD, but you may import data into your QBD file later.

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