Moving existing inventory to new SKUs

Repurposed · ‎April 29, 2024

Here's the situation: We have an existing PRODUCT, which comes in three colors. We do not get to choose the colors. We order a dozen, and get random colors. When we purchased and received this PRODUCT, we entered it on a single SKU. All we cared about was how many units of PRODUCT we had in the store. People could choose whatever color they wanted to.

Now we want to sell PRODUCT online. In-store, customers can take whatever color they want, but online we need to know which color they want, so we have created PRODUCT-RED, PRODUCT-WHITE, and PRODUCT-BLUE. We need an accurate inventory of each color.

Our existing inventory was purchased in a prior year, so this isn't as simple as updating the orders. We have 14 units of PRODUCT, and that's what our inventory reflects. Of those 14, we have 3 x PRODUCT-RED. 6 x PRODUCT-WHITE, and 5 x PRODUCT-BLUE.

How do I move the inventory from the one original SKU to the three new SKUs and maintain accurate costs for each item?

Repurposed · ‎April 30, 2024

OK, after creating test inventory items and running some tests, I can confirm that what suggests definitely doesn't work.

If I create new items for the colors and then do an inventory adjustment, the value of what I subtract from the original PRODUCT SKU goes to Inventory Shrinkage, but the value of the color-specific SKUs is entered as zero. Presumably that's based on an average cost of zero.

If PRODUCT-RED, PRODUCT-WHITE, and PRODUCT-BLUE have an average cost already (i.e. I've already made some purchases), then it assigns each color's cost average to the quantities adjusted into inventory. Better, but it probably won't balance.

This is where it becomes clear that the tracking of inventory and its value in QuickBooks Online was an afterthought.

Chat GPT kept suggesting journal entries to move the total inventory value for each item and then quantity adjustments to update the inventory. A journal entry can only move values between accounts, though, and all four SKUs in this scenario share the same Inventory Asset account. In other words, I can move the valuation of PRODUCT out of the Inventory Asset account, but then I'm putting it right back in the same Inventory Asset account. There is no way to credit it to a particular product. We went over that five times before I gave up, relatively comfortable that AI won't be taking over the world this week.

So the issue becomes moving both quantities and costs, and there's only one way I can see to do that:

A Vendor Credit for the total quantity and cost of PRODUCT. I'm removing all of the existing inventory and its total value.

Then, on the same Vendor Credit, negative quantity "returns" to each of the color-specific SKUs. (Remember: Since it's a Vendor Credit, positive values are inventory out while negative values are inventory in, but the rate is always positive.) The goal here is for the total of the Vendor Credit to be zero: the same total amount out of the Inventory Asset account, and then back in—but attached to new products.

If you're FIFO, that complicates things, but for cost averaging, this is close enough for me.

Until someone can tell me why this doesn't work, this is the solution.

View solution in original post

ShyMae · ‎April 29, 2024

Let me walk you through how to handle your situation, @Repurposed. My top priority is to ensure that your inventory management is successful.

QuickBooks Online doesn't have a direct feature to transfer inventory between SKUs. But there's a method to achieve your goal. We can manually create an adjustment to keep track of the movement of quantities from one SKU to another.

Before we proceed, note the quantity you'll want to move to the new SKUs depending on their color.

To proceed, let's open the original SKU:

Click +New, then select Inventory qty adjustment.
In the Product column, choose the new SKUs and add the original SKU.
Enter its updated quantity amount in the New QTY column.
Hit Save and close.

Please see the attached screenshots for visual reference.

It's always best to consult your accountant to ensure the accuracy of your inventory. If you don't have one, you can find a professional through this link: https://quickbooks.intuit.com/find-an-accountant/.

Moreover, you can generate a report that provides detailed information on the performance of your business, such as the number of products sold, the revenue generated, and the profit margins.

I'm always here to lend a hand and ensure you receive the help you need, @Repurposed. If you need additional assistance with your inventories, click the reply below. Have a good one!

Repurposed · ‎April 29, 2024

Thanks, @ShyMae!

I assumed there must be more to it than that. I see how your instructions adjust the quantities—and understood that before you replied—but what about the value of that inventory? How is a cost assigned to the new variants?

Maybe something is built-in that I don't understand, but when I run my Inventory Valuation, what will be the value of the 10 x M-Blue (for example) that you adjusted into inventory?

LollyNino_C · ‎April 29, 2024

Hello there, @Repurposed.

I can provide details about your inventory assembly concern in QuickBooks Online (QBO).

In the case of new variants, there is a cost associated with manually editing the cost per item. However, Shymae's process ensures that adjusting the quantity of the item does not affect its value.

The value of 10 x M-Blue can differ significantly based on the item configuration and cost entry method. It's essential to ensure that accurate information is entered to determine the best possible value. By doing so, you can ensure that you are making the most of your investment and getting the best value for your money.

But before that, I'd recommend consulting with your accountant to get guidance on handling your accounts accurately. If you don't have one, please visit this link: Find an accountant.

Check out these articles for more details:

Keep us updated in the comments if you have further questions about your inventory in QuickBooks Online. We're just a reply away. Keep safe and have a good day.

Repurposed · ‎April 30, 2024

Wow... That is very... not helpful.

My accountant understands accounting. He knows my end goal is to get the items from the PRODUCT SKU to the PRODUCT-COLOR SKUs. He says I should maintain the actual costs of those items when moving them. But he doesn't understand how QBO works the way you folks do. Well, should.

When I do what was suggested earlier—adjusting inventory down on PRODUCT and then adjusting inventory up on each PRODUCT-COLOR, what is it assigning as the cost of the items that were adjusted into inventory? I know when adjusting quantities down, it's going adjust the value of the Inventory Asset and Inventory Shrinkage (or other, if I so choose) account.

When I adjust an item's quantity UP, what is it doing? Assume PRODUCT-COLORs are new items, never before purchased, so there is no cost average to work with. Are items added to inventory at no cost? Does that inventory have no value? Does QBO try to balance what was added with what was subtracted in the same adjustment? Or do we just not know?

Perhaps if the QuickBooks employees don't understand what I'm asking, someone with practical experience can jump in here.

Candice C · ‎April 30, 2024

Good afternoon, @Repurposed.

I appreciate you coming back and giving us some additional details.

Since you're having trouble getting a direct answer, I recommend contacting our Customer Support Team for further assistance. They'll be able to use a screen share tool to review your account with you and explain some more information in details for you. Here's how:

Go to the Help ? icon in the top right-hand corner.
Press the Contact Us button.
Enter your question and tap Let's talk.
Scroll down and choose to Get a callback.

Keep us updated on how the call goes. I'm only a post away if you need me again. Take care!

Repurposed · ‎April 30, 2024