QB 2018 Inventory tracking

Create Inventory sub-Items. You can make sub-Items of sub-Items, so you can have multiple tiers underneath an Item.

1. Create an Inventory Item named "Item1" (whatever you want your thing called). Set up as normal, tied to correct Expense and Income accounts. The Expense Account you select for this will be the account that QB assigns to bills that have this Item selected. The Income Account you select will be the one QB assigns when you create Invoices with this Item selected. This will be your parent Item - everything else will be indented and sub-indented under this. Your Item List will arrange Item placement depending on alphabetization of your parent Items.

2. Create Size1 as Inventory Item. Set up as "SubItem of.." and select Item1. Tie to same Expense and Income accounts as parent Item1.

3. Create Finish1 as Inventory Item. Set up as "SubItem of.." and select Size1. Tie to same Expense and Income accounts.

4. Create Color1 as Inventory Item. Set up as "SubItem of.." and select Finish1. Tie to same Expense and Income accounts as parent Item1.

Repeat #2 two more times, so you have (3) Sizes that are all sub-Items of Item1 (Size1, Size2, Size3).

This will look like:

Repeat #3 until you have (2) Finishes as sub-Items for EACH Size (named Finish1, Finish2, [3 times]). You should have 6 Finish Items total; 2 each under each Size. You will have to change the Item selected for "SubItem Of.." so that you have 2 Finishes with Size1 selected for "SubItem Of..", 2 Finishes with Size2 as "SubItem Of..", and 2 Finishes with Size3 selected for "SubItem Of.."

Repeat #4 until you have (15) Colors as sub-Items for EACH Finish (named Color1 to Color15, [6 times]). You should have 90 Color Items total = 15 each under each Finish. Like above, you have to change the Item selected for "SubItem Of.." so that you have 1-15 Colors under each Finish SubItem.

Your Item List will look like this:

Item1

    Size1

         Finish1

               Color1

               Color2

               Color3.... list until 15 Colors

          Finish2

               Color1

               Color2

               Color3.... list until 15 Colors

     Size2

           Finish1

               Color1

               Color2

               Color3.... list until 15 Colors             

     Size3

           Finish1

               Color1

               Color2

               Color3.... list until 15 Colors       

          Finish2

                Color1

                Color2

                Color3.... list until 15 Colors

This is a lot of work and you'll end up with many Inventory Items, but you'll be able to track everything perfectly. I've seen Item Lists with several thousand Items/Sub-Items, so you can create as many as you want to keep track of. However, you really need to make sure you're selecting the exact [sub]item necessary on Bills and Invoices so your reports and Inventory/COGS are correct. 

You could also do Groups and Assemblies. This groups Items that are commonly used with each other for similar project builds, so that instead of individually selecting 20 Items you can select 1 item that contains all the other Items.. but that's more difficult to explain here and I wouldn't recommend doing this unless you know exactly what you're doing, as Inventory and COGS values can get messed up very quickly if not perfect.

Forgot to mention, on your Inventory Items they should be Inventory Parts, and when setting them up should have your Inventory Asset (Asset Account) selected also. This is what will throw the value of your purchased parts into an asset account (likely an Other Current Asset), and will be the Account reduced when you sell off inventory.

On establishing Quantity: 

You typically have Inventory Items show up in inventory by purchasing that item. Say you buy (3) Large Widgets in Red with Satin Finish. On the Widget supplier Bill that you enter in QB to pay, you select that particular Widget SubItem (after creating the earlier list, or as-needed), with 3 as the Quantity and the correct price (divide the cost of Freight/Shipping into each item's cost,  if you prefer, or leave Freight/Shipping as their own Items.. but I'd recommend combining those into the Item's price so your true COGS is correct). Entering that bill will put 3 Large Widgets in Red with Satin Finish into Inventory for that particular SubItem. A report on that Item should show how many you have in stock, where they were purchased, and at what price.

Putting an Item on an Invoice to a Customer will remove that Item from Inventory. It's best to stick with Bills and Invoices to Add/Remove Inventory. There are certain Inventory features (such as when you buy the exact same Item but it has different cost over time, QB will do Average Cost) and these need to be working properly. Trying to brute force the correct number of Items can throw things off. But if you're not removing inventory by putting them on Invoices (say you don't invoice your customers in that manner and therefore can't remove it from QB Inventory that way), then you have to do the Adjust Inventory screen. If that's the case a little more explanation is needed.

You can manually adjust Inventory but this gets tricky unless you really know what you're doing, and depending on how you previously recorded the Inventory transaction. If you already have a lot of Items in Inventory but didn't have the Items set up in QB, you're looking at some work to fix before your QB Inventory matches stock. It can be done but I don't want to start listing possible fixes until I know what happened with everything else. If at all possible, stick to Bills/Invoices.

Correction: When setting up an Inventory Item and selecting the Expense (or COGS) account, that's the Account that the value of the Item will go in after it is sold - not when it's purchased from a supplier. Sorry, I was thinking of setting up other Items like Service Items or Non-Inventory Parts when I wrote that. So ignore that part.

Inventory is set up differently - you have a COGS, Income, and Inventory account that needs selected. When you first purchase an Item (create a Bill, Check, or Credit Card Charge with that Item selected), QB will put the Item's value into your Inventory Asset account (selected at the very bottom left of the New Item setup screen in on QB Desktop US). You can't really have a COGS value until you've actually sold something (hence cost of goods "sold"), so you have to "sell" that item on an Invoice before getting a COGS value in QB. Instead of an Expense account, it's typically a COGS account since that was the actual cost you incurred for acquiring the item you sold. When you sell the item, QB will move the Item's value out of Inventory Asset and into the COGS account selected on the Item setup screen.

So when purchasing, it goes into Inventory. The act of selling it moves it into COGS. You probably already know this but it's important to know where/when QB records Inventory Item values.

Also, don't make the mistake of thinking that selecting a Customer on the Supplier Bill on the Item line will assign inventory cost to Customers. It doesn't. Inventory behaves differently in QB. For the item cost to show up on a Customer's P&L or Cost Report, it has to be entered on the Customer's Invoice. The Invoice is the only thing that tracks a Customer's Inventory cost/sales (other than the Inventory Adjustment screen, and that's only for Desktop.. QB Online doesn't let you select a Customer there). Remember, COGS isn't created until you create an Invoice (moving the Item's value from Inventory Asset to COGS), so assigning Customers to Purchase Orders and Bills/Checks/CC Charges will not assign the Item cost to that Customer.