How to set up non-inventory items used in production/assemblies

sbm1 · ‎September 11, 2020

I'm working in Quickbooks Enterprise Manufacturing and Wholesale with advanced inventory. We were recording the purchase of the raw steel as a manufacturing overhead expense. We purchase steel in bulk and use it in our manufacturing process. We do not track the steel as inventory since we cut it up, it would be hard to count, etc. Recently, I tried making the raw steel a non-inventory part so we can put it on a PO, when I created the non-inventory part I tied to the account for manufacturing overhead expense. However, when I created the bill it wouldn't post to the manufacturing overhead account unless I also did a receipt for the item. When I created the receipt it then posted to the overhead account but also posted to the inventory offset account.

Is there a better way to handle non-inventory items used in production? How should I set up items we use but don't necessarily want to track?

MaryLandT · ‎September 14, 2020

Thank you for the screenshot, sbm1.

I've set up the same item under the Manufacturing Overhead account. Then, created a bill from the created purchase order. And, the transaction hits both the A/P and MFG Overhead account. See the attached screenshots below for your visual guide.

If you made some changes to your item list, you can re-sort it to undo the order. Let me show you how:

Go to the Lists menu.
Click the Item button, then choose Re-sort List.
Choose OK.

You can run the verify and rebuild utilities to perform a well-data checkup. This will make sure the item is damage free.

If the same issue persists, the item could be damage. I recommend deleting the bill and purchase order transaction. Then, make the item inactive and re-set up a new one.

Once done, enter again the purchase order and the bill. Then, check what accounts are affected.

Let me know how everything turns out by leaving a comment below. Just tag my name, and I'm always around to help.

View solution in original post

JoesemM · ‎September 11, 2020

Thanks for posting the Community space, @sbm1.

The purchase order is a non-posting transaction that's why it doesn't post to the manufacturing overhead account until you create a receipt or bill.

Also, the steps that you've made are the correct way on how to set up non-inventory items in QuickBooks.

I'm also adding here a link that you can visit for more information regarding Accounts Payable in QuickBooks: A/P workflow in QuickBooks Desktop.

I've added these articles that can guide in tracking the products you build using inventory parts and assemblies:

You can always get back to me if you have any other questions. It'll be my pleasure to help you.

sbm1 · ‎September 14, 2020

I understand that the PO is a non-posting transaction. When I enter the bill against the PO it hits the to the accounts payable account and the inventory offset account, instead of a/p and manufacturing overhead. I have to enter a receipt for it to hit the manufacturing overhead account. I was trying to skip the receiving process since it's a non-inventory item. I've included a screenshot of how the item is set up.

sbm1 · ‎September 14, 2020

I understand that the PO is a non-posting transaction. When I enter the bill against the PO it hits the to the accounts payable account and the inventory offset account, instead of a/p and manufacturing overhead. I have to enter a receipt for it to hit the manufacturing overhead account. I was trying to skip the receiving process since it's a non-inventory item. I've included a screenshot of how the item is set up.

MaryLandT · ‎September 14, 2020

Thank you for the screenshot, sbm1.

I've set up the same item under the Manufacturing Overhead account. Then, created a bill from the created purchase order. And, the transaction hits both the A/P and MFG Overhead account. See the attached screenshots below for your visual guide.

If you made some changes to your item list, you can re-sort it to undo the order. Let me show you how:

Go to the Lists menu.
Click the Item button, then choose Re-sort List.
Choose OK.

You can run the verify and rebuild utilities to perform a well-data checkup. This will make sure the item is damage free.

If the same issue persists, the item could be damage. I recommend deleting the bill and purchase order transaction. Then, make the item inactive and re-set up a new one.

Once done, enter again the purchase order and the bill. Then, check what accounts are affected.

Let me know how everything turns out by leaving a comment below. Just tag my name, and I'm always around to help.

sbm1 · ‎September 15, 2020

Thank you @MaryLandT for such a detailed response. I tried the steps you suggested and did a rebuild but unfortunately it's still not hitting the manufacturing overhead account unless I do the receipt. I noticed in your screen shot that the PO says received in full, which clued me in to why I am having a problem. We have the enhanced inventory turned on and when I reviewed the help I saw this:

Restrictions when using EIR

You cannot enter negative items in Item Receipts or Bills.
You cannot enter expenses on an Item Receipt.
If you create a Purchase Order for non-inventory Items, you must receive them with an Item Receipt to close the PO.
You can no longer mark items as "Billable" on Item Receipts

So, this pretty much answers my question. Thanks again for helping me get to the right answer.

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How to set up non-inventory items used in production/assemblies