QBO COGS Accounting for Inventory Completely Wrong - Major Bug

Hi, justonwo.
 

After switching from QuickBooks Desktop to QuickBooks Online, purchasing and selling products influences inventory figures. Therefore, we need to set up your inventory as soon as the conversion is complete. Let me walk you through the four-step process.

 
First, let's use the Inventory Valuation Summary report to set up everything properly. Here's how to print it:

1. Go to Reports and then Select the Inventory Valuation Summary report.
2. From the Dates drop-down, select All and then Select Print.

Once done, go to your balance sheet report for you to review the account balance before you make the some changes. 

If you haven't set up inventory tracking yet, let's turn on it first: 

1. Go to the Settings (Gear) icon at the upper right and then Select Account and Settings.
2. Choose Sales and then Select the Products and services section.
3. Turn on Show Product/Service column on sales forms.
4. Check the Track inventory quantity on hand box and then Click OK to confirm.
5. Click Save and Done.

For more information, go through this article: Set Up and Track Your Inventory. This link also provides you the steps on how to add your products, track what you sell, restock them, and run inventory reports. 

For more insights on how QuickBooks the products manage your inventory items, you can read through these articles: 

• Understand Inventory Assets and COGS tracking.
• Impacts of inventory tracking on balance sheet and profit & loss reports.

Get back to this thread if more questions arise managing your inventory. We'd be happy to fill you in. 

This is not an account settings issue. The account has been set up properly for inventory management since the beginning. These are my current settings for inventory management. They have not changed since I migrated.

There is a bug in how QBO is accounting for sold inventory. QBO will sometimes put sold inventory into the COGS account on the P&L after a sale, and sometimes it won't. There is no rhyme or reason.

As I said, I already spent 1.5 hours on the phone with QBO support and walked them through the issue I'm experiencing. They AGREED it was a bug and escalated the issue. 

What I'm seeking is other people that have experienced this problem.

After a day of investigation, this is the email I got back from Intuit. Forget for a moment that it doesn’t even make sense. 

They CLOSED my ticket without even resolving a problem that has turned my company’s books totally upside down? No one called. No one emailed. They didn’t even explain what they found or what’s happening next. 

This is completely unforgivable. How can Intuit miss something so fundamental and important in their accounting software?? And then they offer this horrendous, incomprehensible email as a response??

“Hello,

Good day! I just wanted to let you know I have added your company to the open ticket our development team is currently working on. I will now be tagging this case as Closed .

Closing this case does not mean we are closing any pending issue. Should you need to inquire pending issue please know that we can always cater it and re-open this case. Here is the Case Number for your reference xxxx.

If you have any clarifications or any further questions, please feel free to contact us back again. I just wanted to ensure your queries are well address and to know if you need any further assistance from us.

Thank you once again and hope to hear from you soon.


Best Regards,
Intuit QuickBooks Online Care”

Let me clarify things for you, @justonwo.

Closing your case doesn't mean closing the ongoing investigation as well. I want you to know that our development team is still looking into this issue. And base on the email message you've received, your company name is now added to the lists of affected users related to the open ticket. It means that you'll automatically receive email notifications of the latest updates.

Since you're working with COGS and inventory reports, you may review the resources from these links as your guides in the future:

• Impacts of inventory tracking on balance sheet and profit & loss reports
• Understand Inventory Assets and COGS tracking

Please extend your patience as our team is finding for a resolution regarding this issue. You can also leave a comment below if you have any other QuickBooks or inventory concerns. I'm always here to help. Keep safe!

So Quickbooks agrees there’s a system-wide bug with inventory/COGS accounting? But there is no ETA to fix it?

This will mean many hours of extra work for me manually allocating inventory cost to COGS. Pardon me, but asking for my patience is a bit ridiculous. When you can no longer run your business, it’s a little hard to be patient. 

Perhaps Quickbooks should be updating me on their timeline to resolve the problem. They should be calling me to explain how the issue will be fixed. 

Just called QBO support again. The investigation my company was attached to related to formatting reports. 

Unbelievable. This has nothing to do with my issue. Glad I spent an hour and a half on the phone with QBO service explaining my issue in detail. 

Hi there, justonwo.  I’ll share some updates about Inventory/COGS accounting in QuickBooks Online.

I understand the convenience of being able to assign to COGS. However, as mentioned by my colleague above, we have an in-progress report about this issue. Let me make it up to you and ensure you'll know when this issue will be fixed.

We’re unable to give a specific timeframe or timeline as to when will this be resolved. Please know that our engineering team is still working on this to provide the best solution. I suggest to always check your email/spam folders for status updates.

I've added the following resources about working with COGS and inventory reports: 

• Understand Inventory Assets and COGS tracking.
• Impacts of inventory tracking on balance sheet and profit & loss reports.

Feel free to leave a comment down below if you have other questions about Inventory /COGS. I'll make sure to answer them for you. Stay safe and take care.

After 5.5 hours on the phone with QBO support (which is a terrible experience because you can't actually talk directly to the person doing the troubleshooting so it takes about 10 times longer than it should), we figured out the problem.

If you don't list a rate for the part number when you purchase inventory, it will not track the COGS properly. The dollar value will stay in inventory.

In Quickbooks desktop software, if you specify the quantity and rate, amount will auto-populate. Likewise, if you specify quantity and amount, rate will auto-populate. This is not the case for QBO, however. I had a huge number of entries where I specified quantity and amount. Those entries created the problem. I believe QBO should ensure that rate is auto-calculated.

I still have an issue with my inventory where part numbers with zero quantity have a non-zero dollar value in the inventory valuation report. Argh, QBO, this is really bad.

Thanks for coming back to us, @justonwo. I understand the need to ensure that the rate is auto-calculated in QBO so it will track the COGS properly.

QuickBooks Desktop works differently with QBO due to the platform difference. I appreciate your comments about the 2 products and will take note of your observations and will forward it to our developers. 

You can also send your feedback directly to our dedicated support from the Development team. Here's how: 

1. Click the Help menu at the top and select Send Feedback Online.
2. Choose Product Suggestion and enter the details.
3. Click Send Feedback.

You can also enter your comments directly to our QuickBooks Feedback form link. Please know that all our suggestions are subject to further study. 

For additional reference, you can check out this article to learn to more about adjusting inventory quantity in QuickBooks Online.

Keep in touch if you have follow-up questions about your inventories. I'll be up here to help you right away.

Did you find a solution??? I'm getting the same stupid responses from QB Support as if they know nothing about how accounting principles even work. 

We operate on a cash basis. Customer requests an inventory item. We go and buy that inventory item the customer specifically requested we buy for them. All inventory is purchased at one rate and is then sold at higher rate to  the customer. So even though we technically have our books set up for inventory tracking, we don't really need to keep track of quantity on hand or reorder points. So simple and yet.... our books are completely messed up because of this.

I don't really understand how quantity, rate, and amount have anything to do with why COGS wouldn't show on the P&L. Could you explain?

@7399socks 

We operate on a cash basis. Customer requests an inventory item

That's the issue.  If you carry/track inventory, you need to be on accrual basis.

Per the IRS (Publication 538):

Generally, if you produce, purchase, or sell merchandise, you must keep an inventory and use an accrual method for sales and purchases of merchandise.

I am having the same issue!!! it is very irritating.  All of my products are set up the same way.  Most things are decreasing the inventory module amount like they are supposed to be, but some items are not.  Every month I have to print my inventory module and calculate the cost of the items that are taken out at zero!  Most months, it is between $4000 - $6500.  Then I have to do a journal entry to adjust the inventory module and COGS.  This is very time consuming and NEEDS TO BE FIXED ASAP!  We pay taxes at the end of the year based on the amount in our inventory module, and if products are not decreasing this amount when they are sold, we are overpaying taxes.  I don't understand why it would be on some products and not others if all of the products are set up the same way.  This is definitely a Quick Books problem. I have attached a quick report on just one product.  You can see that it is very random.  Sometimes it has a cost, and sometimes it doesn't!

I see how the inconsistencies of the inventory module affect business, TBROWN23.

The behavior you've described, where some products are not properly decreasing the inventory module amount upon sale, appears to be a technical issue. 

To address this matter promptly and thoroughly, let's work with our QuickBooks Support Team for further assistance. They will look into your account to help us identify the root cause of the issue and guide you toward a resolution.
 

1. Within your QBO account, go to Help in the upper-right corner.
2. In the Search tab, click Contact us.
3. Enter a brief description of your concern.
4. Click Continue.
   

Accurate Inventory management and financial reporting are important to help you avoid unnecessary tax payments. Don't hesitate to reach out once more if you require assistance after our conversation. I'll be available to provide support.

Tbrown5, I can tell you from experience that this is a bug. I spent a month on the phone with QBO. Some of the calls were longer than 4 hours. You aren't actually talking to the person that knows how to answer the question. You are talking to someone that is then messaging a person in tech support. So getting an answer to a simple question takes 3-4 minutes. QBO was not able to fix the problem. In fact, I couldn't even get them to agree that there IS a problem.

I should ask, did you migrate from another Quickbooks platform into QBO? I hired an outside CPA/consultant to look into this issue, paid them thousands of dollars, and worked with them for many hours. The best we could guess was that there is some bug in Intuit's migration tool. I finally came up with a workaround that has totally solved the problem:

1) I ran reports of all my inventory on hand, the value that QBO THOUGHT I had for each part, and had my CPA get the actual inventory values for all of my inventory.

2) I exported all of my products, income accounts, COGS accounts, etc to an Excel sheet (to be used later).

3) I then deleted all inventory products in "products and services" so that basically all of those inventory items were made inactive (along with all the bugs associated with those inventory items).

4) I then used a plugin to QBO called Saasant. This is a powerful and easy to use import/export tool to get huge numbers of transactions into and out of QBO. Using Saasant, I rebuilt all of my products again. Then my CPA added the quantities and starting values for all those products.

Since we did that, we no longer have any issues with how the cost of inventory is managed by QBO when you make a sale. I no longer have zero quantity products with non-zero value.

I can promise you that QBO will NOT be able to help you. You'll spend hours of your time going around in circles with people that have no direct expertise. The above steps took about 6-8 hours of total work, but they result in a permanent fix. All of your old invoices and bills prior to the deletion of your products will show that those old products and services are deleted, but it won't affect the transaction values. It just prevents you from getting historical reports on those parts (since they don't exist anymore). 

Essentially what you are doing is rebuilding your list or products. I think this whole issue arises from a problem when you import from another Intuit platform into QBO. I could be wrong about that, but I never got a definitive answer. What I can tell you is that my solution above solved the problem. The CPA and I have checked the sales transactions multiple times and the inventory values and COGS behave exactly as expected. Hope this helps.

You got to be kidding me!  We're to do all those steps, just to get an accurate financial summary of inventory on hand for our CPA? Inventory evaluation is a major step to closing the books annually.  

****  Why on earth is QBO not fixing these bugs? **** 

Looks like I have a long road ahead of me if I'm required to export, delete, and re enter all my inventory. Thousands of entries, wish me luck.