Inventory Tracking without cost or sales

When you purchase inventory it becomes an Asset of the business. When you make a sale from your purchased inventory it becomes a cost of goods sold expense for your business. Your inventory is tracked with "accounting", thus your inventory needs to be part of your accounting.

Of course you can track inventory without running it through AP or AR, and it doesn't have to affect costs or sales.

Let's take these separately: AP is only Enter Bill for something I did not yet pay for. You can list Inventory on the purchase as Check Expense or Credit Card Charge. This is how you show you bought something, with Quantity and Cost.

AR is part of Unpaid Sales. Inventory is not by definition Sales; it is by definition Stuff on hand. So, for instance, a machine shop or fabrication shop might need to track tool bits, saw blades and materials as Inventory for inhouse management, which is never what is sold. Perhaps you sell Trailers, and build them Custom.

So, you list Bar stock, square tubing, cut off blades, etc as inventory on Purchases. When you then Build that trailer to sell, you "Adjust inventory" to remove the Tubing and Bar Stock from on hand. You also Adjust inventory for removing new saw blades as they get placed in the machines.

And you would sell that trailer, as your revenue item. You would never sell inventory, in this type of operation.

I have a client that builds and tests rocket engines. They manage a lot of inventory, all for In House purposes. They sell Engineering Services.

Materials that are used to build a finished good for sale can be setup as "Non-Inventory" parts and tracked in QBO as such. If I build a fence and sale it to a customer I would not charge them for the hammer and nails I used to build it with, but the hammer and nails would still be a cost of doing business, and I may still feel the need to track the inventory levels of my tools and supplies. If you purchase a good that you "resale" to a customer, this is a "Cost of Goods Sold".

Of course you "can" track inventory for business use outside of A/R and A/P. If you don't sell your purchased inventory, it does not become a sale and income for your business. If you do not sell products that you purchase for your business, the cost of those products do not become a cost of goods sold for your business. "Inventory" is NOT defined as "Sales". Everything we purchase or sale in the course of doing business has a value and should be "accounted" for accordingly.

If I purchase products that I use for research and development and sell information based on my findings, but don't sell any of the materials I purchased to perform the research, that does not change the fact that the materials I purchased were needed to perform the research and therefore become a "cost of services sold" when I sale my research findings as a "service".

How would I go about entering it so that it is just inventory and not sales? I tried to mark it as "Tracking" only but it would not allow it without giving it another identity as well.

When I import the data into the Product & Services list, it will not allow me to select "Track" unless "Sell" is selected and it won't allow me to make "non-inventory" if "Sell" is selected? How would I go about tracking the product as non-inventory without affecting the accounting end of the business?

Under your "Company Settings", "Sales", "Products and Services", have you turned on "Track inventory quantity on hand"??

Because you want to use QBO to track non-sales inventory, you need to setup this non-sales inventory as  "Inventory" and not "Non-Inventory". 

If you have it on hand and need to track it as I described, for internal purposes, the "not as sales" means never Selling it. It isn't a question of the setup. It's a question of how you use that in transactions.

If you want to use Noninventory, then never set it up as Sold or "reimbursed." It can be an Expense item only. That isn't the same as tracking inventory for internal purposes only. The point of tracking anything as inventory is because it is on hand of significant value over time, and not already gone = cannot take it as expense.

Example: I buy 50 different Saw Bladed for that machine shop and they run $1,000 each and will last a year or two, but you never know when you would break one, so you want enough on hand to keep operating. You never sell them to customers, but your tool crib manager needs to manage them, get them on hand, keep a minimum level, and the IRS doesn't permit you to report these as Expense when they are still on the shelf. They are an inventory asset.

To add to this advice, the expense is taken when you make an "Inventory Adjustment", as the item is no longer sitting on the shelf. The inventory is an Asset, a Non-Sales Inventory Asset until it is used. If the Non-Sales Inventory Asset item is used to make a product that you sell, it becomes a cost of sales, a business expense. It has no sales price, but it does have a Cost when you purchase it and it becomes an Asset at the time of purchase. When you setup an Inventory item in QBO you can map it to a custom account.