Link COGS for non-inventory drop shipping items to sales estimate/invoice.

Hello @nc0814 ,

You can utilize the Tags feature so you can assign a label for your transaction. Let me show you how.

1. Go to the Gear icon.
2. Under YOUR COMPANY, select QuickBooks Labs.
3. Toggle the Tags feature to turn it on.

Once done, you can start recording your sales and expenses with tags. To do so:

1. Go to the Gear icon.
2. Under LISTS, select Tags.
3. Click New.

Learn more about tag with this helpful article: Find out how to use tags and group tags to get deeper insights into your sales and expenses.

Additionally, I've also included this helpful article to get a better view of your business's financial status: Run basic financial reports.

If you have any other questions, please let me know by leaving any comments below. I'll be here to lend a hand. Stay safe!

Thank you so much - very helpful! That said, does feel like a workaround to manually add tags which duplicate information already stored in QB (i.e. product, customer, etc.) instead of simply linking a COGS to an invoice which has that information. This would be a great solution for info NOT yet in an invoice but all I would like is simply to have the profit report by customer and by product work correctly by linking a COGS entry to an invoice it relates to so that the cost is tied to the product or customer of that invoice rather than showing up as "Not Categorized".  No way to do this aside from tags?

Thanks for getting back to us, @nc0814.

QuickBooks Online (QBO) has the option that will allow you to assign an expense account to this specific non-inventory item (which will reflect on reports). However, this feature is only available to the Plus and Advanced versions.

If you wish to be able to do this, I suggest upgrading your QBO account from Simple Start to either Plus or Advanced. You can refer to this article for the detailed steps on how: Upgrade or downgrade your QuickBooks Online subscription.

Once done, here's how to assign an expense account to your non-inventory item:

1. Go to the Sales menu at the left pane to get to the Products and Services tab.
2. Locate the specific non-inventory item, then tick Edit at the right under the Action column. 
3. Place a checkmark on the I purchase this product/service from a vendor box, then choose expense or cogs account in the Expense account drop-down.
4. Hit Save and close to complete. 
5. Do the same thing if you have other non-inventory items to assign.

Once done, run the report again to double-check.

For more information about managing inventory items in QBO, consider checking out this article: Add inventory products in QuickBooks Online.

Reach out to me in the comment section below if you have any other questions or concerns. I'm always here to help. Have a good one!

We are in the same situation - thank you all for your helpful advice and to the original poster for the question. Another question: we also drop ship, but we want to associate our invoices (which are recurring, because these invoices are based on contracts) with specific salesmen, since it is their account. We do this so I can run a report monthly to see which invoices have been paid for each sales person. Ideally, I would like a report that shows the amount paid - minus the COGS associated with the item, so I can see the actual profit of the invoice and pay our sales person a portion of that profit. Should we associate the invoice with the sales person with a tag, or by making each line item a class tied to the sales person? And what report can detail profit by sales person? Hope that makes sense.

Hey there @kylewayne,

I’d be happy to help find a report to get the information you need. You can try customizing the Profit and Loss by Tag Group Report. Here’s how:

1. From the Reports menu.
2. Under Standard, scroll to the For my accountant section
3. Click the vertical ellipsis (three dots) next to Profit and Loss by Tag Group
4. Select Customize
5. Choose the fields and columns you would like
6. Then Run Report

Let me know how it goes. I’ll be looking forward to hearing if this is what you need. Have any other questions? I’m here to help, just drop a note!

Thanks, @MonicaM3!

I appreciate you mapping that out. Though, it seems when I run the profit and loss report, it does not subtract the COGS or the cost of the item that I have put in these items. Is it because they are non-inventory, perhaps?

Also, does it matter if I put my salesmen tags into a group? Meaning, say we have Shaun and Francine as my sales people, can I just tag them individually or ought I place them in a 'Sales Team' group and tag them that way?

Thanks so much!

Hi kylewayne, 

Let me share some details about the cost of goods sold.

The COGS is only affected when you sell inventory items on invoices or sales receipts. That is the reason why the Profit and Loss by Tag Group report don't calculate it.

In regards to creating tags, you can choose either of the two. If you need to track individual transactions, it's best to set up the tags individually. 

Here are some of the links for more details:

• What are tags and why should I use them?
• Cost of goods sold: How to calculate and record COGS

I'll be here if you need anything else. Wishing you all the best!

@kylewayne 

As another option, you may explore a drop shipping management app. Connect it with your webstore built on a certain platform (e.g Shopify, WC, BC, Wix) and integrate it with your QBO account.

https:// spocket.grsm.io/spockets

@AlexV Thank you for the info! Though, unless I'm mistaken, I am using the invoices. I create the invoices, tag it by salesmen, and pay the invoice. In the profit and loss report, It shows the COGS for shipping, but not for the cost of the item, which is ultimately what I'm looking for. If this isn's the best route, what would you recommend for: running a monthly report to show the revenue paid for each invoice (separated by each salesman), minus the cost of the item so we can get total profit. Does that make sense?

@Fiat Lux - ASIA , thanks for the recommendation! Though our suppliers are for automotive equipment, and we sell directly to our customers and not through an ecommerce app. If you have any other recommendations for our situations feel free to share!

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@kylewayne wrote:

Though our suppliers are for automotive equipment, and we sell directly to our customers and not through an ecommerce app. If you have any other recommendations for our situations feel free to share!

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@kylewayne 

What do you mean with you "sell" directly to your customers. Do you still manage your inventories in your own warehouse(s) ?  

@Fiat Lux - ASIA ,

We have 1-2 year agreements with our dealerships in which we ship product (floor cleaner, soaps, etc.) directly from our suppliers quarterly, and invoice them them monthly based on that agreement. We don't keep inventory in our warehouse, we just ship directly to the customer. We visit the customer every 8 weeks to check on them and confirm how much they are using. Does that make sense?

I have a client with a drop shipping business and I have been looking for ways to make this work.  I have been testing the use of Projects.  I have created a "Project" for each drop ship sale.  Essentially an end to end drop ship sale includes 1. Sale to Customer (Revenue, discounts, etc.) 2. Purchase from Vendor (Bill and/or PO) 3. Possible additional Shipping Costs 4. Reference to Non-Inventory Item.  I have tried examples with Sales Orders, Sales Receipts, Invoice, and combinations.  I have also tried examples with PO and Bill, Bill without PO, etc.

So far I like that you can see the entire "Drop Ship Sale" all in one place under the Project.  I also like that depending on how you use the various transactions you can see the status of the overall transaction - i.e. Has item been ordered, has it been shipped, have you paid supplier, has customer paid you, etc.

What I don't like is that it seems a bit cumbersome and there are not many "Project" reports to use.

From an accounting standpoint - recording sales and cost of goods sold with shipping costs etc seems to work pretty well.

Kyle - I am curious if you ever found a better way of handling the tracking of revenue - COGS per sales person. We are struggling with the same issue and operate on the same business model you do. I look forward to getting in touch and bouncing ideas around!