QBO NEWBIE - Is it possible to track cost on the P & L for a Non-Inventory BULK item?

Non inventory items do not stock cost or qty, so first you have to buy the non inventory item to post the cost to the expense account chosen, then you sell it.

Posting the total purchase to cogs when you buy the barrel, distorts your P&L unless you use it up really quickly.

I would stock it as inventory, a qty of one would = one gallon, then when you create the invoice for the customer, you list the bed liner inventory item and how many gallons it took to do the job.  So an order of one 55 gal barrel would be entered as the item

bed liner, qty =55, price = $3K  (per drum ordered)

you can either set the rate on the inventory and the qty will multiply that rate for the final price, 

or

list the bed liner material at a zero sales price and use a service item priced to include the labor cost, markup, and material costs.

@Rustler Thank you so much for your reply!!! I have a couple of questions regarding your answer please... 

The struggle that I have with the first statement of using a quantity when billing out is that depending on the job we might be off in the estimation of the quantity of material used either over or under. If we set the quantity to say the 55= 1 drum ordered ($3,000) and the inventory is over/under when we run out of material how would you make that adjustment? 

I think the second suggestion sounds like a winner, but would you mind providing a little more detail about it? Are you stating to have say two lines?

1) bedliner part number using a qty invoiced at $0 to the customer and $0 cost on this line item? 

2) Service line charging the customer say qty 1 for $375 and on the service line item cost have the cost of $150 for the material, plus any labor costs? 

If what I stated was correct in what you were saying will the Service line cost of $150 show up as a cost for for the invoice on the P & L? I have been playing around with the P & L and I don't recall seeing Service costs on it. I did see inventoried items with cost, but it sounded like you wanted the bedliner line to have $0 cost unless I misunderstood you? 

The only way I have been able to get the cost to show up on non inventoried/service items is when I create an expense/bill and assign it to the customer. 

Would you mind explaining a little bit more for me? Thank you so much!!!!

Thank you so much for your reply!!! I have a couple of questions regarding your answer please... 

The struggle that I have with the first statement of using a quantity when billing out is that depending on the job we might be off in the estimation of the quantity of material used either over or under. If we set the quantity to say the 55= 1 drum ordered ($3,000) and the inventory is over/under when we run out of material how would you make that adjustment? 

I think the second suggestion sounds like a winner, but would you mind providing a little more detail about it? Are you stating to have say two lines?

1) bedliner part number using a qty invoiced at $0 to the customer and $0 cost on this line item? 

2) Service line charging the customer say qty 1 for $375 and on the service line item cost have the cost of $150 for the material, plus any labor costs? 

If what I stated was correct in what you were saying will the Service line cost of $150 show up as a cost for for the invoice on the P & L? I have been playing around with the P & L and I don't recall seeing Service costs on it. I did see inventoried items with cost, but it sounded like you wanted the bedliner line to have $0 cost unless I misunderstood you? 

The only way I have been able to get the cost to show up on non inventoried/service items is when I create an expense/bill and assign it to the customer. 

Would you mind explaining a little bit more for me? Thank you so much!!!!

---

@Rustler wrote:

Non inventory items do not stock cost or qty, so first you have to buy the non inventory item to post the cost to the expense account chosen, then you sell it.

 

Posting the total purchase to cogs when you buy the barrel, distorts your P&L unless you use it up really quickly.

 

I would stock it as inventory, a qty of one would = one gallon, then when you create the invoice for the customer, you list the bed liner inventory item and how many gallons it took to do the job.  So an order of one 55 gal barrel would be entered as the item

bed liner, qty =55, price = $3K  (per drum ordered)

 

you can either set the rate on the inventory and the qty will multiply that rate for the final price, 

or

list the bed liner material at a zero sales price and use a service item priced to include the labor cost, markup, and material costs.

---

@Rustler Thank you so much for your reply!!! I have a couple of questions regarding your answer please... 

The struggle that I have with the first statement of using a quantity when billing out is that depending on the job we might be off in the estimation of the quantity of material used either over or under. If we set the quantity to say the 55= 1 drum ordered ($3,000) and the inventory is over/under when we run out of material how would you make that adjustment? 

I think the second suggestion sounds like a winner, but would you mind providing a little more detail about it? Are you stating to have say two lines?

1) bedliner part number using a qty invoiced at $0 to the customer and $0 cost on this line item? 

2) Service line charging the customer say qty 1 for $375 and on the service line item cost have the cost of $150 for the material, plus any labor costs? 

If what I stated was correct in what you were saying will the Service line cost of $150 show up as a cost for for the invoice on the P & L? I have been playing around with the P & L and I don't recall seeing Service costs on it. I did see inventoried items with cost, but it sounded like you wanted the bedliner line to have $0 cost unless I misunderstood you? 

The only way I have been able to get the cost to show up on non inventoried/service items is when I create an expense/bill and assign it to the customer. 

Would you mind explaining a little bit more for me? Thank you so much!!!!

cost of an inventory item is established when you purchase it, you do not assign cost. When you sell the item on an invoice or sales receipt the established cost is moved out of inventory asset and into the COGS expense account.

Putting a qty of an inventory item on the invoice or sales receipt causes that cost to post, regardless of the sales price, sales price posts to income.

If you run out, you need to buy more, you do not adjust the qty up.

Yes periodically you need to count qty on hand for inventory, every body does that, that is when you use inventory adjust and set the qty to what you actually find on hand. some do it monthly, quarterly, but everyone should do it before the end of the year so income tax filing is correct.

Service and non inventory have that cost block, it is deceiving. When you buy a service or non inventory item that is the ONLY time cost is posted to the expense account (and it updates the cost on the item usually) But if all you do is sell the service item, only the sales price posts regardless of whether or not the cost block has a price.

You build in your labor costs and mark up into the service item, cost of materials is done with the inventory item. So if it costs you in labor $100 per pickup bed, and it takes 2gal of bedliner at $54 a gallon, and you want a 30% mark up over costs

set the service item sales price to something like this

100 +
208 +
92 (308 * 0.30)

$400

@Rustler Thank you for your reply below. I have read your reply several times and am trying to let it sink in. While I am a novice in QBO for sure I do have a good understanding of inventory :) If I run out I run out and I need to order more, but that is for physical singular products that I sell. 

My statement regarding adjusting quantity was in regards to if I made a bedliner part as inventoried. There are 55 gallons in a drum that is fact. However, the amount of material sprayed may vary slightly from bed to bed or project to project. Yes, I can say ex: 3 gallons of material is "average" for the back of a short bed truck. There is not a meter on the machine that measures the amount of material used. We come up with the average number of trucks we can get out of a 55 gallon drum based on our order history and what we have sprayed (short beds, long beds, rocker panels, etc). 

I am trying to understand your explanation of non-inventory and service items. I want to think it will work, but I am struggling to understand the billing from the vendor. I follow you when you say the amount for cost is what is billed from the vendor, but that is where you loose me. If I am billed say one time, $3K for a barrel, how can I show that cost broken down over several invoices to the customers. It might take us 6 weeks to go through the barrel, but it might take us 3 months it just depends. I am looking for a cost to flow through on the P & L per customer invoice billed. 

Are you suggesting I use an inventoried AND non-inventory/service part when I bill say, 1 bedliner? Sorry, I do not follow this part...

If it helps here is some pricing information - For a short bed bedliner we charge the customer $479. Based on the number of beds we can get out of 1 55 gallon drum we have came up with a cost of $150 for a short bed. Now, if we spray a long box bedliner we charge he customer $529 and came up with a cost of $175 for a long box. 

The cost we assign for each of these parts is strictly for material. We have not ever had a labor line for the time expended to spray the bedliner. That my friend is another post that I need to address which will be my next post to inquire on. Can internal labor be billable to a customer since it is a service and there will not be a vendor bill paid to post as an expense? I don't think so? 

Yes, I know basic accounting.... still learning, thank you for your patience :)

Any time there is a liquid as an inventory part there is the issue of "left over" liquid that just can not be used, and what is used on a project is usually an average.

I would stock the liner as I said, a qty of 55 per drum ordered. when you empty a drum, do the math and use inventory adjust to lower the qty on hand to the number of full drums on hand * 55, that will post the cost of the left over amount to cogs accounting for the full purchase

I would use the liner item in a bundle item, ie
short bed
>> liner item, qty 2.5, price zero
>> service item called install or something, qty 1, price $479

long bed
>> liner item, qty 3, price zero
>> install service item, qty 1, $529

set the bundles to not print all items, they always show on screen, use print preview to see how it looks to the customer.

Yes I know the math is not exact, but QB works best when decimal fractions always add to one. .25, .125 is fine, .243, .233 is not going to work well. This puts cost in cogs per liner sprayed, and when you empty the barrel, any left over is also post to cogs

payroll is an expense, whether the employee is spraying liners or not, so I would not worry about trying to move some portion of payroll expense to sales expense - extra work with no real benefit. When I mentioned labor in the first response, I was showing an example of how to find the sales price

Service and non inventory items d not hold value or qty. So when you buy the item the total amount posts to the expense account on the item screen. The only good use I have found for using service or non inventory as double sided items (can be used for both selling and purchasing) is if you want to make the thing you buy billable to the customer and also be able to track the qty.

what I mean by track the qty, I can buy 5 window blinds for a customer @ $25 each. I can do this by using an expense account
billable expense, $125, customer name
or
item blind, qty 5, customer name

either way I do it, the full amount of the purchase posts to the expense account. But because I use a non inventory item for blind, I can report on how many of the blind were purchased over time, that allows me to make a judgement on whether or not to start stocking that particular blind.