Why Tracking Inventory Is Important
One of the best things about selling online is the ability to monitor your inventory from your home, without having to travel into the office. To take full advantage of Quickbooks Online inventory management tools, you need to understand the importance of knowing what’s in the storeroom and create reports on inventory data.
If you are a sole proprietor or don’t have a dedicated bookkeeper, taking inventory of your goods can be a difficult and time-consuming task. Though QuickBooks Online Inventory keeps track of the basic information by recording when merchandise arrives and when it’s put on sale/discontinued, it’s up to you to ensure that all the goods are accounted for and that the inventory is complete.
To ensure you are accurately tracking items in your storeroom and setting up your QuickBooks Online inventory management tool for best results, you need to know the most common ways in which inventory is lost, misreported, or failed to be reported.
Benefits of Tracking Inventory In QuickBooks
There are several benefits to tracking your inventory in QuickBooks. As you’ll see in this article, your business will have a much easier time tracking sales and keeping track of expenses. The last thing you want is to try and make an accurate determination of profit or loss by hand. That’s even more true when you’re just starting your accounting system. You want to get it right the first time.
Business owners who track inventory will find it easier to:
- Track when goods are received and when they’re sold
- Track what goods are used up during a given time period
- Respond to customer issues, returns, and damaged goods
- Track warranties and recalls
- Maintain your suppliers’ records
How to Set Up & Track Inventory In QuickBooks Online
Inventory is one of the most important parts of running any business. If you don’t have a constant supply of new inventory coming in at your business, you’re in trouble. QuickBooks, an accounting program that’s used by many small businesses to organize their finances, can help you keep track of your inventory numbers. The process is relatively simple, and can make your accounting more efficient.
Step 1 – Navigate to Company Preferences
To set up Inventory.
You can set up inventory for your QuickBooks Online business account by logging in and navigating to “Company Preferences” in the left-hand navigation menu after registration.
Enter the quantity of inventory you currently have or the desired amount and click “Save.” You can also specify whether you want to record inventory purchases or sales.
Step 2 – Navigate to the Sales Tab
Select Sales from the left menu. Make sure youÕre on the Sales tab as indicated at the top of the screen. You are in the right place.
Step 3 – Turn on the Inventory Tracking Feature
Go to the top navigation bar and click on the QuickBooks Online icon.
Filter by Accountant and click on QuickBooks Online Setup.
Select QuickBooks 2018 or QuickBooks 2019 from the drop down list.
Click on the Tracking Options button.
In the Tracking Options window, select Inventory and click on Next.
Click on the Add Stock Item button.
Read the message that pops up and click on OK.
Click on Create New and give the stock item a name.
Enter the quantity of the item or items.
Then click on Save and then Close.
To track the stock item, go to the account register of the QuickBooks Online company file and enter the Stock Item Number in the Action drop down list. If you can’t find it, you can add the Stock Item Number by going to the bottom of the list and clicking on Add New.
Note: If Inventory Tracking for your QuickBooks Online company file is not working, click on the icon to see the help instructions.
As you can see on the screenshot below, if you have inventory that does not show a line on the Inventory Register, Inventory Tracking lets you move the inventory from the balance sheet to the inventory register.
Step 4 – Navigate to the Products and Services List
Exporting your products and services lists helps you as you start off making your first QuickBooks Online account and preparing to track customer billable time.
Adding Tasks to Your Timeline before You Begin Tracking Billable Time
To begin tracking billable time in QuickBooks Online, you need to add a task to your timeline in the My Home tab by navigating to the Timeline page, located at the top left of the screen. The timeline is the vertical bar in your screen that contains daily and weekly tasks for you to complete.
By clicking Add Task in the list below the Brief section of the Timeline screen, you’ll be prompted to add a general task to the timeline.
As you’re creating your first task, you’ll need to add the following details:
Start …Start date. The appointment is a new task that starts automatically on the day the appointment is entered.
The appointment is a new task that starts automatically on the day the appointment is entered. Due …Due date. The due date is when the task is requested and is due to be completed.
Step 5 – Create a New Inventory Item in QuickBooks
In this example, we’ll create a new inventory item where we’ll track and store information about our shopping lists. You can create multiple inventory items for different items you sell.
Go to the sidebar and click on the File menu item. Select New Item from the drop down menu. In the left panel, select Inventory from the list and click Next.
Enter the Item Name and Description. For this post I’ll enter something like Shopping List and provide a brief description. Click Next.
Select Sales Tax Collected for the Tax Code. Next, click where it says Tax NET Amount. Then click on the arrow to the right of the Tax Code column and click on Sales Tax. Then enter the number of cents into the Tax Cut column and click on the Next Item button.
Back in the Sales Tax collection window, select the correct City and Country for your location. Then click on the Next Item button.
In this step, we’ll create a new account for our Shopping List inventory item. We’ll start by typing
In the Account Name field. Enter the amount of your projected sales tax for this item and click the Next Item button.
Click on the Create Journal Entries button. You can do this from the Actions drop down menu on the transaction tab.
Step 6 – Select the Item Type
You’ve just reviewed the information from Step 1 to Step 5, and you’re now ready to set up your inventory items. Go on to Step 6 by selecting the item type.
During this step, you’ll select the type of inventory items you’re going to track using QuickBooks including:
- Inventory items
- Service items
Inventory items include any items whose title reflects what the item is … in other words, not just the inventory number.
For example, if you’re going to track the inventory of basketballs and footballs, you’d classify them as inventory items. Inventory items also include items, such as, cash, that you’re not going to track using QuickBooks.
Products include items for which the price and inventory amounts are tracked as they change over time in your QuickBooks account. Products include things like items in uniform, such as shoes and uniforms.
You’ll track your products using the Inventory Tracking feature.
Materials include items that you actually use in your business, like chopped hay or fertilizer. Materials will be used to create inventory items.
Step 7 – Enter the Information for the New Item
In this step, we’re going to enter all the information for the new item.
If you’re placing your order with a particular business partner, you can simply copy and paste the information. If you’re placing an order with another supplier, you may have to retype all of the information.
Since we’re creating a custom item here, we’re going to use a little bit of DROP-DISTANCE to set the date range. So click the Date Range icon, and then select the Date Range you’d like to apply. In this case, we’re choosing to set the end date to the earliest date that the supplier has available (June 3, 2015) and the start date to today.
The supplies that are available for this item will change as your order date draws closer.
Step 8 – Review List of Products & Services Report
Click the + (plus) icon beside, AR & VT Reports. Select Products & Services from the drop-down menu. Select the Status column to be Product Status Change or Service Invoice. The business owner can perform a product status change at any time during the manufacturing process by clicking the, Status Changed icon.
Change the report options to include product, vendor, service item, and service. Set the report to include the date, date thru, cost and unit price. In the Product column, scan the entire spreadsheet and click the, Click here to add these items to the report to highlight them on the grid.
Click the Data Sources tab, input a name, description, and data source in the three sections depicted. When finished, click, Save Changes. (shaded in green below) >> Click on the Select Columns tab
In the Product Column, highlight, Product ID, Price and Description. In the Vendor Column, highlight, Vendor ID, Vendor Name and Description. In the Service Item Column, highlight, Service Name, Service Detail and Description.
Once the Items Are Listed Click the save Button
Click the Preview button to see what the report should look like.
What Impact Does Inventory Have on my Financial Statements?
Inventory is a very important part of QuickBooks Online. When looking at your company’s financial statements, a lot of the numbers you’ll be seeing come from inventory. After goods sold, you’ll see inventory on your balance sheet and in the balance sheet footnote. Here’s a closer look at the inventory numbers you’re going to see in your statements:
Inventory is part of your assets on your balance sheet.
Looking at your balance sheet, you’ll see that your inventory isn’t included in your liabilities. That’s because the inventory you buy in inventory cost you money and that money goes straight into your balance sheet.
Once inventory is in the balance sheet, it is now part of your assets (inventory) and no longer part of your liabilities (funds borrowed to purchase inventory) and reflects as an asset on your balance sheet.
Inventory is part of the cost of goods sold expense on your income statement.
Inventory items are usually counted when they are used or sold, so an inventory item is identified on the balance sheet by the actual physical item used or sold in the accounting period. An inventory item is identified on the income statement by the inventory account balance.
Physical Inventory Worksheet
One of the most convenient inventory tools you can use to mitigate as much as 50% of the time spent updating physical checklists, reports, order, and invoices, is the QuickBooks Inventory Worksheet.
The physical inventory worksheet allows you to write down what you currently have and how many of each component you bring each month or often. For instance, if you’re fabricating a new product, you can enter the materials that you have available in this inventory worksheet.
However, if you’re running an online shop, you can also use this inventory worksheet to track your inventory of digital products including ebooks, videos, audio files, and images. This saves you from having to import a physical inventory of digital products into QuickBooks each time you add a new item.
What Inventory Reports Are Available in QuickBooks Online?
QuickBooks Online provides a variety of reports and services to help you track your business’s inventory, including products, locations, sales, and inventory balances. They will help you scan and compare your inventory registers and provide you with an annual report to help you track your inventory accurately. You can also load inventory scans directly into QuickBooks, which allows you to create an inventory for your online business and use QuickBooks to generate sales reports.
Inventory scanning and reporting in QuickBooks Online is the first step to more efficient and accurate inventory management. It’s also a crucial part of protecting your business and your hard-earned money, so, it’s important for you to understand how to properly scan and manage your inventory in QuickBooks. Below, we’ll also discuss two important inventory reports in QuickBooks Online, so you can easily track your inventory: Sales and Purchase Ledger.
Inventory Valuation Summary Report
The Inventory Valuation Summary Report allows you to quickly track the inventory, and once why–the sales value. This report, which can be generated by accessing the Reports icon, is particularly useful when one of your customers asks How much is this? or I paid for this, where are my goods?
The QuickBooks Inventory Valuation Summary Report enables users to answer their customer’s questions in a quick and easy way.
This report tracks:
- What are the sales price for each of your inventory items
- How many units are left
- How much work you have left to do for each of your customers
Sales by Product/Service Summary Report
First, let’s pull up the sales by product/sevice summary report. From the dashboard, select Reports, and then select Product/Service Summary. You will see that the report shows you which products you sold in each month. One nice feature with this report is that it includes the cost of sales including freight, return, discounts, and sales tax.
Budgeting the time and resources required to set up, organize, and maintain an inventory system in QuickBooks can be difficult, but is vital to ensuring your business’s financial records are accurate and carefully accounted for.