QuickBooks Online Plus has the Inventory feature that tracks quantity, sales revenue, and cost of goods sold. Find out how you can enable inventory tracking, add inventory and edit your product and services by batch.
Some Key points:
- The value of an inventory item in your books is the amount you paid for it.
- Recording the purchase of an inventory item increases the value of Inventory Asset account on your Balance Sheet report by the cost of the item and increases the Quantity on Hand units for that item.
- Recording the sale of an inventory item decreases the value of Inventory Asset account by the original cost of the item and decreases the Quantity on Hand units for that item.
- Recording this sale also increases the Cost of Goods Sold account (COGS) by the original cost of the item and increases the Sales of Product Income account by the amount your customer paid you for the item. The difference between the income amount and the COGS amount is your gross profit on that item.
At times, you may pay more for some units of a given product than for other units due to price fluctuations. When this happens, QuickBooks Online uses a method called First In First Out (FIFO) to manage the cost accounting as you sell units of that product. For more information on FIFO, see What is FIFO, and how is it used for inventory cost accounting?
Types of items
QuickBooks Online allows you track 4 different types of items.
- Inventory items: These are items you buy and/or sell and that you track quantities of. Inventory items require that the Tracking Quantity on Hand option be selected. Please see 'Turn on inventory tracking with quantity on hand' section below for more information.
- Non-inventory items: These are items you buy and/or sell but don't need to (or can't) track quantities of. Example are nuts and bolts used in an installation.
- Services: These are services you provide to customers. For example, landscaping or tax preparation services.
- Bundle: A collection of products and/or services that you sell together such as a gift basket of fruit, cheese, and wine.
- The default items created by QuickBooks (Hours or Services) cannot be changed to an Inventory Item type.
- Items that have been classified as Inventory cannot be changed.
- Items that have been added as either Non-inventory items or Services can be reclassified into either category by editing the product or service.
To do this:
- Open the Products and Services list.
- Select the Gear icon then choose Products and Services.
- On the Products and Services list, select Edit next to the item that needs to be changed.
- Within the edit screen, select on Change type and choose the appropriate selection.
Enable Inventory tracking
There are 2 ways to enable Inventory tracking:
- Turn on inventory tracking with quantity on hand:
- Choose the Gear icon > Account and Settings.
- In the left sidebar, select Sales.
- Select the pencil next to Products and Services and mark the option Track quantity on hand.
Note: This will enable the new item type called Inventory item when selecting New under Products and Services.
- Click Save.
- Turn on inventory tracking by Importing Products and Services Excel/CSV files into QuickBooks Online. To learn more, see Import or export list data in QuickBooks Online.
After you've turned on inventory, you'll need to set up your products.
Add inventory items to Products and Services
The Products and Services page lets you see all your products and services along with the available quantities, costs, selling price etc. To go to this page, go to the right hand corner and select Gear icon > List > Products and Services.
When you are on the page, you can choose to add individual items by selecting the New button or import from Excel in bulk (New > Import). On the Product/Service information window, you may select one of the four types of items: Inventory, Non-inventory, Service and Bundle.
- If you need to track inventory quantity on hand and costs, use the Inventory type.
- You now have the ability to include “Taxable” data for each inventory item that has been imported via CSV/Excel.
Create Inventory items
- Select the Gear icon > Products and Services.
- Select New. On the Product/Service Information window, choose Inventory as Item type.
- On the Product/Service Information Inventory window:
- Enter a name for the product/service.
- (Optional) Upload an image and enter SKU. Note that SKU will print if you are using the Airy form template.
- In the Category drop-down, add a category or choose the appropriate selection if available.
- Enter the Initial quantity on hand.
- In the As of date field, enter the date you start to track the inventory item’s quantity on hand.
IMPORTANT: Remember that you cannot save a transaction with an inventory item in QuickBooks if the date comes before the as of date.
- (Optional) In the Reorder point field, enter the minimum quantity of the inventory item you want to have in stock.
- From the Inventory asset account drop-down, choose or add an asset account. This account must be of the Inventory detail type. See Account detail types for steps to change the detail type if necessary.
- Complete the following optional fields:
- Sales information
- Sales price/rate
- Purchasing information
- In the Income account field, select Sales of Product Income. See Account detail types for steps to change the detail type if necessary.
- In the Expense account field, select Cost of Goods Sold.
- Select Save and close.
- Continue this process until all the appropriate products have been marked for inventory tracking.
- Inventory tracking can't be turned off for an item after it's been turned on. Instead, you can select Make inactive for the item and add a new item if you no longer want to track inventory. Making an item inactive doesn't affect the transactions that use it.
- Historical account usage of the Product or Service item cannot be changed if the option for Track Quantity on Hand is turned on.
Edit Products and Services by batch
Products and services also can be edited as a group. To edit multiple products, place a check mark in the box next to the items and choose the appropriate selection at the top. You can assign different categories, make the items inactive, or change the type (non-inventory item or service).
Additional information on inventory
Using Inventory items in transactions
Once you've set up your entire inventory list, you can start selling and purchasing items by creating new invoices, bills, purchase orders etc.
Note that you can even add new products or services on the fly within transaction forms (e.g., invoices) by clicking in the Product/Service column and choosing "Add new" in the drop down list box.
Using Categories to group your products and services
To learn more, see Introduction to categories in Products and Services.
If you have the both the Categories option turned on and using the new Redesigned Reports you can filter by Category.
Using reports to better understand your inventory performance
QuickBooks online has a number of reports that can help you better understand the performance of your products and services. You can access reports by clicking on 'Reports' on the left hand navigation menu.
To go to all inventory reports:
- From the left navigation menu, select Reports.
- Select All Reports > Manage products and Inventory.
Some relevant inventory reports are:
- Inventory Valuation summary
- Sales by Product/Service summary
- Sales by Product/Service detail
- Purchases by Product/Service detail
Physical Inventory Worksheet *
You may print and use the Physical Inventory Worksheet when you conduct a physical inventory at your warehouse. This report is accessible under the Manage Products and Inventory section of the Reports page.
* Australian Users: The Physical Inventory Worksheet is named Stock Take Worksheet in the Australian Product.
- For additional inventory links and resources, see Inventory Links and Resources.
- For more information about inventory tracking and cost accounting see Inventory Cost Accounting and Cost of Goods Sold (COGS)
- For more information about how to purchase or sell products or adjust quantity on hand, see Buying and Selling Inventory and Adjusting Quantity on Hand.