Mastering Inventory Management with QuickBooks Online Plus and Advanced

Effective inventory management is essential to achieve profitability and customer satisfaction by many business entities. Poor inventory management may cause stock outs, sales losses, poor utilization of capital and augmented carrying costs. However, QuickBooks Online (QBO) Plus and Advanced provide intensive stock features helping the owner to gain control over the stock.

What is Inventory Tracking in QuickBooks Online?

The inventory tracking within QuickBooks online is the process of keeping track of the quantity and cost of the products a business purchases and sells and thus, its value. It gives you an opportunity to:

• Monitor stocks: Be aware of the number of products you have at an instance.
• Watch cost of goods sold (COGS): Properly determine the direct costs incurred by the business in making the goods being sold by the business. This is fundamental in coming up with gross profit.
• Understand inventory valuation: You can know how much your inventory is worth which is a key asset listed in your balance sheet.
• Manage reorder points: Indicate the amount of a product you can set to remind you when to re-stock the favourite ones avoiding shortages.
• Identify slow-moving or obsolete inventory: Find the products that are not selling as they should so that you may take the right step such as discounting or transacting them back.
• Generate accurate reports: Get access to different reports to investigate the performance of your inventory, sales trends and profitability.

Both QuickBooks Online Plus and Advanced versions have inventory tracking however the advanced version has more features and ability to do it with larger businesses and more complicated needs.

What are the Procedures in the Inventory management of QuickBooks?

Proper management of inventory in QuickBooks Online is associated with a number of steps:

1. Setup of Inventory Items

Prior to tracking, it is necessary to have the items of your inventory established in QuickBooks Online.

• Get back to Sales > Products and Services: On the left-hand navigation, select Sales. Under this category is Products and Services.
• New Inventory Item: Under setup select New, select Inventory.

Enter Item Details:

• Name: Put in something that is identifiable and the describing name of your item (ex: Men T-shirt Blue Large).
• SKU (Stock keeping unit): Give each employee a distinct ID for internal tracking.
• Category (Optional but Recommended): An easy way to report related products is to categorize them into groups.
• Starting Quantity On Hand: Starting Quantity on Hand: Enter the current quantity of the item you possess.
• As of Date: Enter one date against the quantity in hand in the date of opening.
• Inventory Asset Account: This is the account on the balance sheet that holds the value of your inventory (usually the account name is Inventory Asset).
• Income Account: The account to which the sales revenue of this item is to be posted (in most instances, “Sales” or “Product Sales“).
• Cost of Goods Sold Account: This is the account that the cost of the selling this item will be recorded (typically it is called Cost of Goods Sold).
• Purchase Information: You enter the cost per unit of the item that you obtain from your vendor.
• Sales Information: Input price of sales that you will make when you are selling to your customer.
• Save and Close: After entering all the information, Save and Close your new inventory item.

3. Recording Purchases of Inventory

It is critical that you record purchases made by your supplier to reflect an adjustment in the inventory quantities and prices in your inventory.

• Add a Bill or Expense: On the top menu, click on + new and select New Bill (in case you want to pay at a later time) or New Expense (in case you have paid already).
• Enter Vendor Details: The vendor from whom you bought the inventory can be selected.
• Add Inventory Items: In the Item Details section, you can select the type of inventory items that you have bought and indicate the quantity and rate of each one. Your inventory asset account will automatically get updated in QuickBooks.
• Save and Close: Performing this will add your inventory on hand.

3. Recording Sales of Inventory

Assuming that you sell some inventory to your buyers, QuickBooks will automatically keep a track of the flow of products and will also update your books.

• Enter a Sales Receipt or Invoice: Choose + New and then choose Sales Receipt (it will be paid at once) or Invoice (later).
• Enter Customer Details: Click on the name of the customer who will buy the goods.
• Add Inventory Items: Add inventory items you are selling by going to the second column termed as Product/Service and selecting the inventory items and put the inventory quantity in column. QuickBooks will:
  • Grow your Sales Account.
  • Decrease Inventory Asset Account.
  • Increase yours Cost of goods Sold Account.
• Save and Close: This not only reduces your inventory on hand, but also puts a record of the sale.

4. Conducting Inventory Adjustments

At times, you may have physical miscounts of your inventory as compared to those recorded in QuickBooks, owing to damage, theft and errors. The adjustments in inventory serve to eliminate such differences.

• Go to Products and Services: This can be accessed by navigating to Sales then Products and Services.
• Modify Quantity or Value on Hand: Select Adjust Quantity or Value on Hand after clicking the more button in the top right corner.
• Select Adjustment Date: Choose the date when the adjustment will take place.    
• Select Adjustment Account: It may be an Other Expense Account to record the losses or an Other Income Account to record the gains.
• Enter Item Details: The user clicks the inventory item and gives the new quantity on hand or the change in the quantity.
• Save and Close: This is used to keep changes in your inventory quantities and values.

5. Utilizing Inventory Reports

QuickBooks Online has a set of reports to give an understanding of your inventory performance.

• Inventory Valuation Summary: Indicates the amount of each item of inventory, per unit cost, asset, and retail value.
• Inventory Stock Status by Item: Explains the quantities to be reordered, the reorder points, and the quantity on hand.
• Sales by Product/Service Summary: Helps you determine which your best-selling products are and which your slower moving products are.
• Purchases by Vendor Summary: It can be beneficial in determining your buying habits.

A user can access these reports by clicking on Reports on the left hand navigation bar and searching the applicable inventory report.

Conclusion

Every business with a product base must have enough inventory for it to be considered a successful business venture. QuickBooks Online Plus/Advanced is the powerful tool that assists with making this process efficient and quick, as well as detailed reporting. Through some hard work of taking a closer look at all of the above mentioned steps, companies should be able to stay on top of their inventory documentation, maximize their inventory, and avoid losses, which in the end reflects positively on their overhead statement. Taking time to learn the inventory capabilities of QuickBooks is surely an investment that will reap benefits in business operations and financial well-being.

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