Whether you sell physical products or need to keep track of supplies and materials, having a robust inventory management system in place is essential for accurate financial tracking and efficient operations. QuickBooks Online offers powerful tools and features to help you manage your inventory effectively.
In this article, we will explore the benefits of setting up inventory products in QuickBooks Online and discuss best practices to ensure accurate inventory management.
Why Set Up Inventory Products in QuickBooks Online?
- Accurate Financial Reporting: Setting up inventory products allows QuickBooks Online to track the cost of goods sold (COGS) and provide you with accurate financial reports. This helps you understand the profitability of your products and make informed decisions about pricing, promotions, and inventory restocking.
- Streamlined Sales and Purchase Processes: With inventory products set up in QuickBooks Online, you can easily create sales orders, purchase orders, and invoices and track inventory levels in real-time. This streamlines your sales and purchase processes, minimizing errors and ensuring efficient operations.
- Inventory Visibility and Control: QuickBooks provides you with a clear view of your inventory levels, allowing you to know exactly what products are available, what needs to be reordered, and what might be sitting idle. This visibility helps you optimize inventory levels, reduce carrying costs, and prevent stockouts or overstocking situations.
Learn more about inventory management features in QuickBooks Online Plus and Advanced.
Now that we understand the benefits, let’s walk you through the process of setting up inventory products in QuickBooks Online.
Enable Inventory Tracking: The first step in setting up inventory products in QuickBooks is to enable inventory tracking in your account settings. To do this, click on the gear icon in the top right corner and select Account and settings. Click on the Sales tab from the left-hand menu, and under the Products and Services section, toggle “Track quantity on hand” to on and then click Save.
Enable inventory tracking in QuickBooks Online
Set Up Inventory Products: Once inventory tracking is enabled, you can start creating inventory products in QuickBooks Online. To set up an inventory product, click on the Sales tab from the left-hand menu and then select Products and services. Click the green New button, and then select Inventory as the product type.
Product/Service information screen in QuickBooks
Provide the Required Inventory Information: Enter the product name, SKU (Stock Keeping Unit), and other relevant details. Specify the initial quantity on hand and the cost of the product.
Also, set the income account and the expense account associated with the product. Click Save and close to record the new inventory item.
Setting up inventory items in QuickBooks Online
Adjust Inventory Levels: As you start selling or purchasing inventory products, it’s crucial to keep your inventory levels accurate in QuickBooks Online. To adjust inventory levels, go to the Product and Service screen and search for the inventory product you want to adjust.
Click on the Edit button under the Action column to open its details. Under the Quantity on hand section, click on Quantity and enter the new quantity on hand and specify the date of the adjustment.
Inventory quantity adjustment form in QuickBooks
Run Inventory Reports: QuickBooks Online offers a variety of inventory reports that provide valuable insights into your stock levels, sales, and profitability. Running these reports helps you make data-driven decisions about inventory management and strategy. To run an inventory report, click on the Reports tab from the left-hand menu and then search for Inventory Valuation Summary or Inventory Valuation Detail report.
Best Practices for Inventory Management in QuickBooks Online
- Regularly Reconcile Inventory: Perform regular physical counts of your inventory and reconcile the quantities with the numbers recorded in QuickBooks Online. This helps identify and resolve any discrepancies, ensuring accurate inventory valuation.
- Utilize Sales Orders and Purchase Orders: Use sales orders and purchase orders in QuickBooks Online to streamline your sales and purchasing processes. Sales orders help you manage customer orders, while purchase orders enable you to track vendor commitments and expected deliveries.
- Set Reorder Points and Stock Alerts: Determine reorder points for your inventory products based on historical sales data and lead times. Set up stock alerts in QuickBooks Online to receive notifications when inventory levels reach a specific threshold, ensuring timely reordering.
- Integrate with POS Systems: If you have a high volume of inventory transactions, consider integrating QuickBooks Online with point-of-sale (POS) systems. This automates data entry, reduces manual errors, and improves efficiency.
- Train Staff on Inventory Procedures: Ensure that your staff is trained on proper inventory management procedures in QuickBooks Online. This includes entering sales, receiving inventory, and adjusting quantities, promoting consistency and accuracy in data entry.
For detailed instructions on how to create inventory products in QuickBooks, watch the video below.
Setting up inventory products in QuickBooks Online is a crucial step in managing your business’s inventory effectively. Using QuickBooks’ inventory management features, you can streamline your operations, make informed decisions, and maintain accurate financial records.