One essential aspect of setting up your company in QuickBooks Online is configuring your products and services. Properly setting up your products and services in QuickBooks Online allows you to accurately track inventory, manage sales, and generate insightful reports to make informed decisions about your business.
In this article, we will explain the importance of setting up products and services in QuickBooks Online as well as the process of setting them up.
Importance of Setting Up Products & Services in QuickBooks
- Helps you track inventory levels: By enabling the inventory tracking feature and assigning quantities to your products, QuickBooks Online automatically adjusts inventory counts as you make sales or purchases. This helps you maintain optimal stock levels, avoid stockouts, and make informed purchasing decisions.
- Lets you generate detailed reports: QuickBooks Online can provide you with insightful reports on sales, profitability, and inventory valuation. By categorizing your items and assigning appropriate accounts, you can analyze sales by product lines, track expenses associated with specific products or services, and assess overall profitability.
- Simplifies tax compliance: With QuickBooks Online, you specify whether items are taxable or non-taxable and apply the appropriate tax rates. This ensures accurate calculation of sales tax in your transactions, reducing the risk of errors and potential penalties. Additionally, by associating default income and expense accounts with your items, you streamline the process of categorizing revenue and expenses for tax reporting purposes.
- Better track cost of goods sold: By including purchase information for your products and services, you gain better visibility into your cost of goods sold. By entering the cost of each item and tracking purchases, QuickBooks Online can calculate the cost of goods sold accurately. This information is essential for determining gross profit margins and evaluating the profitability of your offerings.
- Simplifies the invoicing and sales process: When creating invoices or sales receipts, you can select the appropriate item from the list, which automatically populates the price, description, and associated accounts. This saves time and ensures consistency in your sales documents.
Setting Up Products & Services in QuickBooks
- Accessing the products and services Tab: To begin setting up your products and services, log in to your QuickBooks Online account and navigate to the dashboard. From the main menu on the left-hand side, click on the Sales tab and then select Products and services.
- Adding products and services: On the Products and Services page, you will find the New button at the top right corner. Clicking on this button will open a form where you can enter the details of your product or service.
Start by choosing whether you want to add an inventory, non-inventory, service item, or bundle.
Select Inventory as the product type in QuickBooks
An inventory item is a physical product that your business buys, sells, or uses in its operations, while a non-inventory item is also a physical product, but it is not tracked as part of your inventory.
Meanwhile, a service item represents a non-tangible offering that your business provides to customers. It could be professional services, consulting, maintenance, or any other service-based offering. A bundle allows you to group multiple products or services together and sell them as a package. This is useful when you frequently sell a combination of items as a single unit. For example, if you run a computer store, you can create a bundle item that includes a computer, a monitor, and a keyboard, and sell them as a complete package.
- Categorizing your products and services: Next, assign a category to your product or service. Categories help organize your items and make it easier to generate reports based on different product lines. QuickBooks Online provides pre-set categories, but you can also create custom categories that suit your business needs.
Categorizing your product or service item in QuickBooks Online
Additionally, you can assign a subcategory to further classify your items. This can be particularly useful if you offer a wide range of products or services within a specific category.
- Adding pricing and sales information: In the next section, you can enter the sales price for your product or service. You can choose between a fixed price or a variable price, which allows you to set different rates for different customers or situations.
If you track inventory, complete fields such as quantity on hand and reorder point. This allows QuickBooks Online to keep track of your inventory levels and automatically update them as you make sales or purchases.
Tax and account settings: QuickBooks Online allows you to configure tax settings for your products and services. You can specify whether an item is taxable or non-taxable, and set the appropriate tax rate. Additionally, you can select the default income and expense accounts associated with each item, making it easier to track your revenue and expenses accurately.
Customizing tax settings for your products and services in QuickBooks Online
- Saving and managing your products and services: Once you have entered all the necessary details, click on the Save and close button. Your product or service is now added to your QuickBooks Online account and ready to use in transactions.
- Using your products and services in transactions: Now that your products and services are set up in QuickBooks Online, you can easily use them in your transactions. When creating invoices, sales receipts, or purchase orders, you can select the appropriate item from the list of configured products and services. When generating an invoice, for example, you can simply select the desired product or service from the dropdown menu.
Selecting products and services to add to an invoice in QuickBooks
Watch the video below to learn more about setting up products and services in QuickBooks.
By setting up your products and services in QuickBooks Online and utilizing them in your transactions, you streamline your workflow, ensure accuracy in your financial records, and gain valuable insights into your business performance. Take advantage of this feature to simplify your invoicing, sales, and purchasing processes, and leverage the power of QuickBooks Online to manage your products and services effectively.