Managing your business’ inventory can get complicated, especially if you don’t have the right tools.
Fortunately, QuickBooks is an exceptional accounting software with features that can streamline your inventory management.
In this guide, you’ll learn:
- What inventory-specific features QuickBooks offers and how they work.
- How to receive inventory in QuickBooks.
- How to track purchases and pay your vendors.
Inventory in QuickBooks Online
QuickBooks Online offers many inventory management features that help businesses stay on top of stock and cut unnecessary costs.
Here are some features you can expect with QuickBooks inventory management:
- Inventory tracking in real-time.
- Receiving notifications for low stock levels.
- Automating vendor purchase orders (POs) when inventory is low.
- Generating bills automatically from POs.
- Detailed reporting from inventory data (e.g., best sellers, total sales, sales tax, etc.).
How to properly track inventory purchases on QuickBooks Online
When inventory transactions happen, you must record the inventory items. You can easily track inventory purchases with QuickBooks Online purchase orders (POs).
With the QuickBooks POs, you can enter the items you want to buy and the quantity.
When your vendor accepts the PO, you can add it to a bill transaction or an expense.
Follow the steps below to set up, create, and send POs.
Step 1: Enable the PO feature
- Select Settings (the gear icon), then Account and Settings.
- Select the Expense tab.
- In the Purchase Order section, select Edit (the pen icon).
- Enable Use Purchase Orders.
- (Optional) Enter up to three custom fields and a default message for your vendor.
- Select Save, then Done.
Step 2: Create and send POs
- Select +New, then Purchase Order.
- Select vendor from the Vendors menu or drop-down list.
- Review the Mailing Address.
- Enter the Purchase Order date.
- Select Settings (the gear icon) under Purchase Order.
- In the Choose What You Use panel, select the link to add custom fields.
- In the Item Details, select the inventory quantity to purchase.
- If you want to send it, select Save & Send. Otherwise, select Save & Close.
How do I account for inventory in QuickBooks
QuickBooks Online automatically accounts for current inventory when you receive an inventory or non-inventory item from a vendor and pay the bill.
Let’s look at how to receive inventory in QuickBooks and how you can make payments and inventory adjustments.
Receive inventory with a bill
When you receive inventory from a PO, convert it to a bill to add the items to your QuickBooks Online inventory.
- Select the +New button.
- Under the Vendors drop-down menu, select Bill.
- Select the appropriate vendor in the drop-down menu.
- Select the PO and click Add (POs show on the left side).
- Select Save & Close when finished.
Receive inventory without a bill
When you receive inventory without a bill, you can adjust the inventory quantity without recording a purchase.
Follow the steps:
- Select the +New button.
- In the Other column, select Inventory Quantity Adjustment.
- Input the adjustment date and select the items to adjust.
- Click Save & Close.
If you reserve the items for a customer, the Customer column will have an entry, and you will see a checkmark in the Billable column.
You can quicklypay your bills directly on QuickBooks Online.
Here’s what you need to do:
- Select the +New button.
- Select the Pay Bills Online drop-down menu.
- Add a check next to the bill you want to pay.
- Click Next.
- Review the payment info. If you need to update anything, select Edit Details.
- When ready, select Submit Payment.
Adjusting inventory items
If you incorrectly entered an inventory item in QuickBooks Online, you’ll likely need to delete or adjust the inventory quantity.
There are simple ways to adjust, add, or delete inventory items in QuickBooks Online.
When adjusting inventory quantity in QuickBooks Online, remember that it can register as inventory shrinkage in your accounts. Luckily, there are ways to fix inventory shrinkage in QuickBooks Online.
Paying a bill before receiving inventory in QuickBooks Online
Sometimes you may have to pay a bill before receiving your inventory assets or items.
Purchasing inventory is a straightforward process in QuickBooks Online. You create a PO, then enter the bill according to the PO. You can view the bill in Accounts Payable, and the inventory quantity will update in the item receipt.
However, if you pay a vendor first and receive inventory later, the normal route won’t work. You will either see an incorrect inventory quantity or an unpaid item receipt that you already paid.
Both options could create discrepancies between your accounts and inventory availability. So, how do you handle entering bills before receipts?
Unless you’re using QuickBooks Enterprise or Premier, there’s no easy way to do this.
Luckily, there is a workaround for QuickBooks Online.
Let’s look at how to keep your accounts accurate when paying a bill before receiving inventory.
Step 1: Create a holding account
You first need to set up a holding account, a separate account for the cost of the items.
Go to your Chart of Accounts (COA), create an Other Current Asset account, and name it.
Step 2: Enter the bill
After you’ve created a holding account for the cost of the bill, you can now enter a bill for the PO.
Selecting the PO will show that the items are available in your inventory in the Item tab. As you have yet to receive the items, you don’t want them to show up under Qty on Hand.
For the sake of this example, let’s say you’re paying $1 for one item:
- Adjust the Cost value in your bill to match the PO ($1).
- In the Items tab, you will now see the total value of the order. You are paying for one item so the total cost will be $1.
- Select the Clear Qty button near the bottom of the window. It will set all quantities to zero, and the Item tab will show a zero value.
- Select the Expense tab, and click on the holding account you created earlier.
- Under Amount, enter the value first shown in the Item tab ($1).
- Select Save.
While you have yet to receive the items, this method allows you to enter a bill for them that will show up in Accounts Payable.
You can view the cost of the items by going to the holding account you created. Access that account anytime to see the value of all items paid for but not yet received.
Step 3: Receive the prepaid items
QuickBooks Online will ask you to enter a bill when you receive items. You can use the information you entered in the holding account.
Once you’ve added the information to the bill and connected it to the original PO, you can delete the information in the holding account.
Here’s how to do it:
- Go to the Vendor Center and open the bill for the original PO.
- Enter the proper quantities you’ve received in the bill.
- In the Item tab, delete each detail line.
- Click the Select PO button, and choose the original PO.
- Go to the Expense tab, and delete the line you created before receiving the items.
- Select Save & Close to save the updated bill.
Now you know how to receive inventory in QuickBooks Online and learned about its other features that can help you improve your inventory management.
The platform lets you track inventory in real-time and notifies you when stock levels are low. You can also gain valuable insights from inventory data.
Each business has unique needs that QuickBooks alone cannot cover. And this is where Method:CRM can fill in the blanks.
Method is a fully-customizable, no-code platform that makes it easy to develop solutions tailored to your business. Its seamless, two-way sync with QuickBooks increases functionality by merging your customer data with your QuickBooks data.
Receiving inventory in QuickBooks FAQs
Can QuickBooks Desktop manage inventory?
Yes, QuickBooks Desktop can manage inventory. Both QuickBooks Desktop Enterprise and Premier have advanced inventory management features. Consider using the QuickBooks Warehouse Management tool if you manage inventory over multiple locations.
How do I receive goods in QuickBooks Online?
You can receive goods in QuickBooks Online through POs. Start by creating a PO and sending it to a vendor. When you receive the inventory and pay the vendor, the goods will show up in your inventory on QuickBooks.
How do I receive a partial shipment in QuickBooks?
You can receive a partial shipment by customizing your PO in QuickBooks Online Advanced. First, you need to have POs enabled in the Expense tab under Accounts and Settings. Then create a PO and an Expense transaction where you can enter the partial quantity received. The original PO will update to reflect that quantity.
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