QuickBooks is a tool that lets you track raw materials, remedy negative inventory, and optimize order fulfillment. But do you know how to use QuickBooks for manufacturing?
Keep reading for:
An overview of how to use QuickBooks for manufacturing.
Tips for if you intend to use it as inventory management software.
If you’re looking at the QuickBooks Manufacturing app as a custom solution for your business, this guide will tell you everything about the feature and whether it is worth your investment.
How does QuickBooks work for manufacturing companies?
QuickBooks efficiently tracks inventory quantities for manufacturing businesses, including your raw materials list.
It breaks your inventory down into four categories:
- Inventory items.
- Non-inventory items.
- Services.
- Bundles.
Through its non-inventory item tracking capabilities, businesses can better manage raw materials and keep the production process up to speed.
Users also gain more visibility into purchase orders and directly assign receivers via QuickBooks Enterprise.
Financially, QuickBooks’ manufacturing feature determines actual materials costs by calculating duties, insurance, and other miscellaneous fees.
In addition, QuickBooks’ Advanced Pricing features enable customization and automation of item pricing and information.
Why should you use QuickBooks for a manufacturing company?
Small-to-medium businesses that require a wide range of industry-specific features and advanced inventory tools may use QuickBooks Manufacturing under the following circumstances:
- You manufacture items with many complex parts.
Costing items that require more materials than usual can be time-consuming and complicated. With QuickBooks Manufacturing, you can define amounts for specific assembly procedures.
- You have specific pricing rules.
Personalize prices according to specific clients, customer types, and individual sales.
- You require detailed sales reports.
Create financial reports according to representatives, individual items, product types, or customers.
- You lack advanced inventory software.
Keep a close eye on your inventory count and know when to restock with QuickBooks’ inventory management tools.
Benefits of QuickBooks for a manufacturing business
Inventory management is often challenging for new manufacturing businesses.
The good news is QuickBooks Online can remedy most of the inventory-related problems you encounter.
These advantages might help you make up your mind about using QuickBooks Online for manufacturing.
Eliminate bottlenecks
Experiencing bottlenecks can be frustrating for any manufacturing business, especially when trying to understand why production is slowing.
Identifying parts of your process that lag and how to improve your manufacturing lead time is simple with QuickBooks.
QuickBooks’ routing manufacturing features map your product journeys to simplify assembly, simplify tasks, and provide a precise schedule.
Eliminate waste
How you store inventory can dictate how much you spend on overhead costs and what you can save.
Through QuickBooks’ Chart of Accounts, you can practice lean manufacturing, which hastens your production processes and matches production to demand.
You also eliminate dead stock and save on inventory costs by making stock to order.
Develop your master production schedule
A master production schedule (MPS) details how much you need to produce in a given period.
Thanks to QuickBooks’ ability to spot inefficiencies, you can prevent stockouts, adjust to fluctuations in product demand, outline storage capacity, and improve overall efficiency.
When you fulfill orders as quickly as possible, you keep customers happy, and, more importantly, they’ll want to do repeat business.
Enhance your production scheduling
Monitor your production schedule to diagnose areas for improvement in restocking, job scheduling, and workflow steps.
With QuickBooks’ manufacturing, you can access your production data in real-time and make better decisions to optimize your processes.
Save your BOMs in one place
Your bill of materials (BOM) outlines the raw materials and components involved in inventory assembly.
When you centralize this source through QuickBooks, you’ll know what you need to order for specific products and can ease communications with supply chain partners.
QuickBooks Desktop manufacturing
The QuickBooks Desktop manufacturing solution is better suited for larger manufacturing businesses managing books across multiple companies.
Compared to QuickBooks Online, the desktop version provides additional industry-specific tools like manufacturing reports, project cost comparisons, and inventory assembly management.
In addition, the QuickBooks manufacturing desktop version also tracks inventory products according to individual parts for manufacturing, wholesale, and general contracting.
QuickBooks Enterprise manufacturing
Compared to QuickBooks Desktop, QuickBooks Enterprise manufacturing offers even more advanced features, including the Inventory Center, which centralizes inventory tasks.
QuickBooks Enterprise also consolidates ODBC-compliant reports across multiple manufacturing companies.
One of the most significant differences between QuickBooks Desktop and QuickBooks Enterprise is the latter’s ability to support up to 30 licenses compared to three on the desktop version.
Finally, QuickBooks Enterprise features over 150 sales tax reports, while the online version can only support up to 65.
How to use QuickBooks for manufacturing
Managing manufacturing in QuickBooks ensures that your products are of excellent quality by easing the manufacturing process in multiple ways.
For instance, inaccurate inventory prices increase your overhead without you realizing it. With QuickBooks’ Advanced Pricing features, improved business insights tell you where you might be overspending and your options for more cost-effective raw materials.
It automatically creates sales forms based on existing prices instead of making them from scratch.
Tracking raw materials inventory and parts-in-process
You won’t have to worry about derailing sub-assemblies through raw inventory management. By tracking your exact items, nothing goes missing or gets damaged.
But meeting customer expectations means having complete visibility into your purchase orders.
For this, QuickBooks offers backorder tracking, which minimizes carrying costs and saves on storage space.
Limitations of QuickBooks for manufacturing
Despite its popular and easy-to-use key features, QuickBooks does pose a few limitations as smart manufacturing software. Here are a few drawbacks to note before you purchase a QuickBooks license.
- QuickBooks tends to ship negative inventory.
While QuickBooks accurately tracks individual component items, you can’t convert these into a finished item. If you update your raw inventory level, QuickBooks might end up “shipping negative.”
- QuickBooks can’t handle many files and users.
Despite its compatibility with the manufacturing industry, QuickBooks has issues handling large volumes of information.
The more files and users you add to the platform, the slower the software becomes.
- Manual data entry becomes too time-consuming.
Unfortunately, QuickBooks’ accounting functions are relatively limited, and most users have to enter data volumes manually.
While this may be a manageable problem for smaller businesses, the risk of human error is greater for scaling businesses.
- Slow adaptation to new business requirements.
As government regulations and compliances change, QuickBooks is slow to adapt. In fact, auditors can only modify single transactions.
What is negative inventory in QuickBooks for manufacturing?
Negative inventory occurs when you generate an invoice on QuickBooks without updating your inventory availability.
If you hit the lowest inventory quantity for a specific item and create an invoice for a manufacturing order, QuickBooks will register your inventory level as -1.
Doing so risks incorrectly calculating costs with negative inventory and throwing off your finances.
QuickBooks add-ons for manufacturing companies
The best way to leverage QuickBooks is to link your account with third-party add-ons and integrations that offer industry-specific solutions.
Extend QuickBooks’ manufacturing capabilities with Method:CRM, a fully customizable solution with out-of-the-box features for manufacturing businesses.
With Method, you can link your sales and accounting data, automate inventory tracking and order management, and save your team hours of manual admin tasks.
Learn more about Method’s capabilities with this video.
Key takeaways
While QuickBooks manufacturing apps can improve your business operations, it does pose some significant limitations.
Before you invest in QuickBooks’ industry-specific edition, keep in mind that it only provides some of the functionalities you need for a growing business.
You can use QuickBooks to track item counts, manage customer communications, price your inventory accurately, and manage your finances. But its limitations can affect your bottom line.
The best way to leverage QuickBooks for manufacturing is through integrations with industry-specific features that allow for more accurate inventory tracking, like Method.
QuickBooks manufacturing FAQs
Can QuickBooks build assemblies?
Yes, QuickBooks is capable of building assemblies. You can combine each inventory assembly item to build a single product.
What industries use QuickBooks the most?
Businesses in all industries use QuickBooks primarily for accounting-related activities. When it comes to QuickBooks manufacturing, it is most useful for small-to-medium enterprises that can manually ensure inventory data is accurate and up-to-date.
Do manufacturing companies use QuickBooks?
Yes. Smaller manufacturing companies use QuickBooks for inventory tracking, sales order fulfillment, powerful reports, and general business management.
Start your Method:CRM free trial today!
Image credit: Ivan Samkov from Pexels
