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How to track inventory in QuickBooks Online

man pulling a wagon of boxes in a warehouse, while two other men stand by shelves.

When starting a small business, keeping track of your product inventory is easy as you handle a smaller product base.

But based on our firsthand experience, as your company expands, your customer base grows too — and you simultaneously start selling more products in large quantities. 

At this point, inventory tracking becomes cumbersome, and manually counting stock items is time intensive. You risk losing track of your stock level and ending up with many unfulfilled orders and dissatisfied clients.

Can QuickBooks Online track inventory effectively?

This detailed guide will help you answer that question and maintain the right financial balance in your business.

Does QuickBooks Online track inventory?

After putting it to the test, QuickBooks Online does indeed track inventory. Leveraging QuickBooks Online for inventory tracking allows you to:

  • Keep tabs on existing stock.
  • Monitor sales and purchase logistics.
  • Receive restocking notifications.

If applicable, our investigation demonstrated that you can also add non-inventory items and services to these sales documents.

But does QuickBooks Online track inventory the way you need it to? Let’s find out.

How does inventory tracking work in QuickBooks Online?

You can retrieve accurate data on your products and stock levels by tracking inventory in QuickBooks Online.

Before getting started with the QuickBooks Online inventory system, we determined through our tests that you must activate the inventory tracking option. Then, you can add inventory goods and track every item you sell.

The QuickBooks-generated report helps you check inventory status and know if you need to restock. 

Below is a step-by-step for how to track inventory in QuickBooks Online.

Step 1: Turn on inventory tracking

Before adding any inventory goods, you must enable the inventory tracking tool in QuickBooks Online.

If you have not yet activated the QuickBooks Online inventory feature, you should do so by following the directions below:

  1. Go to the QuickBooks Settings menu.
  2. After that, select Account and settings.
  3. Choose the Sales tab.
  4. Click Edit in the Products and services section.
  5. After that, navigate to Sales forms, and activate the Show product/service option.
  6. You can toggle the Track inventory quantity on hand and Track quantity and price/rate settings here.
  7. Click the Save button and select Done.

We have found from using this product that QuickBooks Online defaults to the FIFO (first in, first out) approach, meaning that the first item you purchase is the first item you sell.

However, note that not all accounting software programs employ the FIFO technique.

Step 2: Add in the inventory items

You can gradually add inventory items and services to QuickBooks after enabling the inventory feature in QuickBooks Online.

To adequately add stock in QuickBooks Online and track product quantities, ensure to:

  1. Enable the inventory tracking option if you haven’t already.
  2. Add the product name, category, and SKU, ensuring the SKU is at least three characters long.
  3. Add the product count, inventory assets account, and a low stock warning.

Step 3: Keep track of the sales you make

After entering all inventory goods into QuickBooks Online, you should track when they’re sold.

As indicated by our tests, you can do so in two ways:

  1. Prepare an invoice if you expect to get paid at a later date.
  2. Include a cash memo/note if the client paid cash upfront.

QuickBooks Online reduces on-hand stock counts depending on the amounts you specified on the cash note or invoice.

You can quickly check what is on order and what is on hand by moving the mouse cursor over the quantity you have entered for the item for the details to show.

Step 4: Restock the inventory

After ordering your new stock inventory in QuickBooks, you can track what’s in order and what you get from your vendors.

The quantity will automatically increase according to the number of products you receive.

If you run out of stock, you can reorder it by:

  1. First, check the Sales tab for low-stock or out-of-stock products.
  2. Then, generate the purchase order and mail it to the supplier. This order will inform the producer of your order specifications.

Remember to set restocking alerts on QuickBooks to get notified when you’re low on goods and need to restock. 

Step 5: Use the reports to monitor the inventory status

You can review various information with QuickBooks-generated reports, such as top sellers, cost of items, and what is currently on hand.

You can also use reports to check inventory progress and status.

Why should you use QuickBooks Online for tracking inventory?

Drawing from our experience, you should use QuickBooks Online to track inventory because it helps you handle several suppliers and pay them on time.

Apart from that, QuickBooks Online also lets you:

  • Keep track of the inventory items and quantities.
  • Sort items according to whether they are taxed or not.
  • Update inventory amounts automatically.
  • Create purchase orders and distribute them to merchants.
  • Keep track of overall sales and profitability at each of your locations.

Can QuickBooks Online track inventory the way you need it to? Keep reading to find out whether its advantages outweigh its limitations.

Advantages of QuickBooks Online inventory tracking

While QuickBooks Online includes popular features to help you manage your material and products, here are three key advantages of using it for inventory tracking:

  • Easy inventory tracking: QuickBooks Online tracks inventory at all stages, making it easier for your team to understand your operations and fulfill orders quickly.
  • Streamlined accounting: With QuickBooks Online, you can keep track of your inventory, sales orders, production, finances, and customers all in a single location.
  • Less admin time: QuickBooks Online requires little manual effort to keep your sales orders in sync. This way, you can significantly reduce administrative time and refocus on other important parts of your business.

Limitations of QuickBooks Online inventory tracking

QuickBooks Online is excellent for financial management. But our findings show that when it comes to manufacturing management, there are a few limitations:

  • Does not support multiple locations: QuickBooks works well only when dealing with a single location or warehouse. It is unable to track inventory across multiple locations.
  • Lacks serial number tracking feature: This is a disadvantage for manufacturing business owners who track their products for quality control standards with serial codes.
  • Cannot track assembly orders: This is vital if your business outsources material from different locations to assemble the parts to create a product.

Key takeaways

Despite being a phenomenal tool, does QuickBooks Online track inventory the way manufacturing businesses need it to?

In reality, our research indicates that QuickBooks lacks the functionality to track more extensive inventory across multiple warehouses. It also doesn’t provide synchronized stock levels if you’re running your business on different eCommerce platforms. 

But you can complement QuickBooks Online’s shortcomings with a specialized inventory management system, like Method:CRM.

Method is a cost-effective solution that automates storing, labeling, tracking, reporting, and delivering inventory. With Method, you can effectively prevent accounting mistakes caused by inefficient inventory management. 

Learn more about the capabilities of Method:CRM with this video.


QuickBooks Online inventory tracking FAQs

Can I track inventory manually in QuickBooks Online?

Yes, you can track inventory manually in QuickBooks Online. But users of QuickBooks Online Plus can leverage the built-in automatic tracking feature.

Can QuickBooks Online track inventory in multiple locations?

No, QuickBooks cannot track inventory in multiple locations. QuickBooks facilitates the tracking of inventory quantities on hand per location. Using it to run multiple warehouses for your business can be challenging.

How do I set up inventory items in QuickBooks?

You can set up inventory items in QuickBooks by selecting “Items and services on the homepage and clicking “New” under the item list. Choose “Inventory part” in the drop-down menu and add the necessary details.

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