It’s the lifeblood of your company: your inventory of products. Be sure your records are thorough and accurate.
This was how your company got started, wasn’t it? You had an idea for a product – or several of them – that you could sell. You may have maintained paper records manually in those early days.
But then you learned how to use QuickBooks, and quickly discovered that it was much easier to keep track of your inventory using the software. You started creating records for your products.
But are you building them correctly or just getting started with them? Here’s a look at an item record’s parts in QuickBooks.
A Comprehensive Framework
QuickBooks provides a very thorough, understandable record form that you can use to catalog your inventory. This element of QuickBooks is one of its more complex areas, which may mean that you’ll need to access some kind of QuickBooks tutorial to understand the entire workflow.
Start by opening the Vendors menu and selecting Inventory Activities | New Item. A completed record looks something like this:
An inventory record pictured in QuickBooks 2013
- Click the down arrow to open the TYPE drop-down list. Select Inventory Part.
- Enter an Item Name/Number that’s descriptive and, optionally, a Manufacturer’s Part Number. When you’ve created a lot of records, you might want to designate some as Subitems of other items.
- UNIT OF MEASURE is not available in QuickBooks Pro or Premier.
- Enter a description in the field below Description on Purchase Transactions that the vendor will understand.
- Cost refers to your cost, not the sales price. Enter it there. QuickBooks may default to your COGS Account, but open the list and change it if it doesn’t. If you have a Preferred Vendor, select it from your Vendor list.
- To the right of this PURCHASE INFORMATION, provide the information that QuickBooks requests. Enter a Description on Sales Transactions that customers will see, and specify the Sales Price.
- If the item is taxable, select Tax from the drop-down list next to Tax Code (Non if it’s not) and choose the right Income Account (again, you may need to learn QuickBooks better before specifying accounts).
- The INVENTORY INFORMATION you enter must be absolutely correct, or your QuickBooks reports and physical accounts will not be accurate.
An example of a QuickBooks inventory report. Your item records must be correct so your reports will be.
QuickBooks must have current information about:
- Which Asset Account to use (again, QuickBooks may default to the correct one)
- At what Reorder Point (number of units) you’ll be reminded to order more
- The number of units you have On Hand
- (QuickBooks will calculate your Average Cost)
- Number of units On P.O. (Purchase Order) and Sales Order (QuickBooks supplies these figures).
When you’re done, click OK. You’re now ready to start using inventory items in transactions.