Enhanced Inventory Receiving is available only in QuickBooks Enterprise Solutions. The intent is merely to keep more detail of the receiving process in the software. As with most things, it becomes a little more complicated in implementation.
If all the steps of receiving inventory in QuickBooks are used, the flow is something like this:
Purchase Order -> Item Receipt -> Bill
However, once the bill is created for the vendor, the item receipt disappears. The reason is that the two were actually the same transaction. First, the receiving transaction would be an Item Receipt when it was created. Then the item receipt virtually became the bill once that transaction was initiated and the information filled in.
There had been many Quickbooks users who wanted the item receipt transaction to remain, even after the bill was created. Enhanced Inventory Receiving was created to do just that.
The above screenshot shows the location of the preference setting for EIR. Note that in the illustration, the setting reads “This feature is enabled.” There is no provision for toggling between turning the feature on or off.
That is an important consideration. Once activated, there is no way to deactivate this feature in that particular QuickBooks company file.
Using this feature, let’s walk through an inventory purchase process. First, a purchase order is created.
When the merchandise is received, the second step is to create the item receipt. Once the vendor for the item receipt is selected, QuickBooks will present a list of open purchase orders for the vendor, allowing you to select the appropriate one.
The item receipt will populate with the items and quantities from the purchase order. If not all the items are received in one shipment, the quantities can be changed and only a partial shipment recorded on the item receipt. This leaves the purchase order partially open in expectation of receiving the remainder of the order.
Note that when using Advanced Inventory (additional subscription) for site and lot tracking, those values should be entered at this stage.
The item receipt can be saved once it is complete and the inventory is now entered into the system and available for sale.
This is where EIR begins to change the way QuickBooks accounts for the value of the inventory.
No EIR –
Without EIR, QuickBooks would increase the amount (both quantity and dollars) of inventory on hand. It would also increase the amount owed to vendors, accounts payable, for the appropriate amount. However, item receipts would not show up in the Pay Bills window. It must be turned into a bill first.
Once the bill is created, that individual item receipt, no longer exists. Any change in date or amount, changes the numbers in QuickBooks. In other words, a $5000 item receipt created on May 31st, disappears from May’s reports if it is turned into a bill with a June date.
For accountants, this was a significant problem.
With EIR –
EIR changes this procedure. Now the item receipt increases inventory on hand and, likewise, an account called Inventory Offset, a liability account. Even when the bill is created, the item receipt, and its accompanying dollars, stays in place. So, there is no change to a previous month’s numbers if a bill is created in a subsequent period.
That’s the upside.
Next post we’ll talk about the cautions.
Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330