If you track inventory in QuickBooks, you need to be familiar with the ways in which QuickBooks gives you information. Reliable data on what is going on with inventory is critical.
Inventory on hand is generally a large investment for any company. Managing it well is crucial to business success. If not managed well, profits may suffer as space and dollars are used by dated inventory that doesn’t sell.
Sales people are frustrated when their customers can’t be shipped the goods they need because popular items are out of stock.
Inventory management in QuickBooks is a large topic. Today we will limit the discussion to the Inventory Stock Status by Item report.
Let’s focus on one item, cabinets. If you read the columns from left to right the report tells us several things. The reorder point, or minimum quantity, has been set by the QuickBooks user to 10. The maximum quantity has been set to 15.
In the fourth column we see zero. We don’t have any in stock. We also have zero on sales orders or saved for assemblies. So our available quantity is zero.
We have not created a purchase order. We can see that from the appropriate column. But this report would help us do that. It suggests we order. See the check in the order column. It also suggests we order 15, the quantity that would bring us to our maximum.
Let’s look at what else this report can do for us.
First, we’ll create a sales order.
We create a sales order rather than an invoice since we can’t really sell any. We have none in stock. Invoicing inventory so that the quantity falls below zero is a bad practice. Since QuickBooks uses average cost, selling into a negative quantity has a very adverse affect on the inventory cost numbers.
Note the arrow in the sales order. We can create a purchase order right from here to order these items for our customer.
The purchase order is automatically created by clicking the icon from the sales order. All we will need to do is save it.
Now let’s look at our report again.
Our numbers look a little different. Available quantity is now a negative five. That would be quantity on hand (0), less quantity on sales orders (5).
QuickBooks is suggesting we order 10. It derives that number from the on hand quantity (zero) and subtracting 5 since we already have five on a purchase order.
Note the arrow on the screenshot above. There is a setting that instructs QuickBooks to use the available quantity for this calculation rather than the on hand quantity.
If you check this box, QuickBooks will suggest you order 15. The formula used is –
Available quantity now (5)
Existing purchase orders 5
Maximum stock to have on hand 15
Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330
954-414-1524
hector@garciacpa.com
