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Inventory overview

Watch a 2-minute tutorial about inventory tracking

You can use QuickBooks to track the items you keep in inventory and sell to your customers.

Some reasons for tracking inventory in QuickBooks

If your business purchases items that are ready for resale, keeps them in inventory, and then sells them, QuickBooks can track the current number in stock and the value of your inventory after every purchase and sale. QuickBooks can even keep track of products you assemble and resell (finished goods), adding assembled units to inventory and deducting component units from inventory when you build assembly items (QuickBooks Premier or Enterprise editions only).

Here are the benefits of setting up inventory parts as items and using QuickBooks inventory tracking:

  • When you use purchase orders to buy inventory items, QuickBooks updates your inventory, so you know which items are on order and when they're due to be received.

  • You can easily keep track of the cost to you of the items you have sold (the cost of goods sold).

  • You can easily keep track of the income you receive from the resale of inventory items.

  • You always know your current quantities on hand.

  • You always know the current value of your inventory.

Tasks you need to do to track inventory

  • Set up inventory tracking in QuickBooks
    You'll turn inventory tracking on and add some accounts for tracking inventory value and income from selling inventory. You'll also add inventory items to the Item list.

    "Setting up inventory for the first time" goes here
  • Use the right purchase and sales forms to keep inventory figures accurate
    When you purchase inventory, you'll need to enter the inventory items on a purchase form so QuickBooks can properly increase inventory quantities. Then, when you sell inventory, you'll need to enter the inventory items on a sales form so QuickBooks can properly decrease inventory quantities.

    What kind of forms can I use for inventory items?

    You can use any of the following forms to record inventory purchases: purchase orders, bills, credit card charges, and checks.

    Note: Inventory items entered on a purchase order are not added to inventory in QuickBooks until you create a bill or item receipt from the purchase order.

    You can use sales orders, invoices, and sales receipts to record inventory sales.

    Note: Inventory items entered on sales orders are not deducted from inventory until you create an invoice from the sales order.

  • Track backorders
    You may not always have enough inventory to fulfill a customer's order. If you use sales orders, you can partially fulfill an order, and QuickBooks tracks the backordered items on both the sales order and the invoice. Similarly, your vendors may not always have all of the inventory items to fulfill your order. If you use purchase orders, you can receive a partial order from a vendor, and QuickBooks tracks the backordered items on the purchase order.

    "Tracking backorders" goes here
  • Periodically take a physical inventory
    Over time, actual inventory quantities can get "out of sync" with inventory quantities in QuickBooks for any number of reasons, such as breakage, theft, and entry errors. You'll want to take a physical inventory periodically and then adjust your inventory as necessary.

    "Taking a physical inventory" goes here
  • Determine the value of your inventory
    You'll need to know the value of your inventory from time to time to make certain business decisions. You can run a report anytime to see the value of your inventory.

    "Breaking down the current value of your inventory" goes here
  • Check the status of your inventory
    At times, you'll want to know the quantity of certain items in inventory. You can check the status of a single item or of your entire inventory.

    "Checking your inventory status" goes here
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