Enhanced Inventory Receiving (EIR) improves how you receive and pay for inventory in QuickBooks. If you turn on EIR, you can't turn it off. You should read and understand these important considerations before you turn it on.
Should I use Enhanced Inventory Receiving?
When you turn on EIR, you receive and pay for items in QuickBooks in a completely different way. With EIR:
Item receipts don't increase accounts payable
Bills don't affect inventory
Bills against item receipts no longer replace item receipts
To set your file up to track purchasing this way, QuickBooks changes past transactions during the EIR setup. We recommend that you first evaluate whether EIR is right for you. To help you decide, answer these questions:
Do you receive one bill that covers multiple item receipts?
Do you receive multiple bills for one item receipt?
Do your inventory counts become incorrect when you enter a bill and QuickBooks changes the date of the item receipt?
Do you pay for items before you receive them and don't want your inventory quantities to increase? If you don't use EIR, QuickBooks increases inventory quantities when you enter a bill for inventory items.
Do you want to separate the receiving department (item receipts) from the accounts payable department (enter and pay bills)? If you don't use EIR, QuickBooks converts item receipts to a bill when you receive the bill.
If you answered yes to any of these questions, consider using EIR. However, it's important that you read the following cautionary points before you begin because you can't turn EIR off.
Important considerations before turning on EIR
When you turn on EIR, QuickBooks changes past transactions. Converting to EIR may take up to a few hours depending on the size of your company file. If you have a large company file, we recommend that you condense your company data before turning on EIR.
EIR separates item receipts from bills. This creates a new process for receiving and paying for items. This new process also comes with some restrictions.
Note: Third-party applications that affect inventory may not work as expected with EIR. Check with the vendor or search for more information.
You can't turn EIR off. Once it's on, you must use the new EIR process for receiving and paying for items. We recommend that you back up your file before you begin. If after trying EIR you find that it doesn't work for you, restore your backup.
If you receive a bill with different item costs compared to the related item receipt, QuickBooks automatically changes the item cost on that item receipt. QuickBooks makes this change even if the item receipt is in a closed period.
Changes QuickBooks makes when you turn on EIR
With EIR turned on, bills do not increase inventory quantities. This means that QuickBooks has to create an item receipt for every bill that included items. This increases the number of transactions in your company file.
If you haven't received a bill for an open item receipt, the amount no longer shows up in Accounts Payable. This is correct because you haven't received the bill yet. QuickBooks only shows the amount in Accounts Payable when you receive the bill. To understand what QuickBooks does with the value of open item receipts, review the accounting behind EIR in this topic.
When QuickBooks creates the new item receipts, it recalculates inventory average cost. These item receipts change the order of inventory transactions within each day. This change in transaction order can sometimes result in minor changes to average cost of an item.
The new process for receiving and paying for items
Without EIR, you can receive and pay for inventory in two ways:
A single transaction: You can enter a bill for inventory items that increases your inventory on hand.
Two transactions: You enter an item receipt to receive the inventory. Then you enter a bill against the item receipt.
With EIR, you must enter 2 separate transactions:
An item receipt to receive items
A bill to pay for the items
You can enter these transactions in any order.
Note: This new process only applies to bills. You can still increase inventory quantities and pay for items in 1 step with checks and credit card charges.
Restrictions when using EIR
You can't enter negative items on item receipts or bills.
You can't enter expenses on an item receipt.
If you create a purchase order for noninventory items, you must receive them with an item receipt to close the PO.
You can no longer mark items as billable on item receipts.
The accounting behind EIR
QuickBooks creates a new account (Other Current Liability) called the Inventory Offset account. QuickBooks creates the following journal entry when you enter an item receipt:
QuickBooks creates the following journal entries when you enter a bill:
Note: If you enter items directly on a check or credit card charge, QuickBooks does the same accounting as before: It debits Inventory Asset and credits the bank or credit card account.