Every business owner understands that inventory is a vital asset. QuickBooks, a robust accounting program, efficiently tracks your business finances while offering several versions that excel in inventory management. Selecting the correct version of QuickBooks is crucial for those running a product-based business. Utilizing the appropriate version can provide the necessary inventory accuracy and functionality, helping you sidestep the costs and complexities of additional inventory management software.
Which version of QuickBooks?
QuickBooks Premier Manufacturing & Wholesale has all the inventory management tools and reports that most small or medium-sized product-based companies will need, and it is still very affordable. It is superior to QuickBooks Pro mainly because Pro does not have Sales Orders. Sales Orders are extremely helpful in maintaining inventory accuracy because they allow you to view and manage all the orders that need to ship in the future (even if the future is that same day). Creating an Invoice from a Sales Order after the product ships is very easy. Sales Orders do not impact inventory (they are non-posting), while invoices reduce inventory. Invoices should be created only immediately before or after a product ships. Try to time the QuickBooks transaction with the actual physical movement of the product.
QuickBooks Enterprise is even more capable of managing inventory than Premier Manufacturing & Wholesale and is available with Intuit’s Advanced Inventory module, which allows you to track inventory in multiple warehouses (called sites). Enterprise is considerably more expensive than Premier (and the Advanced Inventory module is an additional cost), so do your research to make sure you really need it before upgrading from Premier.
Use transactions correctly
To maintain precise inventory management, it's essential to record a QuickBooks transaction each time a product enters or exits your warehouse. When ordering from suppliers, initiate a Purchase Order. Upon the arrival of products, acknowledge the PO with a Receive Inventory transaction, increasing your inventory count. Conversely, when shipping products to customers, inventory quantities should be decreased using an invoice or sales receipt. Should a customer return a product, increase inventory with the Refunds & Credits transaction. Utilize the Adjust Quantity/Value on Hand function for samples or damaged goods. Remember, many transactions affecting QuickBooks inventory quantities occur in the office, highlighting the importance of collaboration between office and warehouse teams to ensure inventory accuracy.
The myth of bar coding
Bar coding is not a magic cure-all for inventory accuracy problems. Many well-run companies use barcoding, but this does not mean that adding barcoding will transform an out-of-control company into one that has great inventory accuracy. You should be accurate and disciplined in performing the proper transactions that impact inventory before you add barcoding. Check your inventory accuracy by choosing a handful of different items to count each day (count first thing in the morning after the previous day’s transactions are recorded in QuickBooks and before things start moving around in the warehouse). Compare the physical count to the QuickBooks quantity and adjust inventory quantities accordingly. Investigate each discrepancy to determine the root cause (simple one-time error or systemic problem?).
Inventory accuracy is free
Many companies mistakenly believe that investing in additional inventory software will solve their inventory challenges when, in fact, they need to optimize the use of their existing QuickBooks software. You can elevate your inventory accuracy by making it a cross-functional priority. There are numerous cost-effective strategies you can implement. Educate yourself on measuring inventory accuracy and monitor it consistently. Introduce a cycle count program to avoid the necessity of a complete physical inventory. Set a policy requiring owner approval for inventory adjustments exceeding a specific value. Explore ABC analysis. Create a test customer and a test item in QuickBooks to experiment with various transactions affecting inventory, ensuring a comprehensive understanding of their impact.
Accurate QuickBooks inventory management will allow you to make the purchasing decisions that will keep customer service levels high (product in stock = happy customers) while keeping overall inventory low (less money tied up in inventory = happy business owner). This balance can only be achieved with accurate inventory information.
